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Ten to one.

That’s how triumphantly American pilots emerged from the battle in the skies during the Korean War.

It’s not because they had superior aircraft. They didn’t.

No, it was because of two fundamental reasons.

1. The American-piloted F86s had a 360-degree bubble canopy, whereas the Soviet-issue MIGs, flown by the North Koreans, had restricted vision
2. The F86s featured a fully hydraulic throttle, whereas the MIGs’ throttle was semi-hydraulic, requiring North Korean pilots to lift weights in order to handle it

What advantage did this give the Americans?

Vision and adaptability.

In the words of military strategist, John Boyd, they were able to observe and orient themselves to changing circumstances faster than their adversaries.

Information, adaptability, and speed are fundamental to success in uncertain environments; whether that be 20,000 feet above the ground, or in a boardroom on Lexington Avenue.

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The Rate of Change

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Today, exponential technology growth, disruptive business models, changing consumer sentiment and a complex geopolitical landscape have combined to make the business climate more uncertain than ever before.

Gone are the days where companies could release five-year plans, rest their hat on that, and simply execute.

In order to survive and thrive amidst growing uncertainty, large companies have to make like an F86 and get better at adapting to changing circumstances. In order to avoid jumping to conclusions though and over-investing in the wrong things, they need to experiment. Failure to do so will leave them eating the dust of companies that do.

The challenge for many incumbents and traditional companies is that their infrastructure; their processes, systems, policies and even their culture, is more suited to a 20th Century business landscape, when things moved at a much slower rate and the future was a lot more predictable.

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The Business Case is Broken

In these companies, funding for ideas are usually granted on the back of an approved several-page business case.

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The business case will ask for all sorts of financial metrics — ROI, IRR, NPV, payback period — that we can’t reliably predict if we’re taking something fundamentally new and untested to an incredibly uncertain market.

As a result:

• Employees fudge the numbers to get funding (only to lose it once revenue isn’t generated within the first few months)
• Employees don’t pursue potentially impactful innovations
• Too much funding is granted, reflecting a base funding amount awarded by many business cases, resulting in big teams, complex solutions, and costly failures that create a culture of fear around innovation

Not only that but getting business case approval can take months, compromising speed — a fundamental driver of innovation.

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A Fundamental Conflict of Metrics

The thing is, in the world of early-stage innovation, we don't talk about ROI or IRR when measuring innovation. We use leading ‘innovation metrics’ such as click-rates, conversion-rates, opt-ins and so on. While such learning metrics help to guide us towards product-market fit, they don’t mean much to many senior executives and beancounters at most companies.

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Because of this, a company’s need to innovate, and the way it goes about applying capital to new ideas, are in conflict. This means that potentially great ideas never see the light of day.

In order to address this major pitfall, innovators need to speak executive and finance’s language.

Doing so will not only help to secure buy-in, but maybe more importantly, keep it long enough to get ideas through to experimentation, and hopefully, something resembling commercial value and impact.

Common unanswered questions:

• How do we communicate the value of an idea as it makes its way through the early-stage innovation lifecycle?
• How do we know how much we can justify spending on an experiment, based on the risk profile and projected return of the idea?
• How can we determine the ROI or IRR for such ideas?

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