Six Ways to Sell Innovation
Innovation is a hot term these days, and most CEOs will tell their employees and shareholders that they are committed to innovation.
But what does that actually mean? Sometimes, innovation is simply used as a “motherhood and apple pie” buzzword. But in reality, innovation means driving transformational change, be it to products, processes, business models or otherwise. And in any business, change comes with risk and cost. So when it’s time to make real decisions about funding initiatives, most companies focus less on the buzzword spin of shareholder reports or corporate communications and look at the brass tacks of making money. Innovation projects need to be able to hold up in comparison to other possible uses of capital, and justify themselves from an investment standpoint.
Innovation means driving transformational change, be it to products, processes, business models or otherwise.
Making an innovation project seem worthwhile when stacked up against projects with predictable return on investment is tricky, especially when the process that allocates budget in large enterprises is focused.
1. We're getting clobbered.
If your business has taken a dive, if competitors are eating you for lunch, if your customers are defecting, then, congratulations! That’s fantastic news if you’re trying to sell innovation. It’s easiest to sell people on change if their world is crumbling around them. Easiest, but not always a no-brainer. When times are tough, there’s also a tendency to batten down the hatches and try to “weather the storm.” The key here is creating a compelling case that the factors which are harming the business are not a “storm,” but are a new reality. The company must change radically in order to regain its former success.
2. It will be cheaper.
When processes or systems are inefficient, and a radical shift has a strong potential to result in massive cost-savings, this is one of the easier arguments used to fund innovation activities. Look for scenarios in which the savings of innovation may outweigh the cost, and this can be a persuasive approach.
3. Our competitors are changing faster than we are.
In a competitive market, this can be a strong argument. In some industries, being “first to market” with new features or benefits can mean life or death. However, there’s also a counter-argument of the “fast follow,” in which a company intentionally allows their competitors to suffer the “slings and arrows” of innovation, and then simply copies their successful ideas. Be prepared to respond to those who resist change with this argument.
4. Our customers are changing.
When customers needs change, we must adapt or expect to lose those customers. The needs of customers can change in three ways:
- Current customers develop different expectations or needs due to changing technology, fashion or other trends.
- Makeup of your customer base changes (e.g., through generational change), and the customers you’re acquiring have different needs than the customers you’re losing.
- Moving into new markets – geographic markets, moving upstream, moving downstream, etc. – and the growth you are experiencing is coming from customers with different needs.
Most CFOs will naturally look to see where existing offerings can be “tweaked” to meet the changing needs of customers. Where this is a practical short-term solution, it makes sense to do this. However, a case can often be built that the coming millennial generation is not going to accept tweaked versions of their parents’ products and services.
5. Our regulatory environment is changing.
Regulatory changes can be one of the most powerful forces to drive change. Regulatory changes (such as Dodd Frank) can make change a legal requirement, and the failure to change can subject a company to stiff penalties – even criminal prosecution! When you have the government helping you demand change, it certainly makes the argument far easier. In other cases, regulatory changes may not create a legal imperative, but may significantly alter your market or competitive options (The Affordable Care Act, for example, or regulations around net neutrality). When the environment around you changes, it’s often necessary to make a dramatic change in order to survive and thrive.
6. Grown is an imperative and we can't scale to the next level.
Public companies must grow or fear the punishment of shareholders. If your current systems or processes are at a breaking point and a different approach is needed in order to increase business by a significant margin, this is a strong argument for significant change. One risk of growth, in any company, is failure to predict the need for innovation focused on scalability far enough in advance. Once you have reached the breaking point, it’s painful to discover that the needed innovation will take a year to implement, and that in the meantime, you’ll experience either hampered growth, massively increased costs or customer dissatisfaction. If a company is forecasting significant growth, but the growth has not yet arrived, it can be tempting to put off the change until it’s absolutely necessary. However, that can result in substantial pain.
No matter which of these platforms you choose to justify change (or if you use a different one), consider these three ingredients to make your pitch more successful:
- Lay out the burning platform and support it with third party data so the need is difficult to refute.
- Follow up a general case for change with a proposal for a specific innovation that is a compelling solution to the problem. Try to illustrate the concept as clearly as possible, and support the likelihood of its positive impact with data (e.g., market research) when you can.
- Propose a stage-gate process with clearly defined checkpoints that affect opportunities and decisions to continue to fund the innovation. This creates the ability to validate that the innovation will yield the desired result along the way.