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Innovation vs Reality

Written by: Neil Crofts

Article Overview: Reality is much more complicated than we tend to imagine.

Innovation vs Reality

Reality is much more complicated than we tend to imagine.



Our idea of what is real is based on our interpretation of our experiences and our conditioning. In an annoyingly circular way, our interpretation of reality is influenced by our experiences and our conditioning.



Our conditioning largely comes from societal influence and society’s ideas of what is real, which in another circular foundation are based on the experiences and conditioning of the people of the society.



Groups with a disproportionate share of voice in a society frequently skew concepts of reality in a particular direction.



In spite of this vagueness, many of us put a great deal of credibility behind the idea of being realistic.



Many valuable innovations and opportunities are stymied by people’s notions of reality. Equally many dead ends are pursued diligently by the same notions of reality.



Breakthroughs occur when someone successfully challenges prevailing ideas of reality.



Today we have urgent needs to be commercially, socially and environmentally, successfully innovative. We need to do it in finance, energy, efficiency, education, government, farming and transport at a minimum. To do this we need to find much more effective ways of dealing with reality.



We need to be bold and creative, without being reckless or investing too heavily in dead ends.



The answer is a sort of empirical incrementalism.



When you look at the most innovative businesses - specifically in the computer technology sector, they employ a relentlessly incremental approach. From the outside it often looks like great leaps of logic and technology.



From the inside it looks more like constant incremental developments based on empirical learning from previous experiences. When one route proves to be fruitless, it is noted and moved on from, it is not regarded as failure.



It requires a culture that sets itself inspiring and “unrealistic” goals, measures progress and never settles for what it has, but is constantly scrutinising every detail for opportunities for improvement.



If you want your business to be more innovative and to contribute to solving the challenges we face follow this pattern:

1. Set an unrealistic but meaningful goal
2. Empower people only to make small (inexpensive) changes.
3. Make sure the changes are frequent.
4. Measure the results.
5. Feedback performance to everyone celebrating success and learning from experiments.

For example:



Set a goal to halve energy consumption in your organisation every year for five years. (The “right “ goal will be the one for which the people in the organisation have the most energy).



Invest in a measuring system.



Empower people with guidelines - for example you can spend what you have already saved on further efficiency initiatives.



Encourage everyone to share their experiences on blogs, Twitter, Facebook etc (rather than “reporting”).



This could equally be applied to product development, sales, marketing or other areas of strategy. What is important is that the goal is inspiring to those involved.

Related Articles
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  4 Ways We Kill Innovation

Article Tags: disproportionate share, experiences, letter spacing, nbsp, share of voice, span style



Related Forum Posts
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the BDC - Hi Renee, the BDC is a great lender to many Canadian businesses. I've heard many horror stories from businesses that have had problems with the BDC, but I think it all depends on which account manager you deal with (that's the case with most lenders). Anyways, I have a great relationship with the BDC Toronto office, and was successful earlier this year in getting two service based companies loans under the BDC Innovation financing program ($100,000 and $150,000, both for marketing and growth initiatives). Here's an article I wrote about the BDC late last year for an Accounting Firm's newsletter: The Business Development Bank of Canada is a financial institution belonging to the Government of Canada, with the mandate: “to encourage innovation and stimulate the growth of small and medium-size Canadian companies.” The BDC usually looks for companies with a sound management team that possess solid growth potential. The BDC can provide working capital solutions to complement traditional bank financing. The BDC’s lending practices are somewhat different from the traditional chartered banks. With the BDC, borrowers receive a guaranteed term, meaning that financing cannot be recalled without due cause. As opposed to the chartered banks, where facilities are typically demand loans and can be recalled at any time. The BDC has very flexible repayment terms, including deferring principal payments, amortizing loans for up to an 8 year term, or offering seasonal and/or progressive payment options. This allows businesses to structure their cash flow accordingly. The BDC is willing to lend to companies that are more leveraged than traditional banks would consider. As well the BDC is willing to finance higher loan-to-value ratios than the chartered banks max out on. The BDC also offers subordinated debt, where they will postpone their claim to a chartered bank. Sub-debt can be very advantageous to many companies, because the BDC ties the repayment terms to the company’s cash flow projections. The pricing model can be setup as normal interest payments, royalties on sales, bonus interest based on milestones, warrants or some combination of these items. The BDC lends sub-debt to businesses based on historical cash flow, management and growth potential. The innovation financing program provides small businesses with funds to carry out marketing and/or growth plans, increase inventory, and/or develop new products. The BDC funds all types of businesses including start-ups, however will not fund any business that earns 50% or more of their profits from alcohol sales or gambling. The cost of borrowing from the BDC is generally higher than the chartered banks. The BDC’s base rate generally starts at two points above regular bank prime, and then the risk premium is applied to these rates based on each project's potential and the amount of risk involved. The BDC may not be ideal for all businesses, but as an alternative and/or complement to traditional bank financing, the BDC could be a very attractive solution.


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