Innovation can be both exciting and daunting. It has often been described as a 'rollercoaster', offering great thrills and rewards for some, but prompting reluctance and dread in others. Perhaps those that find it exciting are focusing more on the potential rewards, and the benefits that innovation can bring to their organisation. In contrast, those who are daunted by the prospect are aware of the potential complexity of these projects and the various barriers to success.
When talking with clients we often refer to our 'Innovation Volcano', which provides a framework for approaching innovation. One of the main aims is to highlight all those areas that ultimately need to be considered for a project to be successful. Let's suppose that the innovation improves sales by targeting better those customers who have a higher propensity to buy by using a machine learning model. In that scenario, companies need to think about many factors such as defining a measure of success relative to appetite, having the necessary skills to deploy on the project, sourcing data (internal and external), understanding any GDPR implications, understanding how processes may need to change, and so on. It already sounds quite daunting!
However, by having a framework such as the Innovation Volcano, companies are better able to engage with stakeholders, understand the full landscape of potential challenges, prioritise activities and define the necessary steps within the project plan. It may then become clear that it is possible to defer some activities to later, rather than needing to consider everything at once.
With innovation it is important to simplify the problem. This may mean keeping the project as manageable as possible initially, by embarking on a proof of value exercise, with regular stage-gates. This can be particularly powerful if the success criteria have been carefully defined up front and there is an understanding in the organisation that a lack of 'success' is not necessarily failure. We have set out further thoughts on this in a sister article, entitled 'Defining Success: The Frog Prince'.
It might also be possible to simplify the nature of the objective you are trying to meet. For example, when trying to improve sales, focus initially on sales volumes (quantity), rather than price elasticity (quality). Once you have cracked the sales volume challenge, you will understand the broader issues much better and hence will be well placed to enhance the model, methodologies and processes, to also address the price elasticity opportunity.
In addition, with many innovative ideas, it is not necessary to automate the outcome from day one. Indeed, if this is a requirement from the beginning, it can significantly increase the complexity of a project, reducing the likelihood of success. A smaller, simpler and cheaper project (initially at least), more likely to be well received, when budgets are limited and organisations have many other projects vying for their attention.
Often when discussing innovation with clients, and brainstorming ideas in a workshop environment, we find that the creative juices flow and there is an abundance of ideas and enthusiasm. This is great, and in these situations, we capture all the points raised; there is no such thing as a bad idea at this stage. However, we also try to be a calming influence, encouraging participants to think about one step at a time and highlighting the range of issues that need to be considered even on simple projects. Stakeholders, such as senior management and board members, need to be engaged appropriately, in a timely manner, to understand what is being embarked upon and to assess progress. The opportunity must be explained in their language and be linked back to the business strategy and risk appetite.
By taking these steps, maybe those that see innovation as daunting will find it less so, and those that seek the thrill of the ride can see the virtues of a measured approach. In that way, we can maintain a good balance, by making solid, tangible progress without stifling innovation.
For further information, please contact Justin Elks, Head of Risk Consulting.
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