A Scientific Method to Innovation Management
Entrepreneurial decisions in conditions of uncertainty are, by definition, an area in which there are no guaranteed best practices. Innovation management falls into this category, to the point that, according to a survey published by Harvard Business Review, business executives faced with the unknown tend to make decisions based more on gut instinct and intuition than on judgments based on solid and factual reasoning.
"Our research began like that, thinking that entrepreneurs and other decision-makers should instead adopt the approach that is characteristic of scientists. Therefore, they should generate new theories, observe existing phenomena, gather evidence, build experiments, compare results, and only then draw conclusions," explains Arnaldo Camuffo, Professor of Business Organization and first signatory of the research paper "A Scientific Approach to Innovation Management: Evidence from Four Field Experiments" (the other co-authors are Alfonso Gambardella, Danilo Messinese, Elena Novelli, Emilio Paolucci and Chiara Spina).
"We are in an evolutionary phase of history in which there is a lot of data available to build new business theories. Consider, for example, Amazon, which, by amassing enormous amount of data resulting from transactions with customers, is able to imagine and offer completely new services and products. But data alone do not speak by themselves; it is important to have a framework, a theory in fact, that poses the right questions to software, using the sophisticated algorithmic logic of machine learning and AI. This makes it possible to generate theories and to reflect on the firm in a new way, through reasoning by analogies and parallels, and by developing lateral thinking and creativity".
The advantages of this approach can be easily understood: to develop ideas and projects for new, more innovative and convincing services and businesses. The advice is to test innovation early, with small experiments, to avoid costly investment (in time, and in human and financial capital) that could prove useless. This reduces the chances of running into "false positives" and thus mitigates the risk of large-scale applications. "This is not an outlandish practice: Google or Netflix constantly carry out experiments on their portals, even if it is to test a new app, the layout of a website or the graphics of a new video," observes the professor.
"The task of our study, however," concludes Camusso, "was to demonstrate with facts the validity of the scientific method applied to the management of innovation and for this we analyzed four field experiments carried out in Italy and the UK. In the coming months we will expand the research study through another five experiments to be conducted in Italy, the UK, the Netherlands, China, and Tanzania. Furthermore, we intend to apply the method not only to market innovation, but also to other typical situations of business uncertainty such as M&A operations or the selection of top management personnel."