By Jeanne Liedtka. Crazy as it sounds, there’s such a thing as having too much money to spend – or perhaps just the illusion of money to spend. Managers get tricked into doing things that they would never do if they were spending their own money. Things like starting small. Small is not beautiful in big organizations. Everybody wants “needle movers.” And when you combine a thirst for “needle movers” with a desire to “prove” that the investment is worthwhile, bad things happen. Like encouraging managers to take bigger risks than they need to. Like ignoring early feedback that disconfirms elements of their new value proposition. Like doing endless analysis with extrapolated numbers. Like pining for a great new asset or acquisitions instead of using what you’ve got. Like losing out on a lot of opportunities because they don’t look big “enough.”
Producing innovation doesn’t have to be about taking big risks – in good times or in bad. Consider how you’d act if you were spending your own money. You’d start small. You’d place some small bets in the marketplace and try to learn fast. You’d get a running start by using what you’ve got – no capital infusion needed. You’d make a habit of engaging partners early on. These might be upstream supply chain partners willing to be your source for product instead of having to build your own manufacturing capacity or downstream distribution partners intrigued by your new value proposition and interested in helping you find a few shelves to test it out. You’d find an early “yes” to your idea from somebody outside your organization who mattered – ideally, customers. Then you’d create new value together, taking as few risks and shouldering as little of the investment yourself as possible. This is the alternative path – and it doesn’t seem so counter-intuitive after all, does it? In fact, it may be the only way that makes sense in today’s turbulent times.
Potential customers (the kind who say yes in focus groups but then don’t buy) are a false positive. That’s bad. Consider a “no” a favor – they might have said “maybe” and let you invest corporate’s money while leading you down a primrose path to nowhere – something you’d never let happen if your home’s equity was financing the deal.
So don’t be afraid to ask managers to do more with less. Ask them to raise the bar on participation by partners and to seek specific commitments from customers as the basis for “go / no go” decisions. Rather than trying to predict what customers will or won’t buy, what they will pay, and making predictions about the business prospects, ask them to focus on opportunities to ask for something material from customers and partners. That is the gold standard for yes. Rather than run spreadsheets that produce bogus ROIs, ask them to calculate what they can afford to lose. Insist that they work their way into opportunity from the least expensive options up to more expensive methods only as they are able to absorb the costs of being wrong. Ask them to focus on what they can do, what they’re willing to risk, rather than on what investments are justified by market expectations or corporate requirements.
And then, make it safe for them to call their baby ugly if their small bet didn’t come in the way they’d hoped. And the sooner the better.