WTF Is The Principle of Affordable Loss?

The Principle of Affordable Loss is a concept that sounds rather paradoxical. Nevertheless, putting this idea in practice can be rewarding. Adobe, Google, and RevelX have proven that it works!

“Between my consulting, teaching, and writing, I’ve worked with around three dozen companies on their innovation programs, but this is the most open, yet comprehensive mobilization of employee innovation talent I’ve ever come across.”

The words above are from a case study on Adobe Kickbox written by Jeremy Dann, an Adjunct Professor at the USC Marshall School of Business in Los Angeles.

In other words, Adobe’s innovation program seems to be something special. Let’s see why.

Through the Kickbox Program, everyone who works for Adobe can request a box that includes, among other things, a credit card in the amount of ten thousand dollars which can be used to make new discoveries. No questions asked.

Before Kickbox, the US software company prototyped 12 to 24 products each year. In the first year of Kickbox, they tested nearly a thousand new ideas. This process cost less money than Adobe spent on a dozen ideas in the past.

“Adobe does not mind losing ten thousand dollars if it means they learn something from it,” as RevelX partner Matthijs Rosman succinctly put it.

Another way to describe this attitude is the “Principle of Affordable Loss.”

The affordable loss principle can be defined simply as follows:

It is no drama to lose some money if you learn something from it.

Of course, the reality is a little bit more complicated. Before you start wasting valuable resources, please read the following 3 guidelines:

1. Do not lose more money than you can afford. (Yes, that’s why it’s called “affordable” loss.)
2. Just innovating without a solid plan is a waste of time and money. Organize an innovation project with clear guidelines and objectives.
3. Costs are not the only factor to take into consideration. Also give a thought to intangible matters such as reputation loss. In other words, “affordable loss” does not mean that you have to lose your common sense.

At RevelX we have our so-called “40% time” policy. It is inspired by Google‘s famous “20% time” policy. For years, the tech company’s employees were encouraged to devote 20% of their time to side projects that they cared about. This policy bore fruit such as Gmail, Google News, and Google AdSense.

At RevelX, we like to take things a little further. Our consultants are free to spend no less than 40% of their time on what they may think is useful. This has resulted in great projects. Take, for example, the Growth Academy, a project started by our own Björn Brekel. In the pipeline is the book DARE. A Mindset for Innovators in the Digital Age. Some of the ideas in this book will change the way you see your day-to-day job!

Do you want to know more about our people’s innovative projects? Watch this space!