In the Harvard Business Review, branding bigwig David Aaker explains why business execs always seem to kill new ideas.
In a nutshell, they can't step over their own pessimism.
That hardly makes them poor performers.
But it does make them human.
Ten years ago, two psychologists, Amos Tversky and Daniel Kahneman, received the Nobel Prize for proving that people, given a choice, will predicatably choose the road most traveled.
They'll do so because the probable outcome of a safe bet feels a lot rosier than the probable outcome of a long shot.
"There's evidence that firms are no different," says Aaker.
"They overinvest in incremental innovation, and underinvest in innovations that would create 'must haves' that would define new subcategories, which, with rare exceptions, are the only innovations that create real growth."
Business execs' predilection for pessimism typically manifests itself in four ways, Aaker says:
Execs overvalue safe bets. "An innovation that will provide a predictable increase in the sales and profitability of an existing business will be more attractive than an alternative that will offer a chance at a large profit platform."
Execs undervalue vision. Without the customary hard data, execs can't imagine how a novel idea might pay off. "Estimation of the prospects for substantial or transformational innovation will depend on some uncertain market factors. And, the estimate usually needs to be based on insight, not data."
Execs underfund innovation. Inside most companies, it's the established business units that get all the R&D money. "Their business executives will already have a list of incremental innovations that they believe will further their business. They're unlikely to tee up major innovations that don't fall into their space."
Execs eschew other innovators. Executive nay-sayers love to point to other innovators' blunders to justify their dismal views, even though "market size estimates based on existing flawed products can be biased downward."
If human hard-wiring is the enemy of the new, what's the way out?
Execs need to shake their bleak attitudes, Aakers says.
"Biases against game changers need to be neutralized."