Organizations often fail to adopt potentially game-changing ideas. Typically, it’s because the internal idea-evangelists fail to convince the C-Suite that the ideas will either boost profits or cut costs.
But the problem, notes author and former McKinsey consultant Kaihan Krippendorff in a fascinating article on the Knowledge@Wharton site, isn’t the idea evangelists. The problem is that most organizations are erring in using such bottom-line numbers to measure the potential of new ideas.
Why the Bottom Line Is Less Important in Early Stages
Intuit co-founder Scott Cook has famously told his internal disruptive teams to spend almost no time doing financial forecasting or plotting plans on spreadsheets. The reason is one Krippendorff would appreciate: An early-stage idea shouldn’t be prematurely assessed by dollar potential.
As Krippendorff observes, ”industry-shaping ideas rarely show signs of being able to meet these measures early on.” Moreover, their value “cannot be accurately predicted in their early stages.”
All of which makes sense, but it leaves a gaping question: How, then, should companies evaluate bold ideas in their early stages? Here are three suggestions:
1. Assess the idea’s potential to help–or harm–the brand. Krippendorff writes about how one company he worked with “had developed an idea that looked more like building a movement than producing a can of sugar-water.” In other words, there was a risk that the idea would be dismissed for its scope and degree of difficulty. The solution was to frame the impact of a movement as something that could–if not acted on–eventually threaten the company’s brand:
Knowing the CEO may resist this new idea, we reframed it as a defensive move to protect against a threat to the company’s core brand. The idea won funding. In two to three years, we hope this idea provides brand protection and also generates profits. But had we argued its attractiveness based on profits alone, senior management would have probably killed the idea.
By aligning a new idea with the company’s brand, you’re affiliating it with something that any organization has a vested interest in protecting and preserving. That’s important to recognize, especially when the path to profitability for a new idea may be difficult to predict or demonstrate.
2. Assess the idea’s potential to bring in new customers. In business circles, it’s generally more acceptable to have smaller margins on new customers, just to “get them in the door,” so to speak. Moreover, the act of customer acquisition is never an easy thing, whether the organization is young or mature. Any idea that can potentially add new customers–even if the initial cost for doing so seems high–is worthy of the top team’s consideration.
There are countless tools you can use to assess new customer potential, many of which are low-cost, such as SurveyMonkey. You can also use social media. Scott Gerber’s primer reveals some basic questions you should ask.
3. Assess the idea’s potential to inspire current and prospective employees. Krippendorff points out that many innovative employees end up leaving organizations precisely because the organization did not appreciate the potential of their bold new ideas.
He cites a recent survey from Accenture, in which 93 percent of the self-employed respondents who previously worked at large corporations say that they pursued an entrepreneurial idea within their previous company first. Of this entire self-employed population, a whopping 57 percent say their company did not support their pursuits. “Entrepreneurs want to build their ideas inside companies,” Krippendorff concludes. “They don’t mind doing so while they continue other duties, but companies are not supporting them.”
No one’s saying you should support a miserable idea for the sole purpose of employee retention. But it’s possible to encourage employees in their pursuit of bold ideas, while still holding the line on which ones get the top team’s attention.
One way to do this is to actually celebrate when a brave new idea gets killed. That might sound strange, but one company that makes a habit of such eulogies is W.L. Gore, the chemical products company that makes Gore-Tex.
“Mistakes made in the pursuit of novel solutions are accepted as part of the creative process. When a project is killed, staff celebrate its passing with beer and champagne,” notes the MIT Sloan Management Review. ”When a project fails, a post-mortem is conducted. Flawed concept or poor execution? Bad decisions? The goal of these post-mortems is not to punish, but to learn and improve.”