How to Search for and Select Innovation Projects
Managing innovation requires generating lots of ideas and saying ‘no’ to potentially good innovation projects so you can pursue those within the bounds of your resources, capabilities and strategic direction.
You can’t afford to innovate at random or pursue all potential innovation projects – you must select those that match your circumstances and achieve your goals.
Innovation is a matter of resource allocation. Without allocating resources, innovation doesn’t happen. By deciding to allocate your resources to one cause, you effectively close off other innovation projects and create lock-in. This isn’t easy.
Innovation Project Search and Selection
To develop innovation as a core competency, you need to establish suitable innovation search and selection processes to allocate your resources where they will count most.
Regardless of whether you start your innovation journey with a single or several innovation projects, the search phase establishes the routines and activity needed to generate as many innovation opportunities as possible within a range of search areas.
By contrast, the selection phase aims to filter those opportunities into a suitable ‘portfolio’ of innovation projects – those most suitable for commercialisation.
Innovation is best conducted by generating many ideas and constantly filtering them into a portfolio of innovation projects (that align with your innovation strategy). Then you can launch those that make it through the entire selection process. Some key questions to address during your opportunity selection process are:
- What could we do (what are our knowledge-push or need-pull opportunities, and which could we feasibly achieve)?
- What should we do (what are our distinctive competencies, will we strengthen them further or do we need to build new competencies)?
- Do we want to do it (does it fit with our overall business and innovation strategies)?
Idea selection can be more challenging than idea generation because you need to weed out ideas that:
- Don’t have sufficient merit (which ones do you dismiss?)
- Don’t currently meet your needs (which ones do you save for later?)
- Meet your needs, but you’re forced to ‘kill’ them because you can’t do everything (you have limited resources and can focus on only a few things at once)
Innovation Project Selection Involves Trade-Offs
The filtering and selection processes require you to make trade-offs – that is, making hard choices about what you will and won’t do.
Once made, these choices create a ‘lock-in’ that prevents you from pursuing other things. That is, the particular choices you make often exclude you from making other choices (the trade-off).
You need to take care when you make material choices. The opportunity cost may be significant, and you may severely limit your ability and willingness to change course or pursue other innovation projects as lock-in increases. These risks need to be well managed.
Innovation and Uncertainty
Idea selection is challenging because it typically involves making trade-offs in an environment that involves a lot of uncertainty.
By its very nature, innovation is about the unknown. Innovation requires you to work with uncertainty – to make choices when you have limited information and knowledge.
This makes idea selection a potentially perilous and costly exercise (especially if you don’t follow the right processes for reducing uncertainty and incrementally increase your resource commitment).
At the idea development stage (early-stage innovation projects), uncertainty about an idea’s future prospects can be very high.
It’s only with additional time and after committing the further resources required to investigate and develop an idea that uncertainty about its future prospects reduces.
Instead, you need procedures that manage your resource allocation process in a controlled and measured way as you seek to reduce uncertainty.
Learning and Uncertainty Reduction
Learning is the key to lowering uncertainty. You must research, experiment and test to learn, build knowledge and ultimately reduce uncertainty and risk.
- Action – research, experimentation, testing
- Reflection – reflecting on outcomes
- Revised action – improving based on learning
The quicker and more cost-effectively you can learn, the more rapidly you can reduce uncertainty and risk. Consequently, idea selection goes hand in hand with progressive learning and controlled resource commitment.
Innovation Routines
As learning progresses, you can allocate additional resources to innovation projects that satisfy the necessary requirements for continued investment.
Ultimately, managing innovation is a delicate balance between:
- The cost of continuing investment in projects that may fail
- The danger of killing high-value opportunities too early
It’s best not to make these decisions on an ad hoc basis. Establish a structured approach with clear decision points and agreed rules about when to proceed and desist.
If you’d like to learn more about searching for and selecting the right innovation opportunities, call Fortitude Business Consulting on 1300 551 040.