Innovation: Win through failure

Several years ago, I worked with a Fortune 1000 company to troubleshoot their product transformation. The leadership team said they’d set clear goals and empowered teams to take ownership, but the organization was still moving at the pace of the Titanic. At this rate, leaders feared they’d be out of business before they got their new product to market.

I interviewed several team members from the product organization to get their take. Why was progress so slow? Two interesting findings:

  1. They had to hit 100% of their goals to unlock their maximum bonus
  2. When they missed a milestone or goal, managers would “checklist them to death” on the next project

In short, they felt punished when they missed a goal. So, they set safe goals they knew they could hit. In aggregate, these individual and team goals fell short of what the organization aimed to achieve as a whole.

Innovation involves risk and failure. If you want more innovation, you must accept more risk. And that means properly incentivizing your employees to set bold goals that sometimes fail:

  1. Encourage teams and employees to set stretch goals. Then, max-out bonuses when they hit 90% of those goals. If they hit 100%, it means they didn’t aim high enough.
  2. Dedicate a set amount of time and resources to higher-risk innovation activities. Treat that innovation investment as a sunk cost; don’t punish the team for no- to low- short-term ROI.