- developers who are unfamiliar with the proper processes that help them to bring their idea into the product portfolio
- Innovative teams that lack certain skill sets, e.g. teams mainly composed of developers and without somebody who can craft a business model
- active or passive resistance from important gatekeepers
- structures that do not a allow flexible realignment of resources
- and many more…
The Problem with Innovation CouncilsI have been a critic of the way innovation is often handled in large organizations, which is exactly through such official "juries" and "innovation councils". These are groups of "elderly" - pardon – experienced wise men and women, with members coming mostly out of management and being assigned in this role in through an inexplicable process (well, not so inexplicable: they are nominated by a high ranking manager). Those appointed jurors look at ideas and decide on their fate. While each of them may have some expertise and deep understanding in certain areas, they may not necessarily have an understanding of innovation, or a specific idea, of how to deal with it, or they may be influenced (not so say "misdirected") by their background and internal politics or strategic goals.
Let's take as example an innovation council that is composed of 10 members, including the board member responsible for new products and services. Out of these ten members, five may not have much understanding or the time to get an understanding of what a certain idea is all about. Three jurors may understand the overall idea, but only two may fully grasp its potential. Because nobody is going to admit that they have no expertise (but all feel like they are the next Steve Jobs) and the decision process is setup in a way that does not allow to admit that, each jury-member will still put an evaluation and rating of the idea into the innovation management system. In the end the evaluation will be a random average that won't say much about the innovative potential of the idea. The rating process will average out. Especially disruptive innovative ideas may fall victim to this process.
Furthermore, jurors do not have a stake or interest in the ideas. The jurors' performance is not tied to a metrics that measures the innovation-to-successful-product-ratio. Juror-names may also not be tied to new ideas as "the sponsor who helped that thing get out on the market." In the worst case the gatekeepers do not even have means or influence to get an idea funded. This in mind it becomes understandable why the whole exercise becomes futile. I have seen way too many examples where such a setup failed.
How Venture Capitalists EngageInstead of filtering ideas through "innovation-gatekeepers", let's introduce a corporate venture capital model. I have talked about a similar model for hiring and people-development and the basics are the same. If you have ever seen venture capitalists in action, you felt and understand their drive. Because they have - let's say - $10Mio of investment capital at hand that they have return in five years to their investors, who expect their $10Mio investment grown to $50Mio, venture capitalists really need to search for new ideas, teams that can execute, business models that can fly. When you see the interaction of a VC with a startup entrepreneur, you will notice their engagement. It's like a dance taking all the steps in all the corners of the startup-dance floor (you may notice that I am a dancer). How's the unfair advantage of this technology? How the business model? Who are the people on the team? How can this business scale and how fast? What are the early successes?
In order to fulfill the investors' demands, VCs are very actively hunting for ideas and once they found worthy startups, they help them to become successful. Sure, this is the idealized situation and there may be much to improve, but the VC-entrepreneur-relation is a way more engaged interaction than any innovation council demonstrates or is empowered to do.
The Venture Capital Model
To overcome this gap, lets enable management, selected, or even interested individuals inside an organization to serve as venture capitalists. Give them either virtual budget or real budget or an approach of both that they have to "invest" in ideas and bring a return on that after a certain period. Add the return to their performance KPIs and you will increase the engagement with and active search for ideas.
The virtual budget could be similar to what certain gamified innovation management platforms like Spigit are offering. A real budget could be owned by managers or high-ranking members of the organization who have resources in the form of money, equipment and people at hand that are not pre-planned for full capacity for the next 2 years to routine task. Or the real budget could not be money, but a time allotment that employees get. The time budget would allow them to spend a certain percentage of their time on a pet-project, or innovative idea. Virtual currency, real budget, time allotment are – in contrast to ratings – scarce resources. I cannot rate and like each and every idea, but I have only a limited amount of budget and time to spend on an idea. That forces the person commanding those resources – and being missioned to get a reasonable return within a given period – to wisely invest them.
There is one more advantage of this model: the actual tracking of the success is much more transparent. The ROI of the invested resource is better measurable and publicly visible. Hierarchies become less important. Not the appointed manager, but an individual foot soldier at the bottom of the food chain may become the super-investor with the right grasp for trends (see also the case study from the UK Department of Pensions and Work). We turn to a meritocracy and that's what gamified systems are all about: away from kiss-up-o-gracies (=appointed jurors) to meritocracy (=self-made VCs).
Don't get me wrong: this alone won't solve the problem to get innovation out. There is still a lot do be put in place to tie innovation to the production process, to create an innovative culture that is open to to an honest exchange of ideas inside the organization and in interaction with other businesses, partners and communities. That also means encouraging risk-taking and if not the celebration of failure, at least the permission to fail. And certainly much more that you know from your own experience with smaller and larger organizations.