Advice to Innovation Boards: Don’t Make Decisions
Every big company has a group of high-ranking people — usually C-Suiters and C-adjacents — who meet on a regular basis to decide if innovation projects live or die. Innovation projects need funding, people, and time, and it’s this group that decides where those resources go, essentially defining the future of the organization.
I’ve heard this group referred to by a number of titles, ranging from innovation steering committee to growth board. But since it is a board that’s responsible for innovation, I call it the innovation board. (Full disclosure, I am writing a book called Advice to Innovation Boards, so it would be great if the entire world could start using this term please, thank you.)
Innovation boards get together monthly or so to make decisions about allocating these resources. That’s their only purpose. But it’s not the job of the innovation board to make decisions. It’s the job of the innovation board to recognize how these decisions have already been made before the meeting even starts.It’s not the job of the innovation board to make decisions. It’s the job of the innovation board to recognize how these decisions have already been made before the meeting even starts. Click To Tweet
Most executives feel like making decisions is their entire reason for being. This authority is what justifies their high salaries. But when investing in innovation projects, executives should think less like visionaries and more like strategists.
Strategists don’t make gut-level decisions. They follow the data that directs their actions when they approach decision points. Decisions should be made by the party with the most information, and when it comes to innovation projects, the party with the most information is not the board, but the innovation team.
Innovation board decisions should be made according to the data the innovation teams derive from their experiments. If the data shows that the experimental assumptions and hypotheses are valid, the project should likely persevere. If the data shows that one of the assumptions was invalid, the project should likely pivot. If there are too many issues to fix with a pivot, the project should be put out of its misery.
Projects that reach the innovation board should be at a very specific decision point that offers one of these three possible options: persevere, pivot, or kill. And these options should be based on an impersonal look at the data — in other words, the decision should make itself.
To make a decision to persevere, the most critical assumptions of the project should have been proven valid. If even one assumption is off, the project needs to pivot to compensate.
If the customers don’t like the value proposition, change the value proposition. If they don’t use the marketing channels, change the marketing channels. If they can’t pay the price, you need to figure out a different way to monetize the service.
There may be some disagreement about the interpretation of the data, or even its weight in the decision-making process. An innovation board may think a project is strategically significant, providing value beyond its immediate scope as an income-generator, such as raising the brand value or burnishing the company’s image.
But this information should have been presented to the innovation team as part of their mission. A team that lacks strategic context about its project can’t do its job properly. Telling a team to find ROI on a project without telling them that the ROI is a secondary objective to reducing the carbon footprint of the company is not being given the information they need to truly innovate.
It’s not hard for the board to convey strategic rationale for a project to the innovation team. But it is hard for the team to convey the intuition and empathy they’ve acquired about customers to the board. Teams spend months interviewing and experimenting with customers and solutions. To convey this to a board In a 15-minute board meeting is an impossible task.
If the innovation board communicates all of the relevant information to the team, including the strategic objectives, then the team can better determine if the project should persevere. Either the ROI data supports the project’s continued funding, or the project serves an objective beyond ROI and the team is just trying to determine the best execution. Either way, a properly informed innovation team — not the board — is in the best position to make a decision to persevere.
Listen to your team.
The more innovative the project, the less useful the innovation board is at offering suggestions. When it’s a project seeking to disrupt the existing system, a board member’s 20 years of experience becomes a liability.
Innovation boards always have less information than the team. The team is on the ground, talking to customers, running experiments, and gathering information. They don’t always know which way to go, but they usually know which way not to go. Board members are sipping lattes 10 miles away from the project. They rarely see anything first-hand, and have only a cursory view of the project’s scope.Once an innovation team has been given their marching orders — including the strategic context of the project — all they need from the investor board is their trust. Click To Tweet
I’ve seen first-hand the unraveling of startups because investors and accelerator managers told their innovators to pivot from B2C to B2B (or vice versa). This advice was usually based on self-interest or that they felt more comfortable with one business model than the other, no matter the product.
The innovation team should tell the board not only when to pivot, but in what direction to pivot. The board should listen.
Kill decisions shouldn’t even have to wait for the investor board to meet. If the team has six months of funding and they discover in Month 1 that the project won’t work, there’s no reason to drag it out and waste another five months. The innovation team should feel free to stop a project they know is a dead end. This not only saves resources that can be spent on other projects, but it builds trust with the board, knowing that the team is making proper economic decisions.
If an innovation board feels compelled to kill a project against the advice of the team, it is probably because they are making up for an earlier mistake. They may have made a poorly researched decision in the first place, or given a project unlimited resources.
Companies often don’t account for personnel or time expenditures the same way they account for monetary investment. A team could be out of money, but still have a project assigned to them with no clear end date. These are called Zombie Projects — they just linger in a sad half-life, waiting for some hero to put them out of their misery.
If investor boards make complete decisions and properly allocate money, people, and time, then projects should die on their own — either abandoned by the team or killed by a lack of further resources. There’s no need for innovation boards to play the executioner.
To Fund or Not to Fund
If teams are empowered to make decisions and not punished for shutting down an executive’s pet project, they will make the right choices for their company. It’s only when forced to choose between their careers and the company will a team choose their careers.
A properly focused innovation board insulates against this threat. The only decision the board should make is the appropriate level of resources for the level of risk involved. The board should decide on their risk tolerance, and then step back and let entrepreneurs place the bets.
- Decisions should be made by the party with the most information.
- The innovation board should communicate the strategic context and goals to the innovation team at the start of the project.
- The innovation board should allocate funds according to their risk tolerance, leaving the persevere, pivot, or kill decision to the team.
Want to know how to make persevere, pivot, kill decisions for your project? Check out our Team Coaching Program where our coaches help you design and debrief your experiments.