The 5 Deadly Innovation Traps—and How to Avoid Them
A few years ago, we led a project to investigate a question: Where does innovation go wrong? We interviewed dozens of leaders of innovation, design, and new product teams at multibillion-dollar companies in search of clues as to where the trouble starts: When funding was cut? When teams were reassigned? When groups were dissolved?
Our research uncovered five reasons that innovation portfolios fail—and tips for making sure it doesn’t happen at your company.
#1 The black hole of undefined strategy
In work we did with a Fortune 500 shipping company several years ago, executives decided that the company needed a global innovation team. They committed millions of dollars, hired a startup leader, and assigned 25 people to the team. The startup founder built them a venture based on a new technology that tracks packages. In its first year, that innovation alone made the shipping company tens of millions of dollars.
But when review time came around, executives told the leader they were dissatisfied. Why hadn’t this team done anything to evolve the company’s core offerings? Why had they broken rules inside the company? They fired the leader, even though the higher-ups hadn’t articulated to the team—or to each other—what successful innovation looked like.
Often, this misdirect starts with undefined strategy at the top. Innovation strategy requires a different type of conversation: less focused on big-picture goals; more focused on strategic planning, like how to invest and pursue goals over the next year. It starts with this question: What are the outcomes we want from this work?
#2 The peril of orphaned innovations
All too often, a company creates an innovation team, but doesn’t connect it with the company’s core business. That can create an innovation orphanage: ideas developed in isolation that lack the necessary resources and support to be successful.
We witnessed this on a project with a large automotive company. It had recently acquired a startup that offered private work shuttles. They brought IDEO in to lead an innovation lab around new product possibilities. Together, we built a new venture: a commute benefit that the company could sell to employers to better leverage the startup’s fleet of private work shuttles. But after six months of generating revenue and trying to sell it to the broader startup, it still wasn’t in their pipeline.
The problem was misaligned incentives: The CEO of the automotive company had tasked the innovation to a standalone team, without bringing in the decision makers at the startup. When there’s no ownership or investment from the departments that the innovation is meant to serve, great ideas go nowhere. Instead, leaders need to create a process for identifying and nurturing promising innovations, and define who owns the outcomes and makes implementation decisions before the innovation even begins.
#3 The risk of the wrong talent
By definition, innovation requires new approaches. It often requires new talent, too. Think of the classic example of IBM, often taught by professors Charles O’Reilly and Michael Tushman in their work on ambidextrous organizations. Throughout the 1980s and 1990s, the technology giant would invest in new innovation efforts, like the personal computer, but the company was never able to commercialize or scale the product. IBM’s business leaders didn’t have an entrepreneurial mindset—the company needed talent who had experience taking big swings.
We recently saw this play out at a food manufacturing company. They wanted to try an agile approach to developing new products and tasked a team of operators from the core business to make it happen. The team developed a new breakfast product, which tested well with consumers. But they didn’t feel confident enough to advance to piloting it without further data. Why? The internal team had never launched a new product from scratch, and they were terrified of screwing up.
To avoid the talent trap, it helps to think about three different roles in a workplace: explorers, scalers, and optimizers (with credit to Bud Caddell and Simon Wardley). Optimizers make up about 90 percent of employees; they drive growth and improve operations across the core of an established business. Explorers work in departments like R&D and product development, and are good at spotting new opportunities and developing ideas. Scalers iterate on ideas until they find the right product-market fit. All three roles are essential, but shine at different parts of the innovation process. Explorers work best within innovation teams, until they can pass off an idea to scalers for development; scalers can then institute new processes and tools for optimizers to use within the workplace.
#4 The troubles of a bad handoff
When company leaders get excited about an innovation, it can be tempting to go for an ad hoc implementation, rather than moving through clear internal steps. But the wrong handoff can lead to inconsistencies and inefficiencies. The baton gets dropped. That’s why it’s necessary to design a clear innovation process for how to generate, evaluate, and implement ideas. Here’s a guide to the handoff models we see most often—and when to use them:
The Owner’s Manual: After months (sometimes years!) of work, an innovation team hands extensive documentation over to a new team, which is meant to execute their vision. But be honest: When is the last time you actually read an owner’s manual cover-to-cover? Exactly. This model can work if the innovation doesn’t need to be directly developed by others (insights from a research group, for example), but it doesn’t work well for a new product, where it can turn into a knowledge dropoff.
The Architect: The future owner of the work embeds with the innovation team. That way, they can share the insights from the development process with the new team. This model works well for industries like consumer packaged goods, where a brand manager is responsible for product development from beginning to end.
The Ambassadors: Members from each stage of the innovation embed throughout the project, ensuring that no learning is lost and each phase of work feeds smoothly into the next. This model also builds an awareness of what downstream teams most need.
The Hive: Each project functions as a microcosm of the business, where multidisciplinary teams tackle a challenge from beginning to end. This is common in accelerators and incubators, since they often set up new organizations as microcosms of a parent company, made up of people from every major function.
#5 The danger of short-term metrics
In our experience, innovation teams often have a three-year lifespan. During the first year, everyone is excited, encouraging the innovation team to swing big. By the second year, company leaders are asking, what are your results so far? By the third year, a lot of the top executives have changed seats, and the new leadership doesn’t see a meaningful effect on their core business, so they decide to shut it down.
It’s a short-sighted move: This kind of work often takes years to show impact on metrics like revenue, loyalty, or customer satisfaction. The labs can still show value in the short-term, though, by demonstrating how the work drives efficiency or changes behavior.
This brings us back to the head of innovation at the shipping company, the one who created a startup that netted millions, but got fired because the team hadn’t evolved the company’s core offerings. To avoid this trap, companies need to establish clear metrics to assess progress over time—the number of prototypes a team develops, experiments they run, employee retention or external reputation. Otherwise, you’re cutting down the tree you planted three years ago, before it even had a chance to bear fruit.
Falling into an innovation trap of your own? We’d love to chat with you about it.
(Images created with Midjourney)
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