Innovating with Small Bets in a Big Bet World
It’s an annual cycle in many companies. Review the strategy. Amend the strategy. Roll out the new strategy to the rest of the company and ask everybody to align their objectives to it. The thinking behind this cadence is that, if everyone is pulling in the same direction — as outlined in the strategy — then we’ll hit our goals and win.
The problem is that, for most part, companies don’t win. In fact, more than 50% fail in their first 5 years, two thirds are gone in 10, and 80% have failed before their 20th anniversary. Lest you think this only applies to small companies: “Over half of the names of companies on the Fortune 500 have disappeared since the year 2000. And yet, we are only at the beginning of what the World Economic Forum calls the ‘Fourth Industrial Revolution,’ characterized not only by mass adoption of digital technologies but by innovations in everything from energy to biosciences,” says Accenture CEO, Pierre Nanterme.
So why aren’t companies more successful? One reason may be the way they choose to innovate. A small group of people define the strategy and everyone else implements it. This process lays out big bets and constrains innovation to those bets. Big bets take a while to implement and play out. Let’s look at the assumptions behind this model — we know the market, we know what the customer needs, we know the competition, and we know the future. Except that we don’t.
We know the market past and present; it may be very different tomorrow. We know only what the customer tells us and what we’re willing to hear. We know what our competitors have done in the past; what if they shift strategy for their next cycle? As for the future, well — if we really knew the future, we’d all be rich and living in paradise! The future is uncertain and increasingly changeable. Where we were once able to see a decade or more into the future, that horizon is now just in front of us.
Companies do need to place big bets. It’s the foundation of the business and focuses primary thought and execution on a common goal. If big bets are successful, then you get to continue to play. But, it’s a rare big bet that truly differentiates as competitors place the same big bets based on the same data. And as we see from the statistics above, big bets alone aren’t enough. Companies usually fail.
Small Bets Can Diversify Your Opportunities
We need a way to be more nimble and more resilient. One way is to add small bets into the mix. Small bets require small investments. Small bets are simpler and quicker to execute. And decisions to fail or scale a small bet can be made quickly.
Small bets are ideas that come from anyone or anywhere in the company who had a great idea. It might be an idea that popped into someone’s head during the commute one day or one that they’ve been chewing on for months. They often start with, “what if we…,” “how might we…,” or “why don’t we….” Small bets might come as a product improvement that your customer will love, or a change in process, or an internal tool that makes turns a painful job into a breeze.
It’s okay for small bets to be risky. In fact, it’s a great way to take risks that are difficult to take with high-stakes big bets. Because you only micro-fund a small bet, failure can be an acceptable part of the equation. “Risky” is where the potential to differentiate lives. “Risky” is where a successful small bet could one day become the cornerstone of your company. If you have one big success out of twenty small bets, is it worth it? A single small bet that wins can easily pay for all of the bets that don’t make it. A single small bet can become a new business line that would otherwise never have happened because no organization in your company would have been responsible for it.
Small Bets Can Energize Your Team
Then there’s the people part of small bet innovation. Suppose you lead a company of 1,000 people. Every one of those people you hired was the very best you could find. Of those 1,000 experienced brains, a dozen will build the company strategy. Those dozen people have much at stake — the success of the company. And they feel responsible for it. That leaves 988 experienced brains to execute it; basically, just do their jobs. They feel responsibility for their jobs, not for the company.
What if those 988 people, in addition to doing their jobs, had a way to get their best ideas into play as small bets? What if you let those 988 people decide which proposed bets were worthy of funding? Now you have all 1000 people in your company waking up every morning thinking about how to win. Their energy for work goes beyond their day-to-day and anything is possible. That’s 83 times more people in your company asking “how might we…” and who feel responsible for its success. Now THAT is what having everyone pull in the same direction is all about.
So, if your company’s future is uncertain — you’re in good company. Instead of becoming an eventual failure statistic, try some adding some small bets to your innovation formula and turn those small ideas into energy that fuels your growth and your long-term success.