Innovation – a common answer to business challenges. How can my company gain market share? How can I succeed as an entrepreneur to steal market share from established competitors?
Yet, despite agreement on innovation’s importance, few get it right. Just take a look at the Fortune 500 list from 1955. Of the 500 companies listed, only 71 hold a place today. Over time, the majority fell behind, often because of an inability to adapt and innovate in shifting and emerging markets.
Innovation is difficult. Part of this difficulty starts with many would-be innovators sharing several misconceptions about the process of innovation itself. Let’s review some common myths of innovation and separate fiction from fact.
Myth 1: Innovation comes from isolated geniuses
When we visualize innovation, we often picture the lone inventor as someone much like “Doc” Brown from Back to the Future. This isolated genius is narrowly focused on his or her own work, devoid of social interaction or collaboration. Yet, researchers have found repeatedly that successful innovation depends on social networks, and breakthrough innovation is more likely when innovators maintain vast, diverse social connections.
Take, for example, IDEO, the design firm celebrated for innovations such as Apple’s first mouse and the Palm V personal digital assistant. UC Davis’ Andrew Hargadon and Stanford’s Robert Sutton discovered that core to IDEO’s creativity was its ability to draw on knowledge learned from past clients across different industries. By leveraging social connections and past interactions, IDEO could successfully pull from solutions in one domain to solve problems in another.
While there’s a time and place for closing the lab door and getting to work, innovators are likely to be much more creative if they actively maintain large and diverse social networks that help them “borrow” solutions from related domains.
Myth 2: Innovation is about a “eureka” moment
Often accompanying the image of the lone inventor is the belief that innovation strikes in a sudden “eureka” moment. In reality, innovation tends to arise from a lot of trial and error, with the most successful innovators taking risks to discover either flaws or new opportunities with their ideas. Even the greatest “eureka” moments must be put to the test.
For example, when founder Reed Hastings conceived of Netflixin 1997, he planned to focus the business on DVD rentals by mail, charging customers per rental and late fees for overdue disks. But as Netflix got underway, Hastings discovered a critical flaw in the original business model: Netflix was paying $100 to $200 to acquire customers who were only spending $4 on a single rental. Hastings’ original “eureka” moment had created a dysfunctional business model.
To address this problem, Hastings moved to a pre-paid subscription model, allowing customers up to four rentals per month. While initially perceived as a way to screen out low-value customers, this shift led to a surprising revelation – customers loved always having movies in their house! Building on this insight, Netflix shifted to unlimited rental plans, a business model that would ultimately turn the movie rental industry on its head.
As Netflix illustrates, the original “eureka” moment rarely provides the final solution. Instead, individuals and firms should recognize even the best ideas need a test drive.
Myth 3: Great innovations will be easily recognized by others
A third myth is that great innovations will be obvious to others – that a product or technology represents such a breakthrough that investors, partners and other supporters will clamor for a stake. The unfortunate reality is many audiences have a hard time assessing the potential of new products and ideas.
In my research with Stanford’s Kathleen Eisenhardt, we found that experienced venture capitalists held off investing in a promising start-up until the innovators could demonstrate “proof points.” These proof points are substantial signals of accomplishment validated by relevant third parties. Entrepreneurs were far more likely to be successful at quickly raising investment funds if they timed their raising around a recent proof point.
As one example, Mark Zuckerberg and his co-founders didn’t try to raise money to fund their innovation purely based on the idea of . They waited to raise their first outside investment round until they could show some powerful proof points: that the social networking service had already launched and quickly expanded.
For those seeking to bring innovations to market, it’s important to keep in mind that many audiences will have trouble recognizing the potential of an innovation when it’s just an idea, even if it’s a very good one associated with smart people. Innovators need to carefully demonstrate their idea’s viability and potential in a quick, low-cost manner, showing proof points sooner rather than later.
The pursuit of innovation is a challenge. All too often, we’re inhibited by our own misconceptions about how innovations occur. Yet by recognizing that innovation depends on maintaining a diverse set of social connections, viewing initial “eureka” moments as the start of a learning process, and proactively prioritizing early steps so as to best showcase an innovation’s viability and potential, innovators may improve their chances of having a great impact.
Benjamin L. Hallen is an assistant professor of strategy and entrepreneurship at London Business School.