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8 key innovation questions to drive success

Nayeem Syed  Assistant General Counsel at Thomson Reuters

Nayeem Syed  Assistant General Counsel at Thomson Reuters

Evaluate your innovation strategy so that success is likely, and costly errors are avoided using a simple framework to keep the focus on the key issue – opportunity cost – and help build a clear, persuasive narrative. 

Markets today seem to demand that organizations focus on internal innovation and deliver almost perpetual growth. As a result, many companies implement bold strategies that miss the mark and leave observers scratching their heads when it comes to new ideas. Here are eight questions to help you determine if the juice is worth the squeeze when it comes to implementing new ideas:

1. Why do anything at all?

First, be sure the proposal falls within the direction the organisation is heading.

It’s important to fully understand the latest strategies, priorities and targets. This helps prevent fundamental errors early on. Reviewing strategic thinking could even reveal larger opportunities than we first considered. After all, a complex project may require our very best people and a greater amount of their focus than can be spared. Is it perhaps – for now – better to add it to the watch list?

This is easier if the organisation’s leadership is good at effectively communicating strategy. But even if the strategy is accessible, it can often be broad or high-level. We should therefore ensure we have tested our understanding with relevant colleagues. A good indicator of future success is an organisation’s current operational performance and recent track record. Senior management’s perception of their own success or failure will also make a difference for the mindset and appetite for new projects.

2. Why do this exactly?

Will the results please the customers? This obvious question is often bypassed.

There are three basic ways to create value: earn more, spend less or do things more efficiently. Decide what to focus on and be able to explain why the project will do something meaningful towards that. Ask the following: is the problem big enough? And, when solved, will the solution involve us selling more to existing customers, or pitching to entirely new ones? What if the benefits are less tangible at this stage? Proceeding in order to gain market and product knowledge, develop new capabilities partners and test possible models is perfectly valid. The challenge then is to articulate the benefits more effectively.

3. What does success look like?

What exactly will be gained? Be able to articulate the ideal outcome.

Once possible benefits are projected, examine whether those outcomes are realistic when the available financial and human resource inputs encounter risk factors.

In many ways, the most straightforward projects to assess are those that use some traditional corporate finance measurement to assess return on investment. However dynamic slides and complex financial models often prevent weak industry knowledge and risk weighting being challenged. Further, those with specific, relevant knowledge are often far removed from decision-makers or don’t feel confident challenging senior colleagues.

What if the benefits are intangible? If we are proposing experimentation then it is harder to use a traditional justification. We may be able to effectively gauge potential opportunities, point to competitor moves or trends, but approval will largely depend on the budgetary headroom and vision of the leadership and the energy – and current capacity – of the sponsor.

4. Why not wait?

Why act now? Be able to explain why failure to act now will threaten the current market position.

There is often less risk in not being first to market. Competitors can react quickly and effectively, simply learning methods and replicating gains without making large investments. The net result then could be restricted to temporary market share gains and, potentially, lower long-term industry prices. Even if seeking to respond to a new functionality launched by a competitor, be sure of why you can’t wait to see their market reception before initiating action. If the additional revenue gains are not large enough to win sufficient internal support over other opportunities, we must be able to point to other reasons that compel action now.

5. Who could or should do this internally?

Often, the source of innovation is not where the execution ability sits.

Identify which internal departments need to be involved – in any event, if the project proceeds, they are likely to hear about it if it impacts them. It’s better to learn from their perspective and insight early on. This is also important if you need both central corporate and local divisional sponsors, and it is unclear where the full cost should appear.

6. Who externally could do this better?

Ascertain whether you have the necessary skill-sets internally to achieve the optimum outcome.

It is expensive and risky to create an entirely bespoke platform unless the opportunity is large enough. Can we outsource some of the components involved? If, instead of developing new systems, could licensing or working with a third-party vendor improve speed, flexibility and scalability?

7. What else could I do instead?

In a competitive trading environment with constant pressure to innovate, the project generation, review and approval process often only involves a few individuals. This may help with focus, but it also removes valuable alternative perspectives.

Project sponsors should actively seek alternative views and ensure relevant experts are consulted. It is much more persuasive if project sponsors show they have thoroughly considered alternative, organic growth strategies.

8. Where would I start?

It’s essential to have a strong project manager with a detailed plan and clear objectives.

Support from senior leadership can help to ensure internal cooperation, provide regular coaching and even direct intervention when unforeseen challenges arise.

An internal established but flexible structure to ensure all good projects are considered will help maximise the chances of success. Direct sponsor and, to some extent, senior approver accountability, will help ensure that project benefits are not overstated.

Is the why greater than the how?

Ideally, organisations should only do as many things as they can do well.

Managers should ensure that they are exploring all opportunities that create value for the organisation. However, once a growth area is identified, the key as to which is the right decision depends on many variables and estimates, as well as the judgments of senior executives.

Managers may find these deceptively simple but powerful questions quite useful in ensuring their teams remained focused on tasks at hand.  This should help test and refine the underlying proposition, clarify the pitch, build enthusiasm and ultimately persuade others why they should invest scarce resources in the idea.

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