How to get millions in funding to innovate in a big company?

I recently got asked in a webcast how I go to the board to get funding for innovation. The answer might surprise you: I do not. So how do you get millions of innovation funding?

To answer that question you really need to understand why any innovation budget request will fail if you try to compete with all other funding requests. Your competing funding requests are likely of three types:

1. There is a regulatory change and unless we get A millions to implement a solution we go out of business.
2. Top customer B called and unless we get C millions to add this new feature they will take their business somewhere else.
3. We can save 11.68 x D millions in 3.37 years if we spend D millions by putting in place Gartner's Magic Quadrant Leader and redesigning our back office process as part of a digital transformation. [Spoiler alert: we are likely going to spend many times D millions, and cancel this project and as such the board will feel uncomfortable investing millions in future digital and innovation projects]

Now compare this to an innovation request:

We would like to get E millions to roll out this innovative F product based on this amazing new technology G to create a platform that no customer has asked for and the project has a large chance of failure.

If you would be on the board would you invest in innovation? The answer is clearly no, so do not blame a board for not wanting to innovate. So what can you do?

The first step is to find several enormous and important problems, nobody was able to solve yet. I call them Harry Potter Problems because the one having them can only wish for an innovator with a magic wand to make them go away, everything else failed. Given that nobody solved these problems before, failing is the status quo. As such you can say, we are likely going to fail as well but let's make failure 10 or 100 x cheaper and faster than what we do usually.

Now is the time to bring out innovative ideas, technologies and business practices, that nobody applied to the problem before. However imagine the problem is that your horse is to slow, in that case you do not want to go and spend billions on making a Tesla factory to mass produce cars. Instead you probably want to Google for a video of somebody that outraced a horse with a DIY car and show this to your middle management future sponsor. You should ask them for tens of thousands and 4 to 6 weeks to proof that this video is real and their faster horse problem can be solved.

In those 4 to 6 weeks you get the DIY car maker as a consultant, you rent an electric motor, you get four second hand wheels, call in some favours and prototype a driving platform that can only go straight but outraces easily a horse. The difference needs to be large because a 5% improvement will not cut it. Too risky and too few reward.

You also investigate how this new concept of car can be built, what it consumes (no longer grass or water, so how are you solving this) and you make a professional breathtakingly beautiful sketch of how a Tesla will look like. You ask friends and family if they like your design.

Now you invite the middle manager, two of their peers and their line manager to a dragon's den where each of them gets to sit on your driving platform and outrace that horse with a big difference. Remember everybody else shows them slide. They never see demos, so be different! You show them a couple of slides with ideas on how to supply electricity, how you have done market research and see demand and most importantly you sell them on your vision of building this great looking Tesla based on your sketch. 

You ask your dragons for a few hundreds of thousands and 3 months to build a Tesla prototype and establish market fit. You tell them that you need two months to build and one month to do something new called crowdfunding. You sell them that if this works then they will be the only one that will no longer need horses and that the company can change the world.

You now got hundreds of thousands and spend most of the money on improving the prototype to look like a Tesla but still we are talking about a borrowed engine and painted second hand tyres :-) Illusion is important.

You shoot an amazing promo video. You get some endorsements. You run a crowdfunding to target selling 1,000 cars.

Now the important part:

1. You only get 900 preorders, then you walk away. Fail fast. Any other option will end your career!
2. You get 1,002. Then ask for 2 millions to build a real car in 6 months and invite the 1,002 customers to a Test your Tesla day. If 2,000 show up and you get 2500 orders, you ask for hundreds of millions to start production. If 500 show up, you give them their money back.
3. In the off chance that you get 150,000 preorders, you ask for 1 billion and a promotion to CEO of the new Tesla business unit ;-)

Hope you get your funding and if you do, do not forget that collaboration with fellow innovators can make those millions go a lot further :-)