The Bad NewsYou can't pick winners. The data from investing is overwhelming:
- 12% of venture capital funds outperformed the market.(1)
- 7% of angel investments account for 75% of returns.(2)
- 0.6% of 2,100 actively managed US equity funds tracked between 1975 and 2006 outperformed the market. (That is, none….)(3)
- 87% of university patent licensing offices lose money.(4)
- The probability in the US of a pharmaceutical progressing from the first Phase 1 clinical trial to FDA approval is <10%.(5)
- Of the 1,900 new CPG brands that hit retail shelves across the U.S in 2011 almost 70% accrued less than $7.5 million in year-one sales (aka lost money).(6)
The Good News: No One Else Can Either
We have to face it. When it comes to high risk endeavors, we can't picks winners early. And yet, based on the ways almost all companies work to speed up innovation, you would think they have special knowledge none of the rest of us have. Examples include:
- Silicon Valley tourism: bringing executives out to “learn from the best” and “experience the startup vibe"
- Idea competitions - having a committee of experts pick the “winners” for further development
- Incubators with a small number of funded projects
- Mentoring or investing in a small number of external startups
- Internal stage gates in product development that attempt to pick winning projects early
If you work at a large company, it's likely that your company has versions of all of these programs, and you’ve seen them fail to deliver sustainable results. Does it mean your company has to fundamentally reengineer how it does product and service innovation? It does.
Our goal at the Innovation Acceleration Group is to help change the product innovation and entrepreneurship process to recognize that none of us can pick winners. Read Blowing up the Business Plan at U.C. Berkeley Haas Business School to learn more about how we have shifted the paradigm and changed the culture at UC Berkeley in a few short years and have many, many more winners to show for it.
Subscribe to our blog for more updates on how we are helping corporations, governments, and universities fundamentally change how they innovate and deal with all the disruptive busimess models and technologies emerging today. Get in touch if you want to start a conversation about how we can help bring this change to your company. We welcome your comments below.