Can concern for ROI stifle innovation?

July 25th, 2019 5 min |


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“Even if GLab hadn’t delivered a single product in the past three years, it still would have been a worthwhile venture because everything we learned along the way has set us up for a bright future.” As GSoft’s chief financial officer, Jean Gabriel Crevier is well positioned to defend this radical position on innovation. It’s just frosting on the cake that the innovation lab has come out with key technologies for GSoft’s ShareGate and Officevibe brands, and is in the process of developing new products to shape the world of work. He and Guillaume Chalifoux, GLab’s Product Marketing Director, weigh in about performance indicators for tracking innovation.

“Our goal isn’t to hit as many balls as possible. Our goal is to hit a home run.”

Tracking, not trampling

According to McKinsey, 70% of business leaders say that innovation is one of the top three priorities for their company, but only 22% have established metrics for measuring innovation success. If you don’t set clear KPIs at the outset, there’s a good chance that your executive team, investors and shareholders will turn to the measure they know best: return on investment (ROI).

If you’re always being asked “When will this initiative start turning a profit?” or “How much can we expect from this?”, then you’re reporting to people who are focused on short-term investment returns. While ROI is great for measuring the effectiveness of existing business models, it is terrible for measuring the effectiveness of new business model discovery (Malloch, 2018).

Other frequently used metrics are: earnings, number of projects and number of new ideas. But in a 2017 interview, Scott Kirsner, the President and CEO of Innovation Leader, explained that these criteria can crush creativity before it has the chance to grow. Instead, he recommended these pro-innovation metrics:

  • Innovation magnitude: financial contribution divided by successful ideas
  • Innovation success rate: successful ideas divided by total ideas explored
  • Investment efficiency: ideas explored divided by total capital and operational investment

Jean Gabriel isn’t convinced that these metrics make sense. At least not for a company that aims to create technology products that will revolutionize the workplace. “It would be a mistake double the size of GLab’s team in order to generate twice as many projects. These rates don’t mean anything! For example, let’s suppose the lab only has a 1% success rate, but the winning idea is so good that it can carry the company for the next 100 years. That would be terrific! Our goal isn’t to hit as many balls as possible. Our goal is to hit a home run.” “It’s all too easy to use these metrics as bragging points,” warns Guillaume. “My concern is that it would kill creativity. If everyone focuses on generating numbers to please upper management, we might end up censoring ideas before they get off the ground.”

Driving innovation with discipline

As a self-governing, profitable and independent company, GSoft is free to create its own innovation sandbox and measure its returns on its own time, using whatever metrics it wants. “The fact that the lab reports to our CFO is amazing,” says Guillaume, “simply because he has the right mindset.”

How does GLab promote successful innovation? With a disciplined approach that involves:

  • Ensuring that each offer includes new technology. “We don’t want to keep falling back on the same solutions,” says Jean Gabriel.
  • Keeping roughly 12 employees (4% of the company’s total workforce) dedicated solely to GLab projects.
  • Maintaining a fast pace with new products developed in just 3 to 4 months.
  • Setting financial limits. “We’re a company so we need to be creative using limited resources,” explains Guillaume.
  • Making sure each initiative is driven by an industry need and making time for enough feedback loops.
  • Developing in-house expertise on technology, as well as on business models and methodologies.
  • Seeking input from rational optimists who aren’t afraid to fail today knowing it can lead to growth tomorrow.

“These practices help us keep an eye on the goal, without specifying which path will take us there,” explains Guillaume.

Sidestepping pitfalls

“Embracing a no pain, no gain approach isn’t always easy or intuitive,” says Jean Gabriel. But the most successful projects often come with their share of hard-earned lessons. Since GLab opened its doors in 2017, Guillaume and Jean Gabriel have noted a few pitfalls that can derail innovation:

  • Allowing too much financial freedom. This can result in too many concurrent projects and fragment the team’s focus.
  • Getting attached to a product. The risk is that you slip into too many feedback loops and lose the perspective needed to recognize when it’s time to pull the plug on a product.
  • Having a short-term vision. When this happens, certain products might never be given a fair chance.
  • Seeking instant gratification. Ultimately, this is innovation’s worst enemy.

What’s the verdict on ROI?

“It’s not necessarily a bad thing. After all, you want to be able to prove to investors that innovation generates value. If everyone understands that innovation delivers long-term benefits, not just short-term sales, then it’s safe to include ROI as one of many metrics,” states Guillaume. “Essentially, it’s useful if you zoom out,” concludes Jean Gabriel.

GLab has created an innovation sandbox complete with tools and guidelines enabling its multidisciplinary team to come up with new features and products that go beyond incremental innovation and revolutionize the market. On October 2, 2019, Guillaume Chalifoux will tell audiences at the Coopérathon Kick-Off about his successes, failures and lessons learned.

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