(This post first appeared on the Front End of Innovation Blog)
As innovation becomes an increasingly popular topic in business literature, social media and public discussions, it also turns into a powerful magnet for clichés. One of the most used, if not abused, is “celebrating failure.” Of course, innovation is all about experimentation, and experimentation results in failure more often than in success. We must absolutely accept innovation failures, learn from them and recognize people taking risks. An example here could be set by the Tata Group that rewards exceptional ideas even if they weren’t operationally successful (through a special category of awards, appropriately called “Dare to Try”).
But do we really need celebrate failure? In every language, in every culture, the word “failure” carries a distinct negative connotation; placing it in the same sentence with “innovation” doesn’t change anything. By calling to celebrate innovation failures we do nothing to advance innovation in places, still very numerous, where the fear of failing continues nipping innovation in the bud.
Instead of celebrating failures of innovation projects we’d better learn how to minimize the cost of failure through proper portfolio management. In practical corporate terms, that means that we have to master the art of killing projects.
Everyone would agree that killing projects is a key to maintaining healthy product development pipelines. By terminating projects that are going nowhere, companies free up resources to introduce new, potentially more successful initiatives. But in real life, killing projects turns out to be tough. Despite our proclaimed willingness to celebrate failures, we’re actually quite bad even at admitting them, for failed projects negatively affect the company’s bottom line and definitely don’t make our career prospects any better (to say the very least).
So, how do companies approach the ever important kill/continue decisions? This largely depends on which of the two schools of thought they belong to: “pick the winners” or “kill the losers.” The “pick the winners” approach relies on selecting relatively few projects that are expected to have the greatest chance to succeed–and then investing heavily in these projects. As often happens, once a “winning” project has been selected and advanced into the project pipeline, killing it becomes extremely difficult. In contrast, the “kill the losers” strategy is based on launching a large number of projects, followed by carefully monitoring them, identifying those that perform badly and then killing them as rapidly as possible.
A recent study on drug development–an area where “celebrating failures” sounds almost atrocious due to their astronomic price tag–shows that it’s the “kill the losers” strategy that turns out to be a true winner. In particular, the study showed that the number of approved drugs for any company strongly correlated with a high termination rate for drug candidates in preclinical/Phase I stages. In other words, companies making hard decisions about which project to terminate earlier in the project lifecycle did much better than those postponing these decisions for later.
Big corporations should take a careful look at how early-stage companies operate. Of course, startup entrepreneurs don’t run a large number of projects; they simply can’t afford it. However, they never waste time and resources on any single idea that proved to be a loser. They learn from the failure and they pivot, a startup’s equivalent to killing a project. As large companies warm up to the concept of intrapreneurship–instilling the spirit of entrepreneurship in the corporate culture–they must perfect the way they identify and terminate failed projects.
Hopefully, The Corporate Intrapreneur Summit (organized by the Institute for International Research and Culturevate) taking place on October 8 in New York City will address the topic of portfolio management as part of the corporate intrapreneurship process.
We live in a success-driven society. We should strive for success and success only. And let’s reserve celebration for those occasions, however rare, when we succeed.
Image credit: www.123rf.com
Hi Eugene, good article. Another barrier to killing projects is an inability to ignore the “sunk cost” principle, along the lines of “we’ve already spent $xM, we can’t kill it”. Killing projects should always feel uncomfortable; it it doesn’t companies are probably not cutting deep enough.
Thanks, Kevin. Sure, I completely agree: the sunk cost IS a problem. From this point of view, I again believe that the “kill the losers” approach helps deal with this problem as it implies a “VC-styled,” milestone-based mode of funding. Now, I’m perfectly aware that in real life, in real companies nothing is easy, especially changing the modus operandi. But as one smart guy once said: innovation is simple, but not easy:)
Pingback: Don’t Fire Me: I’m Innovating |
Pingback: Chief Decision Maker |
Pingback: One more time about “culture of innovation” |