Create Entrepreneurial Teams

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Create Entrepreneurial TeamsIn our personal as well as business life, change is the constant sculptor. Indeed, entropy is the primary force that drives the Universe. It’s a fact. The paradox is that human beings generally don’t like change. We crave the security of the status quo and yet are attracted to new and interesting possibilities. But therein lays the risk; what if things don’t work out?  Deep inside humans fear bad outcomes. It’s a survival thing. Lose and get eaten. But, losing is not a zero sum game. Indeed, the truth is that success usually comes on the heel of failure.

Winners take that sinking feeling of losing to motivate another shot at success rather than let the negative emotion of a bad outcome force giving up. It’s all about attitude.

Failure is an opportunity for learning. Of course, there are some circumstances-like piloting an aircraft- when the loss precludes any learning and the ability to leverage any lessons learned (death). But for the most part, failure is not fatal. So, what’s the big deal if success can be the ultimate result of failure?

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When deciding whether or not to risk failure, most humans do a form of cost-benefit analysis. As we humans are emotional beings, often the cost of failure is measured is measured or felt in terms of early emotional memory and early experiences with either failure or success.

How a parent, friends or teachers reacted when we were very young can determine those deep feelings and how we react now. Even when we have access to objective data and past experience, our formative experiences can dissuade us from taking a risk that may provide a gain much larger than the risk. It may not be so much a matter of logical cost-benefit rather an emotional cost-benefit analysis that underlies a decision. Indeed, the more people that may know about your failure, the more it can negatively weigh on emotional cost of potential failure.

Top corporate and political decision makers ultimately may make “rational and objectively based” decisions not to go forward with change but those old emotions may be subconsciously twisting the decision. If we fail, it will reflect poorly on management and may result in looking bad and ultimately risking the job, status and income achieved over a lifetime of hard work.

This is perhaps the main reason that small companies and entrepreneurs produce most of innovations. If they blow it, they don’t really have anything to lose except money and time.  I think we can all agree on this pop psychological assumption.

Indeed, on the entrepreneurial level, it is usually individual ego and emotional reaction to failure that can make the big difference in future success… an entrepreneur. However, most established hierarchical organizations create much greater risk-reward consequences when it comes to making changes. Indeed, stockholders don’t like uncertainty and certainly an entrepreneurial management team can be a real threat for investors.

Create the Entrepreneurial Spirits

The reality is that most decision makers in an organization are risk averse. As a result, there is usually resistance to new innovative ideas.  This attitude stunts innovation and proactive thinking. Indeed, if you talk to innovation consultants they will tell you that great ideas are rarely acted upon if they remotely involve political risk for decision makers.

However, there is a way to tap into the creative and innovative by creating a committee or department that is given the mandate to experiment and fail with no repercussions. If set up correctly, the failures will be politically deniable and the victories attributable to innovative management.

Employees and staff at all levels can provide a wealth of innovative ideas but usually have no outlet or incentive to pursue their ideas. For some reason, we believe consultants more than the credible ideas of our own people who work with the product or service on a daily basis. This is probably true because outside consultants pose less of a problem if they are wrong.

Management can tap into their employee corps knowledge and creativity by developing a team devoted to new concepts and ideas without fear and with incentives. Indeed, innovation teams can be drawn from specific ranks depending on the project and goals.

For example, if a new marketing idea needs to be developed, an innovation team can be set up that involves employees from various departments-not just marketing. A production line worker may know ways to improve an existing product; a sales person may have ideas that they don’t want to share with others because there is nothing in it for them to share. If an innovation team is given a budget, time frame and an incentive, the financial risk can be controlled. If a new successful idea comes from the group, they should be able to receive a percentage of ROI above breakeven for the project budget or a share of additional profits related to the idea.

The innovation team for any project should be held in particular esteem for its successes and no mention of its failures. It should be an honor for employees to be selected for an innovation team. Unsuccessful teams are thanked and disbanded. Indeed, innovation teams are set up on an as needed basis and are not the same as the R&D department. Overtime, a company may uncover staff with exceptional innovation abilities that would otherwise go unknown…even to themselves. What a valuable intangible off-balance sheet asset that would be!

Success-Failure rates for innovation

The 80% new product failure rate is a myth. Create Entrepreneurial Teams 2

The 2004 Best Practices Study by the Product Development & Management Association (PDMA) (Reference 2) found differences in failure rates between industries, ranging from 35% for healthcare to 49% for fast moving consumer goods.[1]

But the concept of “success” can have many definitions. In a paper by the Balanced Scorecard Institute success is defined as it relates to innovation in the following manner:

Innovation is defined as the process of ideation, evaluation, selection, development, and implementation of new or improved products, services, or programs. And the intended results of this objective are:

  1. Increased number of new ideas
  2. Improved quality of ideas
  3. More efficient implementation of quality ideas
  4. Improved resultant success achieved from the implementation of new ideas.

Measuring Product/Service Innovation

A performance indicator that meets the above-mentioned selection criteria requirements and captures the four intended results listed above is Return on Product Development Expense, or RoPDE™ (pronounced “roh-pee-d’ee”).

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At a time when innovation is essential for survival in the competitive global marketplace, management would be well advised to consider establishing an organizational annex that exempts innovation teams from the politics of failure. Indeed management should have a mindset of failure is an effective learning tool within the context of the innovation process.

The entrepreneurial spirit should be fostered and rewarded. Incentives and metrics can be developed to measure and reward. By setting up ad hoc innovation teams can tap into the knowledge and creativity that exists within most companies-if looked for. As an ultimate goal and by-product of innovation teams, a company can discover and develop staff with exceptional innovative and creative capabilities.

History is filled with unremarkable resumes that have produced remarkable contributions. In fact, exceptional managers are those with the ability to develop the people around them. Innovation teams-given time, freedom from politics and budgets- can very well prove to become an essential part of corporate strategy and survival.



Additional Reading

Problem Solving is not a Zero Sum Game

Introducing Generation Z


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