“You will never find them,” said a senior leader in a multibillion-dollar IT company.
The “them” the leader was referring to were zombie projects: the nefarious enemies of well-intentioned innovation efforts around the globe. Zombies are projects that, for any number of reasons, fail to fulfill their promise and yet keep shuffling along, sucking up resources without any real hope of having a meaningful impact on the company’s strategy or revenue prospects.
We had suggested that at least one reason why the company was struggling to successfully commercialize innovative ideas was that zombies were draining its resources and clogging its pipeline. The leader was skeptical.
He thought we wouldn’t find any given the company’s highly rigorous planning process. Every year scores of people spent months reviewing recent performance and sanity-checking future projections. Every project went under the proverbial microscope. So how could a zombie project possibly exist?
A zombie project spawns in predictable ways. The project certainly makes sense when first sanctioned by leadership. Its financial projections, while always uncertain, look reasonable. Market assumptions seem plausible. The development timeline looks achievable.
But somewhere along the line, something happens. The technology doesn’t quite work as planned. A competitor does something unanticipated. A key partner decides not to participate. Customers react in an unexpected way.
Project team members know that what’s happened isn’t good, but it’s hard for them to acknowledge when a project has come off the rails. Psychologists have pointed out how we suffer from confirmation bias, paying more attention to the things we expect and ignoring the things we don’t. And even when we’re aware of setbacks, we’re prone to using the affect heuristic — when we believe in something, we play up good news and ignore bad news.
At some point the data do become overwhelming, and if you gave team members truth serum, they’d admit that the project will never contribute meaningfully to the company’s financial and strategic goals. But since in most companies reward systems carry strong penalties for failing to meet commitments, people hesitate to raise their hands and say “Our project is one of those.” It just looks smarter to find ways to stay alive.
We had spent enough time with our IT company to know how skillfully project leaders could subvert the disciplines of the budgeting process to keep their zombies shuffling along. One recipe for survival: project big revenue numbers five years in the future but ask for only modest investment in the near term. In the next budget cycle, repeat the process so that projected revenue always stays safely beyond the planning process’s two-year horizon. As long as the team successfully manages its costs, everything’s fine, since there’s essentially no penalty for perpetually projecting, but never hitting, long-term targets.
Every budgeting system has its quirks, and innovators in survival mode will skillfully find and exploit them. To fight against these challenges we proposed a “zombie amnesty” — a period during which people can come clean, put their projects up for consideration, and suffer no repercussions if a project is terminated. The critical point of the amnesty is not to lay people off to cut costs but rather to allow the company to invest in new growth by redeploying them to more promising projects.
When we evaluated three dozen efforts for this IT company using realistic projections of possible revenues, we found 20% of them were zombies that didn’t warrant continued investment. Shutting those projects down without penalty would free up enough funding to support two years of more strategic innovation activities.
In a December 2014 HBR article, we argued that these kinds of zombie amnesties are a vital component of a systematic approach to innovation. But they aren’t easy to pull off. Based on our work and the work of like-minded academics — most notably Rita Gunther McGrath of Columbia University (a certified zombie killer if ever one existed) — we’ve identified six keys to doing it successfully:
- Use simple, transparent, predetermined criteria. Shutting a project down can be very emotional. Setting and sharing a shortlist of criteria before the process begins helps participants view the process as rational. At the most basic level, we always ask three questions about an idea: Is there a real market need? Can we fulfill that need better than current and potential competitors? Can we meet our financial objectives? Whatever the criteria, remember they are guidelines, not rules. Final decisions will always require some degree of subjective judgment.
- Involve outsiders. Parents will attest to how hard it is to be objective about something you’ve played a part in conceiving. An uninvolved outsider — someone from a different division or from the outside entirely — can bring important impartiality to the process.
- Codify lessons learned along the way. McGrath teaches that any time a company innovates, two good things can happen. The idea is successfully commercialized (clearly good), or — even if it is not — you learn something that sets you up for future success. Hold action-after reviews to capture lessons learned and create a living database to store and share those lessons. As research shows that “knowledge gained from failures [is] often instrumental in achieving subsequent successes,” investing to capture and spread knowledge from your zombie projects maximizes the return on those investments.
- Expand the definition of success. Executives at large companies often fret about how to match the upside potential enjoyed by start-up entrepreneurs. They should spend far more time worrying about what happens to innovators that work on projects that don’t succeed commercially. After all, when taking well-thought-out risks carries the risk of punishment, it’s no surprise that people hesitate to take any risks. Any time you innovate, future success is unknown. Therefore, learning that an idea is not viable is a successful outcome, as long as those lessons are learned in a reasonably resource-efficient way. Pat team members on the back when they’ve given you that precious gift.
- Communicate widely. This might sound counterintuitive, but broadcasting commercial failures widely encourages future efforts, because innovation happens most naturally at companies that “dare to try.” That actually is the name of anaward given by the Tata Group, India’s leading conglomerate. The award “recognises and rewards [the] most novel, daring, and seriously attempted ideas that did not achieve the desired results.” Shining a spotlight on these kinds of efforts naturally makes it safer for people to push the innovation boundaries. After all, if you don’t dare to try, how can you hope to succeed?
- Provide closure. This idea is ripped straight from McGrath’s excellent 2011 HBRarticle, “Failing by Design”: “Have a symbolic event—a wake, a play, a memorial—to give people closure.”
The Finnish mobile gaming company SuperCell, which was valued at $3 billion only three years after its founding, demonstrates the power of following these disciplines. At SuperCell, success is celebrated with beer, failure with champagne. Mistakes are addressed with brutal honesty, as when after a year of development and investment the company decided to scupper a multi-platform approach that fell short of its development targets. By decisively killing a potential zombie project and yet celebrating the good work of the team, SuperCell allowed its members to shift their focus to a better idea. In this case, they went on to develop the massively successfulClash of Clans game.
Almost every company has more resources than it realizes. Find and put the zombies down, reallocate resources to your most promising projects, and you will suddenly find your innovation efforts getting better and bigger faster.
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