Incentivizing Innovation


“a bird in the hand is worth two in the bush”“fools rush in where angels fear to tread”. Just two of many proverbs that warn us against taking risks.

People are both naturally inclined and conditioned to be risk-averse. This is rooted in our very basic desire for positive outcomes over uncertain or negative outcomes, and is reinforced through education and upbringing.

Perhaps you’ve also heard this quote attributed to the great inventor Thomas Edison on his many failures in creating the light bulb: “I have not failed 1000 times, I have just found 1000 ways that won’t work”.

By providing incentives that make experimentation a positive outcome, regardless of success or failure, people will naturally choose to experiment and innovate.

In addition to the forces of digital disruption, as organizations become more efficient via methods such as eliminating waste, adopting better processes and automating repetitive tasks, the profile of the workforce changes too. Roles that require creativity, experimentation, and innovation begin to make up a larger portion of the workforce. Successful innovation becomes even more important in light of this change.


Most people and organizations consider failure an undesirable outcome.

Organizational reward and recognition structures are geared toward rewarding regular and continued success. This creates a bias in people that is detrimental to innovation and stifles responsiveness.

Failure is ok. Sometimes. When it drives you to rethink and try again. When it prevents you from adopting bad practices or releasing a bad product. When you learn. When it happens quickly. This is constructive failure.

Constructive failure is ok. Always. Progress is not possible without failure, and progress you must, so accept that constructive failure is integral to innovation.

Phrases like “Fail fast, fail often” or “fail well” have become somewhat of a mantra in some circles, to the point of becoming little more than platitudes thrown about by managers without any thought as to what they mean.

That’s unfortunate, because there is value in failing fast. Indeed, constructive failure should happen quickly. The real skill lies in being able to recognize failure quickly. Objective measurement of failure can be difficult, however recognizing failure can be easy when experiments are approached with structured goals that include clearly measurable components.

Enough talk of failure. Success is the desired outcome for innovation.

The time taken to achieve successful innovation can be much longer than the time periods that organizations traditionally use when assessing individual or team performance. While regular feedback is always good practice, the measurements of success that are linked to rewards should be assessed over longer periods.

The incentives offered for innovative outputs should scale inline with the longer measurement period and include an emotional reward component such as recognition.

insights & further reading

Research into providing incentives for innovation “strongly supported the idea that toleration of early failure combined with long-term incentives encourage innovation”1

In an employee engagement survey of 1200 people “83% of respondents said recognition for contributions was more fulfilling than any rewards or gifts”2


Innovation requires experimentation, which carries a high risk of failure, and while you can’t change human nature, you can influence how people assess the risk of experimentation by doing two simple things:

  • creating desirable rewards for successful experimentation
    • monetary rewards
    • emotional rewards such as recognition and influence over use of ones own creation
  • changing the assumption that failure is a negative outcome
    • provide training on constructive failure

Put structures in place around experimentation that include:

  • appropriate goal setting to enable rapid recognition of failure
    • C.R.A.P. goals fulfil this via the Appreciable component
  • constructive failure review processes

Assess whether your performance review and reward cycles allow the time required for experimental successes.

As mentioned in earlier topics, consider adopting some version of the “free time” principle to drive innovation. Apply this broadly across your organization. Innovation can come from anywhere.

methods & tools

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  1. California Management Review, creating incentives for innovation [return]
  2. Psychology Today, new employee study shows…. [return]