So, what's the solution? Well, the first step
towards the solution is to recognize that you need to offer an alternative system here,
an alternative way of going at this.
Executives are going to be deeply uncomfortable once they take this in,
recognize this bias, because
it appears to undercut their ability to hold people accountable.
When executives see this,
research finds they react in different ways.
One which is fairly common and which is not particularly
effective is to essentially endorse throwing away the plan.
Agreeing that the plan really wasn't consistent with
reality and thus assuming that innovation really can't be managed,
and it's hard to hold people accountable.
This undercuts your ability to build a rigorous learning process into the initiative.
So this is not the direction you want to go.
Another approach that's a little bit better is to go ahead and not to
push for aggressive plans in the way that you would in your established operations.
That way, people are generally optimistic about innovation initiatives
anyway and revisions downward are likely to be infrequent.
So, this bias you're trying to cut it off at the pass.
But this is a very incremental solution.
What's really lacking is an integrated approach that gets at the core of the problem,
like we discussed in the section on planning.
So, a more integrated approach here,
it's going to be built around a one core idea
and that's really going to be the thing I want you to
most walk away from and walk away from this lesson with.
And that is that you can hold people accountable in
innovation initiatives but you hold them accountable for learning.
The question becomes, did you follow a rigorous learning process?
Did you implement that task well?
And we talked about that in the section on
planning and I'll say a bit more here about what it is,
but the key is that this simple change actually has a fundamental effect.
It puts the focus on learning.
It moves it away from outcomes which is exactly what is needed.
Yet it still allows for accountability.
An executive can still work through a rigorous review of the innovation initiative.
In places where there aren't critical unknowns,
where we're relatively well informed,
we can go ahead and act as normal.
But in those critical areas where we do not know what the markets like,
whether the technology is going to work,
the executive can ask to measure progress by saying,
have we become more confident in our predictions.?
Have we done that? Have we reduced uncertainty so that we
have moved from wild guesses about what
things might be towards reliable predictions or at least reasonable estimates?
So, to develop this approach a little bit further,
accountability now is going to be based on questions like the following:
Did the leader take planning seriously rather
than disengaging from the plan to keep that plan as your baseline?
And did you maintain as the innovation leader and update a cause-effect model,
the kind we talked about in planning,
through an evidence based process with a learning orientation?
Did predictions get better,
especially for critical unknowns?
Did the leader make sure the team understood these things,
understood the model and the critical unknowns,
reacted quickly to new information?
Did the team maintain a learning mindset?
So, essentially the accountability around a rigorous learning process,
means that you can build a system of
valuation that fits the needs of the innovation initiative,
addresses that bias and yet is something that executives could become
comfortable with as a way of maintaining accountability in these important areas.
But I think you can see this is not going to be easy.
It's going to be fragile at first and it's going to take constant work.
So, now I can wrap up a little bit or
bring together the previous video and this one and say,
look, we've identified a problem where planning and evaluation of challenging
innovation initiatives are concerned and we've also sketched the outlines of a solution.
The central insight regarding the problem is that planning and
evaluation for challenging innovation initiatives involves learning.
It involves dealing with critical unknowns and so,
it has to be constructed quite differently than
in established operations where the predominant focus is on
delivering outcomes that the targets for them are based on reliable predictions,
the performance culture, and so on.
And I really want to emphasize,
this is the problem you have to reckon with.
Because planning and evaluation are central functions of management.
If you are proactive,
the regular systems are going to take over by default
whether or not you're in a separate unit.
Like in the ambidexterity scenario.
And that'll stifle your attempts to learn
from your innovation initiative and the experiments you are conducting within it.
Now, the insight behind the solution is that you build
that experimentation into the planning and evaluation system.
Essentially, you're planning in experiments around a model of reality,
a cause-effect model of reality where you've identified critical unknowns,
and you evaluate the results with a learning rather than the results orientation.
You take a rigorous approach all the way through.
That's the core of the solution.
And think about this,
you might have heard this phrase,
"innovation can't be managed."
This is quite common, I think.
And there's probably a lot of reasons that people say it.
But I think the core motivation is often this idea that you can't manage the outcomes.
You can't plan, you can't evaluate based on outcomes.
And the trouble with this statement is that it heads you
outside of a planning system and an evaluation system.
It essentially removes those two critical functions of management from the discussion.
And what you've seen here is the outline of an emerging better way.
This is something that the research is just really starting to grab a hold of.
Where the ideas that planning and evaluation systems
need to be adjusted rather than ignored.
You augment them and customize them for innovation.
So, I think this is an important area
for those of you who are involved in innovation initiatives.
And I've actually included some books that in
different ways get this idea among other things at the end of the lesson.