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Bet Small to Win Big (Max Mckeown The Truth About Innovation)

Bet Small to Win Big (Max Mckeown The Truth About Innovation)

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Published by Max Mckeown
The Truth About Innovation
The Truth About Innovation

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Published by: Max Mckeown on Feb 07, 2011
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02/07/2011

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Bet Small To Win Big

You’ve seen the big picture, haven’t you? The typical big company wants big products. They want big ideas. If they’re big shots with big balls then they place big bets on a big future. No one wants the small project. Or to be the small project manager. Who wants to do that? Problem with the big bet approach is that you are limited to a small number of guesses. You are forced to choose too early. Judging winners and losers before the race begins. Putting all your eggs in one big basket. Or worse – putting all your faith in one egg. Most of us accept the common sense notion that risk should be spread. For some reason it is hard for most companies to spread that risk by sharing out the ‘risk dollars’ between many small projects. Some leaders seem to find it easier to bet big on their own hunches than to bet on their people. A few years ago, Whirlpool decided to make a big bet on innovation by making hundreds of little bets. Instead of investing half a million dollars each on a few ideas they learned how to take smaller calculated risks. The choice was no longer all or nothing. It was 20 million dollars in 400 bite-size chunks of $25,000. Enough money to test ideas, engage small teams of people and do enough learning to inform future funding decisions. The little bets now bring in $1 billion a year. Betting big has other, less obvious, disadvantages: Most of the time, a big project develops a life of its own. No-one wants to take the decision to write-off all the money wasted so far so it becomes a zombie project – using up resources years after it is unnecessary or unwanted. Often by the time a big project is completed the advantages of starting it are no longer relevant. Competitor products have overtaken the original objectives so that even if the big project succeeds it will fail. Bizarrely, a big project is less likely to have rigorous criteria for investment than a small project. A big boss does not have to justify his big decisions. And, a big decision is less clearly defined than a small decision because there is simply more of it to define.

Betting small helps in a number of ways: The safest investments are those that start to pay off soonest. Even better are those that inform the next round of investment decisions. A small project may develop into a big project having contributed to the success of the company. The small bet allows more people to contribute. It engages their talents and goodwill. It encourages them to experiment with comfortable levels of responsibility. Not all ideas require huge amounts of funding to take to market, or benefit from a large amount of money in the early stages of development. They can be ruined by the weight of expectation, and the rush to justify expenditure. Toyota believes in betting small to win big. In one year, its employees suggested over 750,000 ideas for improvement. The company then implemented over 80 percent! In isolation, most suggestions were small and incremental. The total impact of quarter of a million improvements is to strengthen their culture of innovation – getting better is a habit gained through repetition. Sony’s success with the Walkman showed another side of betting small to win big. It did not know which combination of features would most appeal to customers so it developed over two hundred different models each available in different colours. The resulting thousands of variants each represented a small bet that allowed them to find out what customers wanted by offering them choice. All or nothing bets are only wise when the future is certain. If winning is certain then bet everything. If there’s nothing to lose then bet everything. Since the future is not certain the best choice today is usually the one that will leave you free to make most choices tomorrow. This is because you do not know what choices will be attractive tomorrow. You may change. You may learn something new. The future will change what works and what does not. Too many attempts to innovate fail because all the resources are used up before the successful solution, the magic formula is found. Making as many small bets as possible increases the number of attempts possible and keeps options open.

References Snyder, NT, Strategic Innovation: Embedding Innovation as a Core Competency in Your Organization, 2003, Jossey-Bass Business & Management Rosenhead, J (Ed.),1992, Rational Analysis For A Problematic World: Problem Structuring Methods for Complexity, Uncertainty, and Conflict, John Wiley & Sons Liker, JK, The Toyota Way:14 Management Principles From The World’s Greatest Manufacturer, 2004, McGraw-Hill

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