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Corporate Innovators’ Risk-Reward Dilemma

Market leaders and incumbents not only have a problem with innovating their products. They also have a hard time to adopt innovative working methods, despite their better performance.

risk vs reward

 

 

By Hubertus Hofkirchner

This month at the Insight Innovation Exchange in Amsterdam, a market researcher from Nestle described an intriguing dilemma which corporate market researchers face. He observed that the risk when failing with an innovative approach may outweigh the reward when succeeding with it. The other panelists, all seasoned research pros from corporate giants like Amazon, BBC, and Mondelez, nodded knowingly to this.

I got curious as a crucial piece of information was missing. So I asked the panel what their organisation’s typical reward for a successful research project actually is. There was a big silence on the podium. One panelist scratched his chin, thinking. Another shook her head. A third sought inspiration from the ceiling. Something had to be said, so finally one of the group ventured an answer, questioningly looking at the others: “Our reward is … a big relief that it is over?”.

This evident lack of an upside for in-house innovators is compounded by the usual organisational resistance to change. Traditional research methods remain in wide use not because they work so well – we know they do not – but because of the lure of habit. In the coffee breaks at IIex several researchers vented stories of frustration. They would love to apply a better new methodology – something from IIex – but face pushback from generalist higher-ups who insist that some long-known traditional approach must be applied “to be on the safe side”.

It is ironic that these interferences will result not in more safety but in its very opposite. My regular readers will need no reminder of the empirically proven inaccuracy of traditional questionnaire and interview approaches for forward-looking research questions. It should come as no surprise when unreliable results remains unused, collecting dust in some drawer. Very often nothing changes on the back of research, as O2 UK researcher Nick Milne reports. A study’s true measure of success is its influence on better client decisions, the much coveted turning insights into action.

So we need a better solution to make top management, project sponsors, and the organisation understand, appreciate, and apply valuable study results, but how to go about this?

I propose that you simply have them bet on it. Organise a virtual in-house prediction market just before a research project commences. Ask internal decision makers and knowledgeable staff to place virtual bets on what the future will bring and how alternative plans will work out. Then you go about your research, using the organisationally accepted traditional methodology but clearly stating your concerns and your recommendation to use a better method.

Once this internal prediction market is set up, the forthcoming insights from your research will be awaited as eagerly as never before because your results will provide the first indication if their bets are in the money or not. If the results are plausible and insightful, every participant will act rapidly based on your findings, first by adjusting their own virtual bets and then by modifying their real project plan. Should the results inspire low confidence you get the perfect opportunity to educate the organisation about better innovative research methods available in the year 2016.

The organisation will benefit from your in-house market in any case. Trading on the prediction market will produce a team consensus on what is expected to happen and how to proceed. Everybody will pull in the same direction which reduces internal friction and fosters cooperation. While the chosen plan is being executed, participants will regularly change their bets according to their opinion about the joint progress. Top management will start to watch these revised forecasts for early signs of success or failure.

Your hero moment is when the actual results of the executed plan come in. Real-world outcomes are the irrefutable proof of whose predictions were right or wrong. It is a time of celebration and reward. This time, your research will not be long since forgotten. It will have been an integral part of the entire project, right up until the very instant of success.

My clever and perceptive readers will have noticed that they have just successfully introduced a new research method, which leverages their organisation’s collective intelligence. Yes, I propose to fight a lack of innovation with yet another innovation. I will not deny it, I will bet on it. I bet that at one of the next IIex’s, we will hear a happy story how an innovative corporate researcher has escaped the risk-reward balance dilemma.

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One Response to “Corporate Innovators’ Risk-Reward Dilemma”

  1. Charles Shillingburg says:

    April 1st, 2016 at 11:50 am

    Really? Wouldn’t it be better if Research Departments and their work were an active part of day-to-day operations helping decision making and actions taking by providing, relevant Just-In-Time information rather than slow, historical information that ends up being judgemental of past decisions, rather than being forward looking, predictive, iterative (Agile) and self-validating?

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