Investing in failure to create success
By Lia Timson | smh.com.au | 01 February
Given IT innovation is trial and error, how much should you invest in allowing for errors?
The short answer is a lot. Some IT companies are risking up to 75 per cent of their R&D budget for a winning result.
Others have invested years in seemingly losing ideas that eventually transformed into a winning one.
Viocorp chief executive Ian Gardiner says investing in failure is the only path to true innovation.
“A lot of companies will try a product, fail and think it's too hard and crawl back in their box. Australia is quite conservative,” Gardiner says.
However, to compete in a global market companies must take risks.
“(US companies) are risk-takers and to compete with them we have to be too.”
In its first incarnation Viocorp was Viomail, a video email service for corporations. But the concept was ahead of its time: corporate deployment was complex and chief executives weren't screen ready.
“No one had heard of YouTube then. The idea of the CEO recording himself and sending the video off to employees eight years ago just wasn't in people's psyche.”
Viocorp sank $1 million and three years refining and marketing the product before transforming it into what it is today, a hosted corporate video system. It now licenses the software, provides the infrastructure, live feeds and even talent coaching.
“We do everything, from filming and content creation, to the delivery to the viewer. If we hadn't had that horrible process and death-defying experience, we may not have the same attitude to R&D,” Gardiner says.
Colin Cardwell, chief executive of 3RD Sense, maker of corporate games and gaming website www.fizzy.com, says he invests in three losses before arriving at one win.
“Every time we develop a game, we have no idea if it will be a success or not. Only one in four is. So we have to invest in three failures. The good news is, when we get a success it pays for the failures,” Cardwell says.
Tough on staff
Cardwell admits it is an emotional rollercoaster for staff who put their heart into product development.
“We have some depressed people sometimes, but it is the way it is. The very nature of the technology space is that things are only new if they haven't been done before, so tried and tested is not as valuable. We have to take risks but we also have to be realistic.
“The only thing we can do to prevent failures is to stop R&D and we can't do that.”
Outsourcing the risk
Fred Davis heads Invetech, an innovation and product development company. It undertakes risks on behalf of clients in various sectors, including health diagnostics, fast moving consumer goods and software engineering. Its clients include Procter & Gamble and Coca-Cola.
Davis says innovation is about minimising risk, being patient and flexible.
“As we progress with an idea, we may discover the solution is quite different to the one we set out with,” he says.
He believes managers today are too focused on immediate results and are reluctant to spend on developing products that will only pay off years down the track. Some will milk proven products in lieu of trying new ones, despite pouring money into research.
“There is evidence there's a lot of R and not a lot of D happening in our country. It takes entrepreneurship by the big companies to launch new products.”
His advice for companies unsure of investing in new ideas includes:
- Decide what game you are in, then play to win
- Invest in the development team and keep learning so you can discover how you can adapt
- Have lots of tenacity, patience and perseverance. A solution that is very hard to conquer is also very hard to copy, giving its owner an immediate advantage.
First published by Smh.com.au on February 01 2010
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