Ed. Note: This article was created in collaboration with ?What If!'s Inventing team in the Americas.
Reject Fake-o-nomics, Build a Case for Action
In the early stages of innovation, there has to be a case made for taking action. But often the metrics that are applied at this point—five-year P&Ls, NPV, and DCF, for example—presume that the idea itself has already been fully developed. Having confidence in the idea’s potential for delivering commercial value is critical, of course. But it’s equally important that the idea be given room to grow and evolve. That space is often fatally constrained by iron-clad financial projections that will determine every evaluation of the idea for the remainder of its lifespan.
What usually happens here is what we call fake-o-nomics—pulling together arbitrary numbers that impart a false sense of certainty to management about the idea’s bottom-line potential, in the interest of pushing it closer to launch. That’s time that would be better spent figuring out how to make the idea even more of a commercial success by highlighting critical unknowns and generating realistic economic assumptions.
We believe instead in building a case for action. This involves being transparent about the unknowns and finding relevant external proxies and assumptions to bring a new business model to life. For example, when ?What If! partnered with a health care company to create a direct-to-consumer business, we looked for inspiration in related industries and then collided their most effective growth levers to create a unique—but proven—commercial proposition. This gave our partner and us confidence that impact around the idea was possible, while still leaving it room to evolve. And it freed us up to focus on big-picture considerations such as:
- Who will we target?
- With what offering?
- How is it differentiated?
- How will it be delivered?
- Do we have the right to win?
- What is the payoff?
- What are the risks?
Building a case for action moves you beyond the false confidence of fake-o-nomics. Unknowns can be scary. But vocalizing what you don’t know is ultimately far less dangerous than making predictions off flimsy financials.
Avoid a "Judgment Day"
Tensions arise when the “stage” and “gate” balance get out of whack—when there’s too much emphasis on the gate and not enough on the stage. There’s a sense sometimes that gate meetings are for corporate elders, the stage for minions to gin up sales pitches. A team’s energy tends to be spent working the watercooler and tweaking PowerPoint presentations in preparation for “the big meeting.”
Tensions arise when the “stage” and “gate” balance get out of whack—when there’s too much emphasis on the gate and not enough on the stage.
We believe a good ideating climate is one in which proactive collaboration between the project team and leadership is built in from the start—where both the development and the judging of an idea is collectively owned. Leadership should be involved throughout the innovation process, not wait for grand reveals on Judgment Day; and the team should be rewarded for figuring out that their proposition is or is not worth an investment. The latter is seen as failure, when it should be viewed as part of the process of illuminating real opportunity.
A hospitality organization we partnered with successfully created a culture in which employees are encouraged to treat moments of “failure” as opportunities to forge lasting bonds with customers. And a pharmaceutical partner successfully engaged leadership by bringing senior legal and regulatory leaders into idea-building workshops—a move that resulted in a creative reinterpretation of an internal policy about its sales force engaging with physicians.
Be an Idea Geneticist
How do you preserve ideas through the sausage grinder that can be the commercialization process? Don’t lose sight of “Idea DNA.” Ask yourself: What insight drives this idea? What delivers on it? What’s the soul of the idea—the part that makes it what it is, the part that must not change? And what can change? Where’s the flexibility in the execution? Doing so can avoid potential pain at the end of the process when a team realizes it’s lost the Idea DNA of its core proposition, and what’s left is an uninspired husk.
When ?What If! partnered with the beer company Carlsberg to invent a new low-calorie line for urban sophisticates, the insights driving the project pointed to the strength of the name Copenhagen. It represented the modern aesthetics of Scandanavia; was internationally aspirational and instantly recognizable; and lent the parent brand a current-day credibility. When copyright issues arose, a name change seemed inevitable. But Copenhagen represented everything Carlsberg wanted this product to represent. Scrapping it would have unraveled the Idea DNA. In the end, Copenhagen became Copen Hagen—a tweak that remained true to the core of the idea and circumvented the barrier.
Successfully managing stage gate is a teachable behavior. You can’t bypass it, so the key is to behave differently within it. The problem with stage gate isn’t the process—the problem is being beholden to the bad habits that have come to define it. The key is not to dread the journey, but to make it better by navigating away from the pain points—by letting ideas germinate; by blurring the line between stage and gate; and by protecting your intellectual property’s Idea DNA. Doing so will help you thrive within the system rather than making you want to subvert it.
Illustration by Kris Fillon.