Forecasting the Success of Innovation

Are you good at generating ideas or evaluating ideas?

Published: Monday, August 8, 2016 - 09:16

Creators beat managers at predicting an innovation’s success—unless they’re predicting the success of their own work.

You probably know someone who owns an Apple Watch, or maybe you own one yourself. Is it a creative product? Well, the multifunction watch was creative the first time it appeared in science fiction, but that was a long time ago. Technologically a watch with the Apple Watch functionality has been possible for some time, but firms have waited because they were unsure if it could become a success. If fewer and fewer people wear watches, because smartphones do the same job and much more, why make a watch?

In fact, the potential for success of the Apple Watch was in dispute as soon as it was launched, and it’s still not settled. This is an issue that surfaces again and again: Firms need to estimate the potential success of ideas, both creative ones and more conventional ones. Innovative solutions are increasingly granting a competitive edge, but managers can’t invest in every novel idea that employees dream up. At the same time, organizations can’t afford to miss out on potentially transformational ideas.

How can decision making within organizations be improved upon concerning which ideas to pursue? In the article, “Balancing on the Creative Highwire,” by Justin Berg (Administrative Science Quarterly, July 21, 2016) this question is examined in the context of who in an organization is best for deciding what is most likely to be a creative success: creators, managers, or customers?

The question is important because it reflects an ongoing tension in firms. Creators think that managers don’t have the right kind of thinking to appreciate their work, and managers think that creators are poor decision makers, especially when evaluating their own work.

Theoretically the key difference is between the divergent thinking (idea generation by exploring many possible solutions) that underlies creativity, and the convergent thinking (idea evaluation) that underlies analysis and decision making.

Creative circus

Berg turned to professionals in the circus industry to conduct field studies on forecasting the success of circus acts with audiences. Creators (circus artists), managers (circus directors, producers, and agents), and supporting staff who occupied roles with both creator and manager duties, were asked to watch online videos of circus acts and forecast how successful the videos would be with the audience. Creators and those with dual roles also submitted videos and were able to forecast the success of their own work as well as that of others. The audience was surveyed as well to rate the videos.

Berg also recruited 150 laypeople with no circus experience for a comparison group to shed light on whether the roles of creators and managers put them at a disadvantage for forecasting creative success.

It turns out that the creators are much better at assessing creative success than managers are. Managers could be the worst—even laypeople outperform their predictions in one measure of assessment accuracy.

But managers still had an edge in some respects: Creators are bad at assessing the success of their own work (you get no points for guessing that they overestimate it). Even more interesting, a creator with a strong track record of past forecasting successes is especially bad at assessing the acts, probably due to overconfidence.

To better forecast the success of creative ideas, this study gives a good rule of thumb for managers. If a creator says, “I know this product idea will succeed/fail because [insert own success story here]”, it would be worth considering whether the creator is talking about his or her own creation, or one from someone else. It is also helpful to know what the person’s past record has shown. It’s also useful for the managers to ignore themselves occasionally. Having creators assess each other’s work could be the best way of forecasting whether an idea will be a hit or not. If that’s not possible, ask the audience.

This article is republished courtesy of INSEAD Knowledge. © INSEAD 2016.

About The Author

Henrich Greve

Henrich Greve is a professor of entrepreneurship at INSEAD. Greve’s main interests are the causes and consequences of strategic change in organizations, but he also studies organizational innovation, and organizational founding and growth in young industries. He has written more than 50 published articles and the book, Organizational Learning From Performance Feedback (Cambridge University Press, 2003). Greve holds a master’s degree in sociology and a Ph.D. in organizational behavior from Stanford University.