The Challenge of Growth in New Areas: The Innovator’s Paradox … and Solution

Nathan Furr, Stanford University May 13, 2011

The Innovator’s Paradox

If you work for any type of business there is a good chance you may get trapped by the innovator’s paradox. At some point in the quest for growth, you will be forced to look at growing into new area or an incredible opportunity will come up. Your business will face the decision of whether to be leaders in a new market or let the competition pass you by. Most likely you will put together a cross-functional team of your best players, they will put together an ambitious plan that gets everyone excited, perhaps even some outside attention from the press about how your corporation is leading out, and then you will start executing.

Most of Your Projects Will Fail

Sadly, despite your best efforts, most likely you will fail. In fact, some research suggests that up to 85% of new initiatives fail. It will start slowly … a few press releases and consulting engagements later, the big new initiative slowly starts to lose steam and higher ups, whether they are the board or the CEO start to doubt whether the new initiative really makes sense. Usually the all-star team starts getting recruited into other projects and the initiative just seems to disappear. Without recognizing it, your team got caught in the innovator’s paradox. You believed in the new opportunity, you allocated resources, you put your best talent on the project, but somehow it didn’t seem to work out. How do I know? Because I’ve lived it and seen it happen inside some of the best businesses in the world.

The paradox is that even though these companies believed in the idea, allocated resources, and planned for success, by doing these things they were actually increasing their chances of failure. Furthermore, most of what you’ve learned in business school won’t help you to manage real innovation and growth. Of course, if you are working on a minor product line extension or something familiar, you may succeed. But if you are trying to conquer a new market, a new product, a new customer, most of what you learned will actually trap you and the consulting companies you hire to help you won’t answer the real questions, instead they will mirror back to you what you already know.

The Innovator’s Solution

The solution to the innovator’s paradox is to use the right management techniques—the techniques to manage unknown problems rather than known problems. Below I highlight the contrast between these two types of management:

If you asked me to say it in one sentence, it would be: identify your assumptions, rapidly test those assumptions, and iterate. When most managers see this list, they nod their heads and say “I already do that,” but in practice, most people don’t. Everything in our training and in our organizations runs counter to managing unknown problems! Why? Because the tactics for managing unknown problems are terrible for managing known problems and the bills today get paid by managing known problems.

The Bills Tomorrow Get Paid When You Manage Unknown Problems

Unfortunately, the bills tomorrow get paid when you manage for unknown problems. Therein lies the fundamental tension for businesses trying to grow.  And the tactics for managing unknown problems can be surprising different than those one might think at the outset. As one example, consider John Seely Brown’s recommendations for how to incorporate innovations into the corporation during a recent lecture at Stanford.

I’ll write more about how to really use these tactics in your business. But for those of you who read my posts regularly, if this sounds familiar, it should. But notice I didn’t use the word entrepreneur. Why? Because managers and innovators, you face this problem every bit as much as, even more than, entrepreneurs because you have to fight uphill against the established way of doing things to really innovate. And I’ll help show you how.

Lessons Learned:

  • Innovators face a paradox: they wouldn’t act unless they believed in their idea but their belief leads them to failure because they use the wrong techniques to execute on a guess
  • Success depends on recognizing that you face the unknown and applying the right management techniques
  • Although you may believe you already understand these management techniques, they can be difficult to use correctly, particularly in a corporate environment that favors the opposite