Economic Considerations

Innovation expert Scott Anthony says IT execs need to push the immediate benefits on new technologies, even if they’re difficult to see.

Some experts strongly believe businesses need to invest heavily through an economic downturn or suffer competitive setbacks. So you agree?

One of the challenges, though, is you can easily measure the returns you get from slashing innovation programs--you can say, these things aren't going to pay off for a few years anyway, and we cut X percent of our budget. Knowing precisely what that catch-up figure is going to be, or what the contributions of those programs are going to be, often times is frustrating and difficult.

There's a whole general theme that because innovation is so difficult to measure, it can lead to companies making the wrong decisions. You'll take something that's measurable over something that's not, even if the thing that's not measurable has much greater long-term impact.

There are tools that are beginning to emerge that can at least put some parameters around what an early-stage innovation might be worth (prediction markets, etc.). In the long run this problem will go away. But it's a lot easier to focus on things you think you can control, even if you really can't.

CIOs say it's a challenge to justify new technologies because much of it hasn't been done. Is that a problem for IT folks or blunt reality?

It's a real problem, and it affects a lot of different parts of innovation. Markets that don't exist are incredibly difficult to measure and analyze; with technology that's never been used before, it's hard to understand exactly what kind of impact it's going to have. The thing you can reasonably guarantee: any spreadsheet you put together to show the impact of a new-to-the-world technology is almost always guaranteed to be wrong.

We advise our clients, in these circumstances, when they're trying to launch products into new markets, is to say, instead of relying on what are surely faulty forecasts, go out and create the data. So if CIOs are thinking about adopting a technology and have no idea what kind of return it's going to provide, run a pilot somewhere in the organization. Don't run it throughout the whole organization, but run a localized test so you can begin to see what happens once these things get into people's hands. For so many of these things, you can't predict what users will do; you can't predict what kinds of impact they'll have. The only way to know is by playing with the technology.

Some of the product-based companies we've worked with have realized that the only way to get reliable forecasts for a true disruptive innovation is to go out and have people pay money for it. Even if you do the best market research you can, the margins of error are so huge, because people can't really understand it until they touch it and play with it.

This article was originally published on 06-05-2008
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