Are You Killing Enough Ideas?

Are You Killing Enough Ideas?
Zia Khan and Jon Katzenbach
Strategy+Business, Autumn 2009

Right at this moment, a group of senior leaders of a large global company are wondering why they aren’t innovating enough. Yet, the biggest problem many companies face isn’t a lack of good ideas. Instead, the real challenge is that they are still wasting resources on ideas that should have been abandoned a long time ago.

As the authors explain in “Are You Killing Enough Ideas?” in the Autumn 2009 Strategy+Business, this problem occurs because most companies have two parts — a formal organization and an informal organization.

Production is largely governed through the formal side, which includes decision rights, reporting structures, and corporate metrics. These elements enable a business to be disciplined and efficient.

Creative work, however, is typically done by the informal side — the part that doesn’t exist on paper but that influences behaviors through shared values, social networks, and commonly held ideas. These factors motivate an organization to be flexible and responsive.

Because real innovation requires that good creative ideas be efficiently launched, a balance between the formal and informal structures is critical. If “creativity is king” and teams are encouraged to chase every idea, there will be a great deal of waste in the system. Winners for the final rounds of funding will be chosen on the basis of informal relationships rather than what’s best for the customer.

On the other hand, if the organization is weighted too heavily on the formal side, new ideas aren’t allowed enough time to develop. They are subjected to decision criteria similar to those used for running the existing business. This results in a bias toward incremental innovations that resemble the existing products, rather than breakthrough innovations that might require a new way of operating.

A successful innovation strategy requires a balance between the formal and informal sides of the organization. If this balance is right, there will be a high number of losing ideas. This shows that the enterprise is creatively generating enough ideas, evaluating them to predict which will be successful, then applying internal discipline to drop support for those that won’t work while shifting time, money, and attention to driving the best into the market.

By contrast, when there isn’t a good balance between formal and informal sides, no one plans the next steps for the losing ideas, to put them to rest, free up their supporting re...