Don't expect managers to be full of ideas

Nov 04 2005 by Nic Paton Print This Article

The notion that organisations are full of shy managers simply bursting with money-spinning ideas if only they were asked is a myth, research has suggested.

A study by research group H-I has concluded that trying to force out ideas for new products and services is unlikely to reap rewards.

Its in-depth study of 50 successful new business initiatives found that not a single project was the result of a management desire to "get more ideas on to the hopper".

The report, which studied 150 international corporate venturing efforts in total, warned against quick-fix solutions and concluded there is little evidence to suggest lots of ideas lie hidden in the minds of managers waiting to be released.

Companies instead would be much better advised simply to create a culture that promotes a natural flow of ideas.

This in turn often comes about as a result of concentrating on developing a strong core business.

Andrew Gaule, co-author of the report, said: "The challenge of unlocking new ideas in an organisation is not easy and something which frustrates many directors.

"However, it is quite clear that innovation needs to be a part of the natural operating processes of a business, not a hastily fashioned bolt-on," he added.

Many businesses, he argued, set up specific corporate venturing units, which invariably produce a lot of ideas.

But more often than not, these ideas will not work within the existing business and therefore will not produce any tangible value.

"The best ideas come from a corporate culture where innovation is encouraged and co-exits happily with the day to day operational side of the business," said Gaule.

"There is a fine line between attempting to force innovation and ensuring that there are systems and processes in place to both capture and capitalise on good ideas, but companies need to find that balance," he added.

"In short the flow of ideas should be natural; the process for capturing and developing those ideas should be systematic," he concluded.

The report also offers guidance for companies to meet the difficult and somewhat conflicting challenge of improving "top-down" processes to help the natural flow of ideas.

"Often the best ideas come from people that are close to the market and understand both the competition and their own core skills, but have the 'sponsorship' of a senior member of the company," said Gaule.

"Innovation by its nature needs a certain amount of ambiguity and leeway. However, directors also need to know where to put a stop to a project that is not going to deliver value," he added.

The report also identified the eight most common pitfalls for companies attempting to innovate.

The first is mixing targets and innovation. Managers under the pressure of "new business targets" work to reach that end and that end alone, meaning that the viability and levels of risk in opportunities aren't given due consideration, it suggested.

Then there is the curse of too much thinking "outside the box". In the quest for creativity, not enough attention is paid to why the company is likely to do better than average in the opportunity identified.

Managers, the report recommended, needed to think about what the business can offer the new venture and what the new venture will offer the business.

There there is the problem of "carpet bombing". Too many companies launch into numerous schemes instead of pinpointing a lower number of quality targets, said Gaule.

Based on the research, companies that choose only a few new business ventures and are selective in their approach were more successful.

The next pitfall was "being ignorant of ignorance". Too many managers fail to consider the learning costs (in other words the costs of making mistakes from inexperience).

Most successful new business initiatives examined in the research were in situations where either the sector was "new to world", meaning that all competitors had an equal amount to learn, or where the company had sufficient knowledge of the new sector to keep learning-costs low.

Next, firms needed to bet on the track and not the horse. It is a common error for companies to get excited about the next big thing without considering whether it is right for their business, suggested Gaule.

A classic example of this was the era, where for many companies normal business sense was ditched in favour of hype.

Ordinary managers equal ordinary results, Gaule added, while innovation needed exceptional and unusual managers.

If insufficient attention was paid to the comparative quality of managers leading the project against market competitors, then the project was unlikely to succeed, he said.

Burning the candle at both ends could be detrimental to an organisation's health, he advised.

Too many companies failed to take account of how the core business would suffer as attention shifted to the new business.

The negative impact on the core must be taken into account before plunging into a new venture.

Finally, companies needed to be wary of pride coming before a fall.

Successful companies could be overly confident in their abilities and unable to assess clearly whether a new venture is right for the business and the business right for the idea, said Gaule.

Gaule concluded: "If you look at some of the best new ideas in recent history, a fair number came as a result of being in the right place at the right time.

"There's no amount of planning that can legislate for the element of chance, but certainly companies can do more to make their own luck," he added.