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If you read nothing else on inspiring and executing innovation, read these 10 articles. We've combed through hundreds of Harvard Business Review articles and selected the most important ones to help you take your business into the future--the right way. This collection includes these exceptional HBR articles: "Innovation's Holy Grail" by C.K. Prahalad and R.A. Mashelkar, "Stop the Innovation Wars" by Vijay Govindarajan and Chris Trimble, "How GE Is Disrupting Itself" by Jeffrey R. Immelt, Vijay Govindarajan, and Chris Trimble, "The Customer-Centered Innovation Map" by Lance A. Bettencourt and Anthony W. Ulwick, "The Innovation Value Chain" by Morten T. Hansen and Julian Birkinshaw, "Is It Real? Can We Win? Is It Worth Doing?" by George S. Day, "Innovation: The Classic Traps" by Rosabeth Moss Kanter, "Discovery-Driven Planning" by Rita Gunther McGrath and Ian C. MacMillan, "The Discipline of Innovation" by Peter F. Drucker, and "Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things" by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih.
This collection was previously published as "Harvard Business Review on Inspiring and Executing Innovation." We've moved it to HBR's 10 Must Reads series because the ideas are critical to the success of every manager and aspiring leader, meeting our high standards for must-read status.
For years we’ve been puzzling about why so many smart, hardworking managers in well-run companies find it impossible to innovate successfully. Our investigations have uncovered a number of culprits, which we’ve discussed in earlier books and articles. These include paying too much attention to the company’s most profitable customers (thereby leaving less-demanding customers at risk) and creating new products that don’t help customers do the jobs they want to do. Now we’d like to name the misguided application of three financial-analysis tools as an accomplice in the conspiracy against successful innovation. We allege crimes against these suspects:
The use of discounted cash flow (DCF) and net present value (NPV) to evaluate investment opportunities causes managers to underestimate the real returns and benefits of proceeding with investments in innovation.
The way that fixed and sunk costs are considered when evaluating future investments confers an unfair advantage on challengers and shackles incumbent firms that attempt to respond to an attack.
The emphasis on earnings per share as the primary driver of share price and hence of shareholder value creation, to the exclusion of almost everything else, diverts resources away from investments whose payoff lies beyond the immediate horizon.
Discovery-driven planning is a practical tool that acknowledges the difference between planning for a new venture and planning for a more conventional line of business. Conventional planning operates on the premise that managers can extrapolate future results from a well-understood and predictable platform of past experience. One expects predictions to be accurate because they are based on solid knowledge rather than on assumptions. In platform-based planning, a venture’s deviations from plan are a bad thing.
