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Entrepreneurship

The ROI of Innovation

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As product managers, we are often asked a single question when we propose a new product: What’s the Return on Investment (ROI)? What’s the ROI of innovation?

Money bag - Tests cost money to run and impact the ROI of InnovationThere has to be a Return on Investment (ROI) or we can’t get funding for the project. The details of this conversation may vary depending on if we are an entrepreneur talking to and investor, an intrapreneur pitching to our business unit manager, or head of a skunkworks pitching to the CFO. But the general theme is the same.

  1. Finance requires a 4 year projection of revenue showing an ROI
  2. The visionary grudgingly creates a realistic spreadsheet projection of the next 4 years revenues that shows a 100 million dollar market.
  3. Finance denies funding because the returns are too small. Finance declares, “If it’s not a billion dollar market, we don’t invest.”
  4. The visionary, adjusts the market size and margins until the spreadsheet shows 1 billion dollars.
  5. Finance divides the projected revenues by 10 to account for “visionary enthusiasm” and then approves it because 100 million is pretty decent.

WTF just happened?

There must be a better way to decide on innovation investments than this.

Shared Fiction

It reminds me of when I see someone waving at me at a party, so I wave back to be polite, not knowing who the hell this person is.

Of course, they were waving at someone else behind me, but assume, since I was waving at them, they must know me and walk over to have a chat. Even after 10 minutes of conversations where we’re both fairly certain the other person has no idea who we are, we continue the charade out of courtesy.

Everyone in this scenario knows it’s a complete charade and suspects that everyone else also knows it’s a charade, but everyone plays along because it would be impolite not to.

Until someone dares to question the shared fiction out loud, it will continue.

Harmless Fiction

Cocktail party civility is a harmless fiction. The fiction around pitching new innovation projects can be deadly.

It’s deadly because if we know one thing for certain, companies are dying faster than ever.

Average company lifespan on S&P 500 Index (in years)

The average lifespan of an S&P 500 company has declined from 80 years to 15. If you work at a large company, that fact should terrify you.

The Absurdity: The ROI of Innovation

What’s the ROI of innovation? What about a potentially disruptive innovation?

Let’s start with something easier. What’s the ROI of buying health insurance?

(Let’s assume we’re in the US where there isn’t state sponsored health care.)

Hint: It’s negative.

Stethoscope - What's the ROI of health insurance?Without doing any math, we know it’s negative because health insurance companies would quickly go bankrupt if they lost money on every person that bought health insurance. It’s the same reason we can be assured that the odds are against us if we gamble in a casino. The casino would be bankrupt if the odds weren’t in their favor.

On average, we’re bound to lose.

Does that mean we should never buy health insurance?

No. We want to buy health insurance because the downside of a health problem is potentially catastrophic.

Death - A problem everyone has and corporate startups are no exceptionWith medical costs what they are (at least in the US), the cost of a major surgery is sufficient to bankrupt us. Or even worse, we simply might not be able to afford cancer treatment. Unless, like Walter White, we have a spectacular backup plan, we’re dead.

Spoiler alert: Walter White died anyway.

The Joy of an Unused Option

Health insurance doesn’t make any sense in terms of ROI (or Net Present Value if you’re into that sort of thing.) The only time it makes sense is when we know we’re about to get sick.

Does that mean we should be unhappy unless we’re able to cash in on our health insurance by having a triple valve bypass?

If we don’t have to use our health insurance, we ought to be absolutely thrilled! It’s not a waste of money just because we didn’t get sick.

Buying health insurance is like buying the option of going to the doctor. We don’t have to go. But we can if we need to.

The option has value, even if we don’t use it.

Happiness in Disruption

Congratulations on Your FailureIn innovation, we should also be thrilled when innovation projects fail. Particularly if they are disruptive to our core business.

If they fail, it means that the potential disruption is probably not as much of a threat as we thought.1

If they succeed, sure…we’re disrupted. But at least we disrupted ourselves! We have a chance to profit and sustain ourselves through that disruption.

The alternative is to let others disrupts us.

Which would you rather do?

Investing in innovation is investing in the option to launch a new business. Even if it might fail or we decide against it in the long run, the option still has value!

Innovation Options

Innovation accounting & innovation options

This is a deep topic (as is all innovation accounting) where I have been heavily influenced by my conversations with David Binetti. For those that are interested in calculating the value of innovation options, I’d recommend a conversation with him and to check out his new project called Innovation Options.

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About the Author

This article was produced by grasshopperherder.com, a website that is dedicated to insights in entrepreneurship. see more.

Callum Connects

Malcolm Tan, Founder of Gravitas Holdings

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Malcolm Tan is an ICO/ITO and Cryptocurrency advisor. He sees this new era as similar to when the internet launched.

What’s your story?
I’m a lawyer entrepreneur who owns multiple businesses, and who is now stepping into the Initial Coin Offering/Initial Token Offering/Cryptocurrency space to be a thought leader, writer (How to ICO/ITO in Singapore – A Regulatory and Compliance Viewpoint on Initial Coin Offering and Initial Token Offering in Singapore), and advisor through Gravitas Holdings – an ICO Advisory company. We are also running our own ICO campaign called AEXON, and advising 2 other ICO’s on their projects.

What excites you most about your industry?
It is the start of a whole new paradigm, and it is like being at the start of the internet era all over again. We have a chance to influence and shape the industry over the next decade and beyond and lead the paradigm shift.

What’s your connection to Asia?
I’m Singaporean and most of my business revolves around the ASEAN region. Our new ICO advisory company specialises in Singaporean ICO’s and we are now building partnerships around the region as well. One of the core business offerings of our AEXON ICO/ITO is to open up co-working spaces around the region, with a target to open 25 outlets, and perhaps more thereafter.

Favourite city in Asia for business and why?
Singapore, since it is my hometown and most of my business contacts originate from or are located in Singapore. It is also a very open and easy place to do business.

What’s the best piece of advice you ever received?
Be careful of your clients – sometimes they can be your worst enemies. This is very true and you have to always be careful about whom you deal with. The closest people are the ones that you trust and sometimes they have other agendas or simply don’t tell you the truth or whole story and that can easily put one in a very disadvantageous position.

Who inspires you?
Leonardo Da Vinci as a polymath and genius and leader in many fields, and in today’s world, Elon Musk for being a polymath and risk taker and energetic business leader.

What have you just learnt recently that blew you away?
Early stage bitcoin investors would have made 1,000,000 times profit if they had held onto their bitcoins from the start to today – in the short space of 7 years.

If you had your time again, what would you do differently?
Seek out good partnerships and networks from day one, and use the power of the group to grow and do things together, instead of being bogged down by operations and going it alone from start.

How do you unwind?
I hardly have any time for relaxation right now. I used to have very intense hobbies, chess when I was younger, bridge, bowling, some online real time strategy games and poker. All mentally stimulating games and requiring focus – I did all these at competitive levels and participated in national and international tournaments, winning multiple trophies, medals and awards in most of these fields.

Favourite Asian destination for relaxation? Why?
Phuket – nature, resort life, beaches, good food and a vibrant crowd.

Everyone in business should read this book:
Rich Dad Poor Dad by Richard Kiyosaki

Shameless plug for your business:
Gravitas Holdings (Pte) Limited is the premier ICO Advisory company and we can do a full service for entrepreneurs, including legal and compliance, smart contracts and token creation, marketing and PR, and business advisory and white paper writing/planning.

How can people connect with you?
Write emails to [email protected], or [email protected]

Twitter handle?
@malcolmABM

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Entrepreneurship

Women on Top in Tech – Pam Weber, Chief Marketing Officer at 99Designs

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Pam Webber is Chief Marketing Officer at 99designs, where she heads up the global marketing team responsible for acquisition, through growth marketing and traditional marketing levers, and increasing lifetime value of customers. She is passionate about using data to derive customer insights and finding “aha moments” that impact strategic direction. Pam brings a host of first-hand startup marketing experiences as an e-commerce entrepreneur herself and as the first marketing leader for many fast-growing startups. Prior to joining 99designs, she founded weeDECOR, an e-commerce company selling custom wall decals for kids’ rooms. She also worked as an executive marketing consultant at notable startups including True&Co, an e-commerce startup specializing in women’s lingerie. Earlier in her career, Pam served in various business and marketing positions with eBay and its subsidiary, PayPal, Inc. A resident of San Francisco, Pam received her BA from the University of Pennsylvania and MBA from Harvard Business School. Pam is a notable guest speaker for Venture Beat, The Next Web, Lean Startup, and Growth Hacking Forum, as well as an industry expert regularly quoted in Inc., CIO, Business News Daily, CMSwire, Smart Hustle, DIY Marketer, and various podcast and radio shows. You can follow her on Twitter at @pamwebber_sf.

What makes you do what you do?
My dad always told me make sure you choose a job you like because you’ll be doing it for a long time. I took that advice to heart and as I explored various roles over my career, I always stopped to check whether I was happy going to work every day – or at least most days :). That has guided me to the career I have in marketing today. I’m genuinely excited to go to work every day. I get to create, to analyze, to see the impact of my work. It’s very fulfilling.

How did you rise in the industry you are in?
I had a penchant for numbers and it helped me stand out in my field. This penchant became even more powerful when the Internet and digital marketing started to explode. There was a great need for marketers whose skills could span both the creative and the analytic aspects of marketing. I capitalized on that growth by bringing unique insight to the companies I worked with, well-supported with thoughtful analysis.

Why did you take on this role/start this startup?
I’m not sure this is relevant to my situation as I had been a marketing leader in various start-ups and companies. I took on the role at 99designs because I was excited by the global reach of the brand and the opportunity the company had to own the online design space. I especially liked the team as I felt they were good at heart.

The challenge I’ve faced in my time at 99designs is how do I evolve the team quickly and nimbly to address new challenges. The work we do now, is very different than the work we did a year ago and even the year before that. There is a fine line between staying focused on the goal ahead and being able to move quickly should that goal shift.

Do you have a mentor that you look up to in your industry or did you look for one or how did that work?
There is no one I’ve sought out or worked with over my entire career as my “mentee” needs have changed so much over the years. There are many people who have helped me along the way. For example, one of my peers at eBay, who was quite experienced and skilled in marketing strategy and creative execution, taught me what was in a marketing plan and how to evaluate marketing assets. As I have risen to leadership positions over the years, I often reach out to similarly experienced colleagues for advice on how they handle situations.

How did you make a match if you and how did you end up being mentored by him?
I learned early in my career that it rarely hurts to ask for advice. So that is what I have done. Additionally, there are people that are known to be quite helpful and build a reputation for giving back to others in advisory work. Michael Dearing, of Harrison Metal and ex-eBay, is one of those people. I, as well as countless others, have asked him for advice and guidance through the years and he does his best to oblige. Finding mentorship is about intuiting who in your universe might be willing and whether you are up for asking for help.

That being said, generally, I have found, if you are eager to learn and be guided, people will respond to the outreach.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I generally look for a good attitude and inherent “smarts”. A good attitude can encompass anything from being willing to take on many different types of challenges to working well amongst differing personalities and perspectives. Smarts can be seen through how well someone’s done in their “passion areas” (i.e. areas where they have a keen interest in pursuing).

I try to hire those types of people because in smaller, fast-growing companies like many of the ones I’ve worked in, it’s more often than not about hiring flexible people as things move and change fast.

Once those people are on my team, I try to keep them challenged and engaged by making sure they have varying responsibilities. If I can’t give them growth in their current job or in the current company, I encourage them to seek growth opportunities elsewhere. I’d rather have one of my stars leave for a better growth opportunity than keep them in a role where they might grow stale.

Do you consciously or unconsciously support diversity and why?
I consciously support diversity. When I am hiring, I am constantly thinking about how to balance the team with as broad a range as possible of skill sets, perspectives, etc. to ensure we can take on whatever is thrown at us, or whatever we want to go after.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
I’m going to assume a great leader in my industry to mean a marketing leader in a technology company. I think a great leader in this industry is not afraid to learn new tricks no matter their age – it’s the growth mindset you may have heard about. I have a friend who inspires me to do this – she purchased the Apple Watch as soon as it was available, and was one of the first people I knew to use the Nest heating/cooling system. She’s not an early adopter by most definitions, but she adopts the growth mindset. This is the mindset I, too, have sought to adopt. In my field of marketing, it most recently has meant learning about Growth Marketing and how to apply this methodology to enhance growth. Independent of your industry, I think a growth mindset serves you well.

Advice for others?
I have been at 99designs for 3.5 years. During that time we’ve invested in elevating the skills and quality of our designer community, we’ve rebranded to reflect this higher level of quality, and have improved the satisfaction of our customers. Our next phase of growth will come from better matching clients to the right designer and expanding the ability to work with a designer one-on-one. We have the best platform to find, collaborate, and pay professional designers who deliver high quality design at an affordable price, and it’s only going to get better. I’m excited to deliver on that vision.

Pam Webber
Chief Marketing Officer of 99designs
Twitter: @pamwebber_sf

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