Why It’s Hard for Companies to Kill Bad Innovation Projects
I recently had an opportunity to talk with a friend, whom I’ll call Ted, who was a vice president with profit and loss responsibility for the Asian operations of a Fortune 500 technology company.
Now back in the United States, he and I were talking about why it is so hard for companies to kill bad innovation projects. Ted told me about one situation that was both illuminating and all too common.
Like many companies, Ted’s firm didn’t know how to find good projects. Being technology-driven, they tended to develop “cool” technologies and then try to find markets for them, which, based on experience, usually does not work well. So, not surprisingly, the team’s product portfolio lacked good projects.
Is something better than nothing?
This led the team to fall into the mindset that it is better to have something to champion than nothing.
Failure was more acceptable than not pursuing something, even when that something was highly questionable. And as anyone who has worked in an organization for more than a day knows, people manage how they want to be perceived by others as much as they manage their job responsibilities.
In this case, the lack of good projects led people to over-rate the viability of this project.
Another component to the problem is counterintuitive. Ted encouraged his people to step up and champion projects with passion. He knew that leaders with passion were more likely to get funding and succeed than those who did not have passion.
The unfortunate consequence of this, however, was that people fell in love with their projects and became blinded to what others could see – that their “baby” was ugly. Additionally, people were crushed when their projects got cancelled. This hindered objectivity as well.
The last problem was the hardest to foresee. Like 80 percent of the Fortune 1000, Ted’s company had a stage gate new product development process that was supposed to prevent bad projects from getting funded. Each stage in the process is comprised of information-gathering activities so that gate keepers can assess the viability of a project to either kill it, move it forward, or send it back for more work.
But once the chief executive officer let it be known that he thought this project was great, objectivity was eroded still further. As Ted said, “the project took on a life of its own” and kept getting approved, eventually costing the company over $1 million a year before finally getting killed.
A neutral team and objective criteria
The primary problem, according to Ted, was the lack of a truly neutral team to evaluate projects and, even more important, the lack of hard objective market criteria to use in the gate evaluations.
If you don’t have objective market criteria to measure the need for a new offering, then other subjective factors will fill the void making it nearly impossible to evaluate projects objectively. Companies need objective market criteria to 1) avoid starting projects that don’t target a large validated customer need in the market that the firm can address effectively and win, or 2) terminate bad projects early.
Most companies don’t know how to obtain objective market criteria to validate the demand for an offering. Many people think this is impossible. So they resort to launching minimally viable products, failing fast, and iterating hoping that they’ll home into product/market fit. This is often a huge waste of time and money, however, unless you have already validated the market opportunities and determined which you want to pursue.
The way to obtain objective market criteria for evaluating/selecting innovation projects (new products) is to conduct Jobs-to-Be-Done research to determine:
- Who is the target customer?
- What is the main job your offering will enable them to get done?
- What criteria do target customers use to measure success when getting the main job done?
- Which criteria are going unmet given their current offerings? (“Unmet” criteria are important unsatisfied needs and your opportunities for innovation and growth).
- Is each new product idea in your pipeline solidly addressing the most attractive unmet needs/criteria? If not, kill it.
This is how leading companies ensure bad projects don’t get started in the first place, kill bad projects early, and dramatically improve their success rates.
(A version of this article first appeared in The Business Journals, August 16, 2016.)
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