Innovation is essential for the growth and sustainability of mature companies, yet many face significant challenges in executing effective innovation programs. Understanding the common failure modes can help organizations navigate these pitfalls and enhance the success and impact of their innovation strategies. From our years of experience, these are some of the most common failure modes — and our recommendations for mitigating them.
1. Lack of Top Down Strategic Alignment
One failure mode occurs when the innovation program is not an explicit and supported part of the overall corporate growth strategy. Organizations often treat innovation as a peripheral and opportunistic activity rather than a core component of their strategic growth plan. Growth through exploratory innovation has fundamentally different characteristics from the incremental growth of the core business in terms of expectations on the pace, scale, and probability of success. Therefore, both expectations and investments need to be managed differently. Without top-down recognition of the differences, how they can complement each other, and how to manage them differently, the innovation programs often fall out of favor or lose support in several years when the results are compared to the short-term growth from core business efforts. Once this happens, it creates cultural baggage within the organization, making it even more challenging to try again with a new approach.
Intel was one of the earliest companies to invest in a formal corporate innovation program in the late 1990s. The program lasted over 25 years and…produced dozens of complementary business opportunities worth tens of billions in potential new revenue streams.
This was the biggest failure of Intel’s corporate innovation program. Intel was one of the earliest companies to invest in a formal corporate innovation program in the late 1990s. The program lasted over 25 years and developed outstanding processes and methods that produced dozens of complementary business opportunities worth tens of billions in potential new revenue streams. Still, Intel didn’t capitalize on its full potential, mainly because the company leadership did not recognize and support the long-term growth opportunities as part of the overall growth strategies, which were always much more focused on short-term impact.
Innovation program leaders should start by tying the program results to the corporate-level strategy, setting the expectations for the timing and scale based on the type of innovation program they are leading. The longer-term innovation growth strategies should be set up as a complement to the shorter-term incremental core business growth strategies.
The best innovation programs are set up to deliver a mix of opportunities with short, medium, and long-term impact. While the short-term opportunities may have smaller incremental value, if they complement or support an existing product line, they can help maintain credibility and support for the program as it progresses on longer-term opportunities.
2. Early Over-Investment in High-Risk Ventures
Another common failure mode occurs when innovation organizations over-invest in ambitious projects or “big bets” that are not sufficiently adjacent to their core business before sufficient opportunity validation & risk reduction. While pursuing groundbreaking innovations can be exciting, it often leads to high-risk ventures that may not yield the anticipated returns. Companies may find themselves betting heavily on untested ideas without adequately assessing market readiness or alignment with existing capabilities. This results in insufficient resources and mindshare being available for a diverse portfolio of incremental innovations that could deliver steady growth. While there’s always a chance that the bet pays off, if the customers, channels, capabilities, and business model are not closely aligned with those of the core business, there’s a very high statistical probability that it will fail. We’ve seen this happen more often with technology companies when a leader becomes overly enamored with a new technology and invests as if success is guaranteed before fully understanding and validating all the other dimensions of the strategy hypothesis.
To avoid this pitfall, organizations should adopt a balanced portfolio approach to innovation based on incremental investments that are appropriate for the uncertainty levels of each strategy. This means allocating resources across various types of projects—incremental improvements alongside more ambitious initiatives—while ensuring that all efforts are aligned with the company’s strengths and market opportunities.
3. Inadequate Governance Framework
The third critical failure mode involves the absence of an appropriate governance framework for managing innovation programs and ventures. As innovations progress through different stages of maturity, they require varying levels of oversight and support. Without a structured governance model, companies may struggle to adapt their management approaches as projects evolve. Early-stage ventures might benefit from agile decision-making processes, while later-stage initiatives may require more formal oversight to ensure alignment and synergies with corporate core business assets.
Without a structured governance model, companies may struggle to adapt their management approaches as projects evolve.
One of the most challenging stages of innovation governance is the scaling stage. New ventures may be able to succeed and get traction with a custom governance framework of an innovation program that allows them to operate differently and move quickly and efficiently. Still, as they start to scale, the interactions and interdependencies with core business operations will necessarily increase. Leadership will want to exploit synergies with the assets and capabilities of the core business, but the operation expectations from leadership and those core business functions will be like those of the core business, not the nimble, custom governance that allowed the new venture to succeed. This is the most vulnerable stage for a new venture when expectations increase significantly, but it’s not likely self-sustaining, and it’s still small enough that it could be cut with minimal consequences.
To address this issue, organizations should establish a dynamic governance framework that evolves with the maturity of each venture. This includes defining clear roles and responsibilities, setting appropriate performance metrics, and ensuring that decision-making processes are flexible enough to adapt to changing circumstances. We typically recommend a joint responsibility governance framework that includes both the innovation leadership and core business operations leadership with an explicit recognition of what attributes of governance to leverage from the explore and core parts of the business and what metrics will trigger changes in select aspects of governance.
Be Vigilant About These Potential Failure Modes
In conclusion, mature companies must be vigilant about potential failure modes in their innovation programs. Organizations can enhance their chances of successful innovation by ensuring strategic alignment with corporate goals, balancing investments across various risk levels, and implementing adaptive governance frameworks.
BRI Associates can help set up corporate innovation programs for success to avoid these pitfalls or help diagnose and address specific failure modes or challenges.
Jim Bodio is Managing Partner of BRI Associates.
