IXL Center on The Back-end of Innovation

Republished with permission from IXL Center. See the original post here.

Many
people think that innovation is about generating ideas. In our previous
articles we discussed how structures must exist that allow ideas to
reach decision-makers, but it is not enough to merely come up with new
ideas'this is only the 'front-end' of innovation. Since ideas must be
executed in order to generate value, a 'back-end' of innovation is
required to test and refine the ideas and make them a reality. The unit
of execution of innovation is not the idea itself, but a project derived
from the idea. Many people can claim to have innovative ideas, but only
the ones who actually implement them can claim to have innovated.

Not
all ideas can be implemented though, because there are limited
resources. Organizations must choose wisely which ideas they will focus
on, given the resources they have. Ideally, they should focus only on
the ideas that will succeed and have a large, positive impact, but
without a crystal ball it is difficult know which ones to place the bets
on. Despite the best predictions, when ideas are put into practice,
they collide with many unforeseen variables, and can turn out very
differently from what was expected. This is where the 'back-end' of
innovation plays a crucial role: ideas can be tested and refined before
they are executed, either increasing their likelihood of success, or
proving early on that they will fail so as to avoid costly investment
losses. This testing and refining is done through lower-cost experiments
that prove (or disprove) feasibility, demand and profitability.

Creating
this 'back-end' of innovation has two components to it: first,
organizations must create a culture of experimentation and learning, and
second, employees need support in designing and executing experiments.
The first key component is creating an atmosphere where experimentation
is encouraged and failure is seen as a lesson learned rather than a
finger-pointing opportunity. Many organizations want to avoid failure at
all cost'creating a culture where ideas are not executed unless all
possible risks have been eliminated. But in the world of innovation,
lessons learned from failures are critical to building successful
breakthrough businesses. This makes failure more of an asset than a
liability, especially in the early stages of idea implementation.

Dr.
Patel from IXL Center, explains that "leaders have to tolerate failures
and employees have to take risks. We need to create a culture of
learning similar to that seen in kindergarten ' or, in a research lab.
In either place, kids or scientists learn by experimenting, by trial and
error. They are passionate, patient and persistent. Out of ten tries
(experiments), they may both find one success. But neither the kid nor
the scientist would say that they had nine failures. Instead, they say
that they had nine learnings that allowed them to get the one success."

A
great example of such a culture is Alcoa. Paul O'Neill wanted Alcoa to
become a safe company. For this he created a culture that emphasized
learning and experimentation: even though they wanted to become the
safest company, when employees made mistakes it was more important for
them to report them so that the rest of the company could learn how to
avoid those mistakes and others as well. In one instance, O'Neill fired
Alcoa's best division president because "one hundred fifty people [...]
succumbed to carbon monoxide fumes and had to be treated at an emergency
clinic. The incident was never reported, so others at Alcoa were not
informed nor able to learn from the accident" (Paul O'Neill: Values Into Action, HBR Working Knowledge).
Alcoa managed to fulfill its goals because of this culture that placed
great value on learning and experimentation. It is in this environment
where ideas can flourish and become a reality.

Even
with a culture of experimentation and learning, employees still need
support in knowing what kinds of experiments to run, and often need
resources to run them as well. A good place to start is with the aspects
of the idea that are most uncertain. For some ideas, there will be a
lot of uncertainty around their feasibility: Can it be produced and are
we the best ones to produce it? For other ideas, the uncertainty may lie
more around demand: Is there are a market for this and are they willing
to pay for it? Other ideas may have uncertainty around the
profitability: Can we produce it cheap enough and sell it at a high
enough price to make it worth it? Employees must be able to determine
the biggest uncertainties, and design experiments that will address
those uncertainties.

Experiments
can range from simple phone calls to lead customers to sophisticated
working prototypes. A good place to start for reducing uncertainty
around feasibility is making mockups and prototypes, getting feedback
from others on the look and feel, signing NDAs with potential partners,
and running demonstration projects that show that certain expectations
were achieved. A good place to start for reducing uncertainty around
demand is making a brochure that clearly states what you offer and what
the advantages are, getting feedback from lead customers, and getting
advanced purchase orders from clients. A good place to start for
reducing uncertainty around profitability is getting cost estimates from
producers, margin estimates from distributors, and feedback from
potential customers on what it currently costs them to solve the same
problem through alternate methods.

Increasing
the likelihood of success of ideas is an iterative process in which
rapid feedback from small successes and failures is used to transform
the idea into something that has high feasibility, strong demand and
will have a positive impact on the organization's bottom line. It is
important to give failure the value it deserves'a tremendous source of
insights that will ultimately lead to success. As Henry Ford once said:
'Failure is simply the opportunity to begin again, this time more
intelligently.' Innovative organizations need to create space and
provide resources for their employees to experiment with ideas, take
risks, fail fast, learn from mistakes, and iteratively refine ideas
until they are ready to go to market.