27 September 2017

Is your company throwing away its best innovations?

 

 

 

 

Good ideas can go to waste because managers are too busy, too specialised or too close. Dr Paola Criscuolo explains how to keep your best proposals out of the bin.

 

Companies spend significant amounts on research and development (R&D), and academics conduct countless studies to help organisations increase the number and quality of the ideas they generate. Much less thought, however, has been given to how organisations decide which of these ideas to back. In fact, the mechanics of selection often see the most innovative projects consigned to the bin. This is just one of the findings of a research project that looked at the evaluation of R&D projects at a large multinational professional services firm.

 

Panels in charge of selecting these R&D proposals are most likely to fund projects with intermediate levels of ‘novelty’, i.e. the ones that were the most innovative or bold, or indeed the least, were less likely to get funded. It is often assumed the selection process is neutral, with each idea judged purely on its merits – but that doesn’t take social context into account.

 

The more novel an idea is, the longer it can take to evaluate and that can be difficult for busy executives. Senior managers cannot be experts in every domain, so they often have to evaluate projects in areas they know little about. In addition, if they all share the same expertise, they will not be able to look at multiple facets of a proposed project.

 

We also found selectors are less likely to back unusually novel ideas if they work in the same location as the applicant – perhaps because they want to avoid charges of nepotism, or because they don’t want the risk involved in the project to rebound close to home.

 

So what does this mean for innovation? Organisations need to think about their selection process just as much as their ideas generation. One recommendation is to give selectors fewer projects to evaluate, so they can give novel ideas the extra attention they need. One way to do this is to stockpile projects until a certain number is reached and then hold the selection meeting.

 

I would also advise organisations to consider the make-up of the selection panels. They need to involve the right people with the right diversity of experience, even if it means bringing in people external to the firm. With the right non-disclosure agreements it can be done, and by introducing externals with the appropriate expertise to assess the R&D project – and people with no relationship to the applicants – ideas with greater novelty, and more value to the firm, are more likely to get backed.

 

The full version of this article can be found on IB Knowledge.