I was at the Front End Innovation Conference in Boston put on by the PDMA this week and heard some terrific presentations. One quick conclusion from several of them is this: CEO’s comfortable with Six Sigma and reducing risk may be wrong in seeing innovation as increasing risk.
Now it is true that risk-taking is an important part of the design culture (central to innovation today) as opposed to the risk aversion taught at most B-Schools. Yet in the practice of design, especially at the fuzzy front end with consumers, risk is actually reduced.
Why? In the past, innovation meant companies developing new products by having their scientists, engineers and mathematicians (in finance) cook up new ideas in labs, toss them over to the product development and marketing folks to shape them and then throw the stuff at consumers—hoping the products/services would be embraced. Now, this is really risky.
Compare that to what increasingly happens today—inverting the innovation funnel. Companies first use ethnography to observe actual consumers’ behavior (seeing what they do, not what they say in focus groups), take the information to determine unmet needs and move back to the scientists and engineers (around the world, not just inside the company) to come up with new products that satisfy them. With this knowledge, new products are developed and offered to consumers in the marketplace. Now, this kind of innovation process actually reduces risk.
Indeed, as companies increasingly co-create with consumers over time, the risk of innovation is further reduced.
So we should be re-thinking the whole risk-reward equation when it comes to innovation. In the past, we talked about high-risk, high reward. Now perhaps it should be lower-risk, higher reward.
What do you think?
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