Principles of Innovation Actually Applied in Practice

Chris Kay
Chris Kay
Jun 14 · 5 min read

I was having coffee with a management consulting friend when we got into a discussion about the best practice principles that underpin good corporate innovation activities. During that discussion I Googled “McKinsey Innovation” as I was curious to know what the global thought leader had to say on the topic (go ahead and do the same, I’ll wait). Here’s the top link for that search The Eight Essentials of Innovation. After reviewing the list and reading the article I felt underwhelmed, as this was a list of abstracted verbs not anything essential or even tangible:

  1. Aspire
  2. Choose
  3. Discover
  4. Evolve
  5. Accelerate
  6. Scale
  7. Extend
  8. Mobilize

I’ve decided to compile my own list of best practice principles in corporate innovation that can actually be applied in practice.

These following concepts are not groundbreaking insights to any rational individual, but I find them often overlooked by senior corporate innovators and leadership. This list is inspired by a mosaic of codified best practices in building startups and technology, as well as lessons I’ve picked up from over a decade of my experience spanning investment, startups, and innovation.

When being innovative you are doing or creating something new. When doing something new, as humans can’t predict future outcomes, uncertainty and lack of information dictates that the chances are that you will be wrong more often than you are right. This is why venture capitalists have a portfolio of bets, knowing that not all investments will be successful.

To reinforce these principles below I have included excerpts from Jeff Bezos’ 2014 Amazon Shareholder Letter and an article from Nassim Taleb, former derivatives trader and Author of Fooled by Randomness, The Black Swan, and Antifragile:

Principle 1 — The heart of innovation is experimentation and learning.
As Eric Ries, Author of The Lean Startup would say (borrowed from the Scientific Method) “Build — Measure — Learn”.

Principle 2 — When experimenting, you will be wrong more often than you are right. Uncertainty and lack of information dictates you can’t predict future outcomes.

Principle 3 — There is information in both failure and success. A failed experiment should be seen as buying learning and avoiding further costly mistakes. Pre-mortems, post-mortems and a strong feedback loops are also required as part of the “Build — Measure — Learn” process.

Principle 4 — Have a portfolio of cheap experiments. As venture capitalists understand very well, not all investments payoff. Having a portfolio of cheap experiments means when an experiment fails you are wrong by a little and have other options for success.

Principle 5 — Double down on your winners. Be wrong by a little and right by a lot.

Principle 6 — Maximize the frequency of iteration to adjust strategy and increase the rate of learning. Experiments need to be long enough to learn something, but should be short enough to maximize frequency of iteration: the more iterations, the more feedback loops, the more you learn in a shorter period of time.

Principle 7 — Balance speed and risk. By reducing the scope of an experiment, you can reduce the downside risk if the experiment fails, as well as increase the frequency of iteration and speed of learning.

Principle 8 — Use a barbell strategy — A barbell strategy is used by financial derivatives traders to balance short-term protection with long-term speculation. If an innovation strategy is only focused on long-term results (e.g. 5 years out or flying autonomous cars), as budgets tighten it gets harder to justify your budget to the CFO after two years with no tangible results. Innovation departments should balance solving short-term business problems and generating tangible ROI, with protecting the business against long-term macro trends.

Principle 9 — White space allows for positive black swans and non-obvious solutions. The uncertainty in an experiment can also yield a positive unexpected outcome.

This is not an exhaustive list, but when these principles are combined into a cohesive innovation strategy they can yield very effective results.

Multiplicity

Multiplicity is a Toronto based startup lab and corporate innovation consultancy. Learn more at http://multiplicitylabs.com

Chris Kay

Written by

Chris Kay

Chris is the CEO of Multiplicity. Chris has over a decade of experience spanning investment, startups, and innovation.

Multiplicity

Multiplicity is a Toronto based startup lab and corporate innovation consultancy. Learn more at http://multiplicitylabs.com