Just as parents tend to think their own children are the most amazing things to walk the earth, so too do innovators have similarly distorted opinions of the ideas that form the basis of their innovations. So says a recent study from the Technical University of Munich, which suggests that up to 75% of innovative ideas are overvalued by the originators of the ideas.
“Grasping the true value of ideas is essential for corporate innovation success. When it comes to forecasting the value of one’s own innovation ideas, however, people may err systematically,” the researchers say.
The researchers assessed nearly 1,000 employee-generated ideas from a European automotive supplier. The ideas all revolved around the fairly humdrum world of manufacturing process innovation.
“We found that 74% of all ideas are overvalued even in the down-to-earth realm of manufacturing process innovation,” the authors explain.
Overvalued
The scale of the problem is significant, as the researchers believe that if these over-valued ideas are actually implemented they would cost the organization as much as would be gained by implementing the good ideas. In terms of the distribution of value, whereas around 75% of ideas were overvalued, just 6% were correctly valued, with the remainder being undervalued.
The bias can be especially strong among groups, as the presence of our colleagues appears to embolden us to puff up our ideas. The study found that ideas from people working in groups were overvalued by 37%, versus just 4% for employees working on their own.
Similar overconfidence was visible the higher up the hierarchy one climbed. This sees ideas generated by managers overvalued by 42%, whereas those by frontline workers being undervalued by 11%.
“One of the reasons for such mismatches between expectation and reality is that firms often depend on ideators’ knowledge when trying to predict idea values. Ideators are often subject matter experts with unique sticky information, which is hard to codify and to disseminate,” the researchers say. “In the words of a process innovation manager in the firm we study: ‘It will even take a method specialist two days to fully understand somebody else’s idea.’”
Avoiding overvaluing ideas
So can this problem be overcome? The researchers propose a number of possible solutions:
- Distinguish idea generation from idea evaluation, so that those who tend to overvalue their ideas aren’t also those charged with implementing them.
- Keep idea generators anonymous when the ideas are being evaluated, to overcome the problem of ideas being overvalued if they come from important people, or undervalued if they come from frontline staff.
- This should also be part of an explicit program to empower frontline staff to propose ideas, as such people are more likely to undervalue their ideas and think them not worthy of consideration.
“Failing to grasp the true value of an idea can lead firms to make poor selection decisions, and to miss out on great opportunities or to make costly investments, which may even threaten their survival,” the authors conclude.
