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The Two Questions to Ask Before You Innovate

Harvard Business Review

The project team had certainly prepared for the workshop. Its members had a carefully constructed PowerPoint document, replete with facts and figures that showed the attractiveness of what we'll call the booming management-training market in China (details have been disguised to protect the client's confidentiality). Embedded video clips showed potential customers raving about the offering the team had recently piloted. A meticulously constructed business plan showed how the venture could thoughtfully expand into six major cities in China.

Yet, the presentation highlighted a critical gap between the team and its senior management sponsors. Executives immediately began asking questions about why the team was focusing on only six cities. The team responded by saying that its model required substantial marketing and a large local staff. Smaller cities just couldn't support that overhead. Executives pressed, asking the team to figure out how to reach 100 cities. Team members assumed that meant going back to the drawing board to develop a business model that would be profitable in smaller cities. And that meant, they thought, sharply lower investments in marketing and smaller staff.

I stopped the meeting and asked the project leader and lead executive sponsor to write on a piece of paper what each thought the project's primary strategic intent was.

"Create a business that generates attractive profits and has margins that are at or above corporate levels," read the project leader's note.

"Grow our brand presence in China," read the executive sponsor's note.

Now the disconnect was clear. While it was very clear what the team planned to do, its members hadn't verified their assumptions about why they were going to do it. Certainly, the end goal of many innovations is to generate financial returns. But, as this team found out the hard way, there are other reasons to innovate as well, such as boosting employee morale, having social impact, or bolstering a brand.

And whether or not achieving financial returns is the goal, the other thing the innovators should have taken care to clarify before starting to innovate was how the effort would be measured. And here they should be pushing to be as precise as possible. What are ultimate revenue targets? By when? What do operating margins have to be?

It's perilously easy for corporate innovators to skate past the why and the how, particularly those working in new-growth groups or incubators. Just as Tim Robbins told Morgan Freeman in The Shawshank Redemption to either get busy living or get busying dying, corporate innovators feel the urgent need to get busy innovating, or have their existence questioned.

One mechanism some companies use to deal with this problem is to have each team complete a charter before it starts to work, detailing the project's strategic intent (the why), specific goals (the how), strategic options that are on and off the table, critical uncertainties, project resources (both people and money), identification of who is responsible for making which decisions, key strategic milestones, and the next project checkpoint.

One final piece of advice: be wary of well-intentioned executives who express discomfort about approaching innovation in a structured way or about placing boundaries on innovation efforts. It feels good to say, "We're open to anything," but in my experience, it's never true. Make sure you're clear about the rules of the game from the beginning — particularly the why and the how — to save time and rework later.

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