5 reasons why innovation fails—and what to do about it

Senior leaders at every company know that being able to innovate successfully is critical to their future. But too few of those leaders truly understand how to foster innovation across all segments of their organizations. 

Innovation is not just the purview of a few supersmart individuals walled off in an ivory tower isolated from the rest of the company. Every employee from the stockroom clerk to the senior design engineer can contribute to innovation if they believe it’s valuable to do so. And not every innovative idea needs to be as disruptive as the iPhone or generative AI. Even incremental innovations can add meaningful value. 

Companies shouldn’t limit their view of innovation only to projects targeting the next big breakthrough. Open it up to a broader swath of ideas from large to small. Here are five reasons why innovation initiatives fail (and what to do about it).

1. Lack of Commitment from Senior Leadership 

It takes more to inspire innovation than senior leaders who give speeches to employees or highlight it in annual reports. Employees need time, resources, and support to explore ideas outside their day-to-day responsibilities. 

During my tenure as general manager for a tech company’s communication hardware, I targeted 5% of the overall organization’s time for blue-sky innovation—the phase where ideas were being initially explored. 

I didn’t expect this to be time employees could use in secret, but rather a plan agreed upon between employees and their manager to pursue an idea. I also knew that not every idea would be successful. 

Rather than penalizing employees when an idea didn’t work out, I used it as a learning experience to improve our ability to innovate in the future. I knew that nothing would discourage innovation more rapidly than for employees to believe their careers would be damaged if their innovative idea was not successful.

2. Employees Don’t Understand Your Objectives

Innovation thrives when employees understand their company’s business—its mission, priorities, and core values—and believe they can make a difference. Without this context, any useful innovative ideas they come up with will be due to little more than blind luck.

Some senior leaders hesitate to share this vision. They worry that if an employee leaves to join a competitor, they’ll share what they have learned with their new employer. But you don’t need to share trade secrets. Think of what might be shared in a public company’s annual report: information that helps employees connect their work to the broader mission.

This is especially important for those who are not involved in strategic planning. Manufacturing staff or clerical personnel can have valuable innovative ideas, but they will often only share them with their managers if they think they will be supported.

For example, an assembly line worker might have ideas for how to improve the manufacturing process in ways the engineers supporting that same line don’t have. A manager whose response is “you just worry about building the product and let us worry about innovation” is killing innovation, just as surely as the senior executive who never supports it in the first place.

3. Innovation is Not Built into the Company’s Plan

Although this can be a problem at any company, it is especially prevalent in large, multinational corporations—the result of something I call the curse of the corporate business model. 

Investors expect the company to deliver continual, predictable growth and profits. Investing in new, untried ideas that take many months or years to produce results does not align with the need to deliver predictable results. Many managers in the corporate world are reluctant to take on this risk, especially since corporate culture often penalizes failure more than it rewards innovation.

This doesn’t mean large companies can’t be innovative; it just means innovation has to be built into the plan. Even if specific innovation projects are not yet defined at the time of the company’s annual budgeting process, a commitment to innovation must still be built into the plan. 

How much? It depends on the industry. For a company in a well-established mainstream market, adding 10% to the business’s R&D budget for innovation projects should not draw undue attention from investors. For companies in newly emerging or high-growth markets, investors may even expect the number to be much higher.

4. Innovators Don’t Understand Actual Market Needs

Some people say that innovation should be done in isolation, away from the influence of customers. They point to Henry Ford’s alleged quote, “If I had asked customers what they wanted, they would have said a faster horse.” 

But that misses the point. Innovation will only be successful if it fills a true customer need. Customers can tell you their problem, but don’t expect them to tell you the solution. A “faster horse” does not describe the customer’s problem; it’s only one idea for a solution. Instead of taking suggestions at face value, the innovator’s job is to get past that to understand the true problem. 

If Ford had probed more deeply, he may have heard that the speed of the horse was fine when it was moving, but it had to stop to rest every few miles. And a horse needed food and water every day, even when the customer wasn’t going anywhere. With this insight he would have understood the customer’s true problem and been in a better position to be truly innovative. 

Ford’s lack of attention to customer needs wasn’t a problem when he introduced the Model T because there were few alternatives, but continuing to ignore the customer is what caused Ford to lose market leadership to General Motors in the 1920s (and never recover).

5. Innovation Projects are Managed Incorrectly

Innovation projects can’t be managed the same way as a revenue-producing business unit. Truly disruptive innovations may take many months or years to deliver financial returns. 

A better approach is to structure the innovation project as an “in-house startup.”  The project is measured not by monthly financial results, but by its ability to deliver to the metrics the team has committed to on the schedule they have promised.

In the early stages, the focus should be on answering fundamental technical and market questions, so the metrics may only cover the next month or next quarter. As confidence grows and the probability of success improves, a longer-term plan can be established.