innovation accounting & innovation options

The ROI of Innovation – What is it?

As product managers, we are often asked a single question when we propose a new product: What’s the Return on Investment (ROI)? What's the ROI of innovation?

There has to be a Return on Investment (ROI) or we can’t get funding for the project. The details of this conversation may vary depending on if we are an entrepreneur talking to and investor, an intrapreneur pitching to our business unit manager, or head of a skunkworks pitching to the CFO. But the general theme is the same.

Finance requires a 4 year projection of revenue showing an ROI The visionary grudgingly creates a realistic spreadsheet projection of the next 4 years revenues that shows a 100 million dollar market. Finance denies funding because the returns are too small. Finance declares, “If it’s not a billion dollar market, we don’t invest.” The visionary, adjusts the market size and margins until the spreadsheet shows 1 billion dollars. Finance divides the projected revenues by 10 to account for “visionary enthusiasm” and then approves it because 100 million is pretty decent.

WTF just happened?

There must be a better way to decide on innovation investments than this.

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Putting User Insights Into Context

(This is a guest post by Michael Bamberger. He is the co-founder of Alpha UX, a real-time user insights platform for enterprise product teams. I reached out to chat about his approach for generating user insights for new products. You can find him on Twitter or Linkedin.)

Seeking out and applying ‘best practices’ is a tried and true strategy. Unfortunately, when trying to apply what has worked well for others, many product teams end up dogmatically following instead of contextualizing for their specific case. It is rare for best practices to be universally applicable in all contexts and scenarios. Rather than focusing on what other people are doing in a vacuum, instead seek to understand and implement the principles and methodologies that led to those outcomes.

Generating user insights is no different. There are few, if any, practices that should be applied universally. Each organization - and even each team within - must construct a practice that aligns with their business objectives and target market. What might be a profound insight for one team could be utterly meaningless for another. In my experience, there are three common occurrences that can trip up otherwise diligent product teams. Watch out for these when interpreting insights.

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A Diploma for Asking the Right Questions?

21st Century Education: Ask the Right Questions

“If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” - Albert Einstein

In school, we’re constantly taking tests to gauge how well we’ve learned last week’s material. We cram geographic boundaries, the dates of battles, and multiplication tables into our heads and spit out the results.

Sadly, those rote memorization skills and the ability to answer pre-formulated questions doesn’t help us as entrepreneurs. When building a new business model, there is no test or quiz to cram for. It’s as if we sat down for our final and open up the exam book only to find a blank piece of paper in front of us.

“Where is the test?” we ask.

“Right there in front of you, “ answers our teacher.

“Is there a right answer?” we hesitantly inquire.

“Yes there is,” assures our teacher.

“What are the questions?” we plead.

“That’s what you have to figure out.”

As an entrepreneur (or intrapreneur) we can’t just guess at the answers without first identifying the right questions to ask. If we just guess by building a fully functioning product, it’s very likely that the market will judge us wrong and punish us with zero sales and bankruptcy.

Our job, as an entrepreneur, is to first ask the right questions and only then to find the right answers.

21st Century Education

(Note: I wrote the above text as part of The Startup Real Book to explain why the book focused so much on asking the right questions instead of handing out Step 1, Step 2, Step 3 answers. I wanted to repost it here because I'm deeply concerned about the state of education in the US and the world.)

We (in the US at least) should be concerned by how badly our students do on standardized tests, but we ought to be terrified of shifting to rote learning.

Standardized tests are a metric. They tell us something about our education system but the metric is not the goal. Doing well on standardized tests does not produce value.

If we refocus our entire educational system around the metric instead of the goal, we're doing an immense disservice to our students.

We shouldn't be drilling students on answers. We should be teaching how to ask great questions.

Diplomas & Certificates

The focus of recruiting in top tier tech companies isn't in having the perfect skill set. It doesn't matter if the engineer knows Rails or Java. It matters how they think.

Academic credentials that demonstrate a baseline competency does opens doors. Having a Stanford degree is still pretty badass and will remain so for a long time. For some companies, desperate for warm bodies, a degree or certificate may be all the qualification required to be hired on the spot. But the great companies don't hire for just skills.

They hire for culture. They hire for determination. They hire for the ability to rapidly improve those skills and figure things out from a blank sheet of paper.

Wish List

I've been looking back at the dozens of accelerators and hundreds (if not thousands) of entrepreneurs I've worked with over the last 6 years. I've also been thinking about my own haphazard entrepreneurial journey going back to when I was playing guitars in coffee shops two decades ago. From that, I have a wish list.

These are the things I wish I had learned long, long ago. I wish I had a few more decades just to practice these skills. They are also the things I wish entrepreneurs knew before they went into an accelerator.

Focus on the Question, then Figure out the Answer

Too many entrepreneurs assume they have to know everything in order to get funding. They jump to answer every question with the confidence of a prophet.

But when we pretend to know everything and jump straight to the answers, we're invariably failing to ask the right question. Trying to fool everyone into thinking we know everything just winds up fooling ourselves.

Admitting ignorance allows us to ask the right questions.


The word priority should not have a plural. What's the one thing we should be working on this week?


Critically looking back at our own behavior is the only thing that lets us improve. Regularly managing that process is a hard won skill.

Some startups get lucky. Most successful ones make their own luck by continually improving.


Often the desire to express our own opinions overrides our ability to hear other points of view. Communication starts with listening.

It's very easy to blame others for mishearing us or not saying what they meant. The fault is always partly with the speaker and partly with the listener.

We need to practice listening, repeating the key points back, listening again for confirmation. Expressing ourselves, listening for confirmation.

(Note: Listening is also a key component in conducting good customer discovery interviews.)

Emotional Awareness

Why the hell don't we teach this in kindergarten?

How much better off would we be as adults? How much better would we be as a society if everyone could identify when we're feeling angry or nervous?

Instead of just lashing out for unrelated reasons, we might take a step back, make some space, and use emotions to drive us...not let them control us.

How many "founder issues" could be avoided with a little bit of emotional awareness?


Patience doesn't mean complacency. It's good to want to move forward. It's good to be quick and iterate.

But results take time and patience.

Lessons Learned

I don't have any lessons learned here. I don't have a strong thesis to defend here and very little advice.

But something is bothering me about Education in the 21st century and I hope it's bothering you too.

What am I missing? What should we be teaching from kindergarten up?

Please let me know in the comments.

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lean startup velocity car

One Lean Startup Experiment Per Week

"Go fast" is one of the principles of running a lean startup experiment. The faster we go around the Build-Measure-Learn loop, the faster we validate our business model the sooner we have a business.

(Note: To be accurate, we're not validating our business model, we're successfully failing to invalidate it. Correction thanks to Roger Cauvin.)

So how fast is fast enough?

Many teams wonder if they're moving fast enough. Many accelerator managers and VPs of innovation worry if their teams are running enough experiments or doing enough research. What's normal?

tl;dr: We should target at least one experiment/research per week.

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Hi.P.P.O - Highest Paid Person 's Opinion

In Defense of the Hi.P.P.O

The Hippo is a much maligned creature. Forever scorned by data scientists and UX professionals.

Hi.P.P.O stands for the Highest Paid Person's Opinion. It's a time honored way of making decisions which goes back centuries.

If a decision has to be made, the boss' opinion wins. After all, there must be some reason they get paid more!

If we're deciding between a red button and a blue button for our Call-To-Action, don't test, just ask Hi.P.P.O! There's even a SaaS web site dedicated to asking Hi.P.P.Os.

Personally, I don't mind the Hi.P.P.O. Sometimes I have to bow before the Hi.P.P.O. Sometimes am the Hi.P.P.O.

What I truly fear is the Z.E.B.R.A (More on that below.)

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Silicon Valley Startup Unicorn

The Complete Team

Building a Complete Team is not easy. Talent is in short supply.

In Silicon Valley, the common sense wisdom used to be that engineers were the most critical team members. The good ones were rare and hard to come by. Sometimes we called them ninjas or 10Xers.

More recently, the proliferation of consumer web apps made design a key differentiator. Designers became the scarce resource and salaries skyrocketed. Everyone who knew photoshop was suddenly rebranding themselves as a UX designer. No one really knew the difference between UX and UI, but we called them unicorns anyway and started the hunt.

The ideal team is often described as Hacker, Hustler & Hipster. Articles have made it into Forbes and Steve Blank posted his version back in 2011.

Even corporate teams have bought into the dogma to the degree that every innovation team must have a designer, hacker, and business person. No more than that and definitely no more than two pizzas worth of people!

The idea that there is an ideal team size and composition is...well... absurd.

(Except the pizza part. That's true from Dunbar's number.)

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