Ride the 80/20 Innovation Cycle

Have you built innovation into your brand model? It starts with building in a little fun. Consider how one of history’s greatest creative thinkers inspired innovation.

During a lull in film production, Walt Disney would often become worried about how to fund the creative staff. Due to stress, his doctor actually advised Disney to pick up a hobby. Disney decided to work on miniature trains. He loved to get his hands dirty. He built everything himself. His passion for small trains led to bigger and bigger trains. Outgrowing his studio lot, and looking to find a lot big enough for his next train, he decided to design a theme park. 

As a busy manager of the business and an onlooker to his brother’s distraction with trains, Walt’s brother Roy didn’t want anyone to use Disney Brothers film funds on Walt’s next hair-brained idea, so he forced Walt to form a new company so that he could keep tinkering around without risking harm to the foundational movie franchise. Roy offered Walt $10,000 when Walt began his dream for Disneyland. They formed Walter E Disney Enterprises (WED) to allow Walt to have his own sandbox to play in. 

Don’t think innovation is only for big companies with lots of resources. Don’t tell yourself you don’t have a big enough marketing budget to add innovation to your media mix. Our study of the greatest innovations show that the opposite is true. 

As with Disney, there is no need to put at risk the core business model if it is currently healthy and financially sound. Start small. 

In our study of innovation, we have discovered there is an 80/20 rule at work among successful business and marketing leaders. We must take into account the reality that all innovation presents risk. Just as a financial advisor recommends to keep your high-risk, high-reward stock investments capped below 20% of your total portfolio, a marketing investor should follow suit. 

Experts in innovation have come to understand that innovation is a balance. In his study of the performance of hundreds of companies over two decades, Jim Collins learned that great innovators always “preserve the core” while maintaining a culture to “stimulate progress.” His model uses the yin and yang symbol to illustrate the tension between the two key forces in a healthy business. The following was used to describe Disney’s success:

“Disney also instilled a remarkable constancy of purpose that permeated every new Disney venture—namely, ‘to bring happiness to millions …’ Walt Disney provides a classic case of preserve the core and stimulate progress, holding a core ideology fixed while changing strategies and practices over time, and its adherence to this principle is the fundamental reason why it has endured as a great company.”**

Innovators are experts at allocating scarce resources for constant renewal of the brand. Instead of using a pie chart or a yin and yang symbol to describe this allocation model, our team prefers to use two wheels of a bicycle. Our model visualizes the unity of two pie charts, working together toward a common goal. This keeps the innovation unit separate from the core business unit. However, we don’t use the image of a modern day Schwinn or Huffy bicycle. That would assume innovation should get equal resource allocation as the core business gets. Imagine the one wheel much bigger than the other, as in the 1800s bicycle called a “High Wheeler.” 

This “Innovation Cycle” presents the larger wheel or pie chart as the core competency that powers the business or marketing strategy. This competency should inform your “Brand Promise.” The smaller wheel or pie chart represents the innovation initiatives that are focused on stabilizing the future of the business or marketing strategy. Innovation should be inspired by our “Brand Aspiration.”

As a rule of thumb, we use the 80/20 rule. As long as 80% of the marketing or development budget is spent on tried-and-true models, you can expect to get 80% of the results that are necessary to grow and maintain the business. That leaves up to 20% of your budget for innovation and exploration of new services, products or media options. The worst-case scenario is that 20% of discretionary budget is lost, but the best-case scenario is that the 20% accomplishes more than the 80%. 

Often this gamble isn’t a gamble at all. History has proven that lack of innovation has been the death of many businesses. However, never bet the farm on a single long shot. The reason we use the 80/20 rule is that over-innovation has also been the death of many businesses.

What is most important is that you can maintain a sustainable model for innovation. Great innovators would rarely say, “Innovate or die.” That statement adds more rules and puts too much stress on an unknown future. Worse yet, it would put fear into the core business team. A great innovator would prefer the phrase, “Innovate for fun.” This keeps innovation in the context of a balance vs. a desperate, last-ditch maneuver of a dying brand. 

As your guiding light, your Brand Aspiration should provide a structural approach to freely explore your Passionate Purpose, and even allow you to fail often while having fun.

For Disney, innovation was a hobby. Similarly, Steve Jobs often called AppleTV “a hobby,” rather than a serious undertaking. Apple CEO, Tim Cook once explained, “The reason we call it a hobby is because we don’t want to send a message to shareholders that we think the market for it is the same as the iPhone, iPad, Mac, etc. We don’t want people to think the leg of that stool is the same as others.” 

Ironically, AppleTV is becoming one of the strongest legs on the Apple stool, growing 709% to more than a quarter billion hours of video in 2018, driving an estimated several billion dollars in revenue for 2019.** As silly as the label might sound, a “hobby” is a great way to manage expectations for those who don’t have tolerance for failure. Treating risky innovation as a hobby will also manage emotional behaviors of innovators, who tend to get carried away with undisciplined investment of scarce resources. 

Innovation can and should be fun. And if it’s in-line with your brand, it can invigorate the spirit of your team, but it usually delivers very little revenue to the bottom line, for what could be years. So, don’t take innovation so seriously that you bank the company on it, but don’t neglect it either. Afterall, it’s not just for fun. If you don’t plan for innovation, it will be too late when disruption falls upon your industry. 

If you fail to plan for the future, you have a plan for failure. 

If your brand is built on past competency alone, you won’t be credible to serve up new thinking in the marketplace of disruptive ideas. So, always position your brand as an innovator in your industry, but keep your operational model in balance. And, most importantly, don’t get bored of your core competency.

How do we apply this discipline to our brand model? When you design your brand, don’t merely look to the past. Envision what your brand might stand for 20 years from now. The aspirational vision of your brand should exude from your brand statements and taglines. Of course, don’t forget to sell what you do today, but as Jim Collins would say, great leaders are never restrained by the “Tyranny of the OR…” Enduring leaders, “embrace the genius of the AND.” This is why the Brand Aspiration is the most difficult statement your team will ever write.

– Excerpt from: Surfing The Black Wave: Brand Leadership in a Digital Age

* https://publicism.info/business/great/9.html

** https://9to5mac.com/2018/04/25/ios-11-adoption-rate-tv-streaming-up/