Innovation notes

From Luca Dellanna’s EconTalk appearance on Compulsion, Self-Deception and the Brain:

Try a lot of things and see what works, see what sticks. And, at the beginning, don’t necessarily look for effectiveness. Look for what sticks, what you keep doing. And then, only in a second step, you can look for effectiveness.

One common mistake in the startup world is to optimize before having found a product/market fit–a product that the market really wants, that they start pulling. And, only then you can think how to advertise it better, how to make it cheaper, and so on. But, if you try to optimize too early, there is just too much friction because you don’t have a good product enough. You don’t have a product that the market wants; and you push it, but the market doesn’t get it.

And, the same applies in some way to our habits. If you try to look only for the habit which is the most effective, but it’s not a habit that your brain is, like, receptive to, then you might waste a lot of effort.

I agree. I’ve been involved in a lot of idea generation sessions, one this week even, where this happened.

There’s a strong tendency for people to want to think down the road to the finished product or write-off an idea if they can’t immediately see how it can fit into the current system or if they think it will cost too much to make.

It’s often hard to reel them back to step 1. Forget about finished product, cost troubles or how it will fit in the current system. Step 1 is to figure out if you got something that works, on a really small scale.

This is another hurdle. Lots of folks still want to jump to step 3 or 4, imagining what a market test would look like.

Think smaller. What’s the minimum you would need to do for a proof of concept and very small pilot? That could be as simple as mocking up the idea on some paper and talking to 5 or 6 random friends about it.

Many think this is too small. They want fully baked market research.

Some of the tendency to jump over the early steps comes from folks who just don’t know better. In big companies with big resources, they large test is considered a gold standard.

But, I think some of the tendency also comes from another incentive. I’ve worked in companies where people got brownie for simply proposing smart sounding ideas, but had not ownership of whether the idea got tried or worked, or not. That was someone else’s job. But, they basked in the glow of of their great sounding ideas.

Talk is cheap. Have them put their money where their mouth is.

They don’t want to test the idea because they want credit for coming up with the idea. Actually giving it life, even in a small way, terrifies them because it might fail. So they try to optimize for what the final product will look like because they know that finding out is in some far out future and nobody will remember who had the idea by the time everyone finds out it’s a dud.

In one company that I worked in, field management had lots of discount ideas, many of which have been tried many times without. We had a hard time getting them to pay attention to that info as they were too busy accepting the praise for having an idea.

When field managers came to me with ideas, I started asking if they would fund a trial from their budget.

About 90% of ideas died on the spot. When faced with the prospect of paying for their idea, they became more interested in the results of previous attempts, calculated the hole that would put in their budget and refrained from spitting those ideas out in meetings for brownie points because I might ask them to fund it.

One time a field manager did have an idea that hadn’t been tried before. We asked if he’d be willing to fund it to try it.

Yes.

I was skeptical of the idea, but he was taking the risk. Also, I know I can be wrong, so I didn’t let my skepticism get in the way.

It turns out it worked, spectacularly. He never let me forget my skepticism. I never let him forget that I didn’t let that stand in the way of trying it, nor did it keep me from digging to discover why it worked.

To Luca’s point, when we tried, it wasn’t fully baked. There were lots of problems in execution. It was late getting out the door. There were systems problems.

But, there were strong signs that he was onto something. None of those early problems hurt the signal that. The signal was one of the clearest signals I’ve seen in all my years of looking for things.

Folks who haven’t seen such signs tend to get excited about 1-2% bumps. I don’t anymore. They can have those. I’ve seen too many statistically significant 1-2% bumps that evaporate into the noise of the real world when they are rolled out and they have to resort to the smart sounding, but empty defense, “just think how much worse it would have been if we hadn’t done it.”

These are the same folks that want to optimize before finding out if they have something.

If innovation isn’t easy, you’re doing it wrong

After some time working in mature companies it occurred to me how difficult companies make their innovation.

There is more action in just getting ideas through the political and operational hurdles. Ideas compete for executive approval and company resources. Ideas that win executive buy-in are then treated as if success is a fore drawn conclusion.

That’s how it worked at one of my former employers. My group went to the executives each year during planning with a list of 10 ideas to have them pick the 2-3 they wanted to try.

One year, we had a new CEO from a company with a healthier innovation culture (though he didn’t know it and neither did I, at the time).

We presented our 10 ideas and sat there with an awkward silence. He broke the silence after a bit, “So, what do you want from me?”

“Which 2 or 3 should we try?”

He responded, “Is there a reason you can’t try them all? I don’t know which one is going to work. Figure out ways to try them, even if on small scales, to find out.”

That completely changed how we approached our work. While he was there over the next three years we tried lots of stuff and found a lot of success. We spent zero time on the politics of trying to get buy in and almost all of time trying to figure out how to market research, proof of concepts, pilots and tests to figure out what would work for customers.

I now call this the ‘discovery innovation culture.’ It has some basic underlying principles, like the chances of success of any one thing is low, so try lots. Also, an ounce of customer reaction is worth 5 pounds of executive politics.

Sadly, I don’t think he knew the impact his innovation culture had on the business. He also did the typical CEO, top down ‘5 point plan’ like his predecessors and when that failed to make an impact, as most of such plans do, the board soured on him.

Ironically, the month after he left, the board approved rolling out one of the projects we discovered under his discovery innovation culture. It had a major impact on the business. He didn’t get a lick of credit for it.

It wasn’t his idea. It was a crazy idea that wouldn’t have seen the light of day in the political innovation culture. But, he didn’t stand in its way when one of the field leaders wanted to test it, like his predecessors would have.

Thinking back, I think he could have bought himself more time as CEO if he recognized what was happening and told the Board, Look, when I got here the innovation pipeline was bureaucratic and anemic. Innovation is the way to grow, but you have to be extremely lucky to grow if your pipeline only has 1 or 2 projects in it at a time. No wonder you have been struggling. I’m going to change that, but it’s going to take 3-5 years to see scalable projects coming out the other end of the pipelin. This is how we did it at the company I’m from and it works. Be patient.

After he left, his replacements brought back the political innovation culture.

In the 3 years under him my group alone rolled out about a half a dozen things that has stuck with the business.

Since he left about 10 years ago, the business has been going sideways and they’ve just been tweaking the stuff we rolled out. The energy has gone back to the politics of getting executive buy-in rather than just trying stuff and nothing new has come of it.

When I see organizations that are struggling to stay relevant, I tend to see the political innovation cultures that result in anemic innovation pipelines that usually do not produce enough successes to keep the business ahead of its evolving competition, which is innovating at faster rates in more discovery innovation cultures.

Give luck a chance

In his book, How Innovation Works, Matt Ridley adeptly captures an idea that I’ve struggled to articulate well:

“Serendipity plays a big part in innovation, which is why liberal economies, with their free-roving experimental opportunities, do so well. They give luck a chance.”

Later, he described how nuclear energy has not advanced nearly as far as other areas, like electronics, because not many folks want to give luck a chance with nuclear since because of the risk.

In a world where improving requires trial-and-error, failure, learning and luck, nuclear energy remains in a state close to where it started because it does not have the luxury of errors and failure.

I’ve witnessed this same limitation in many organizations. Managers of mature companies, for example, too often think their job is to keep the company healthy by using their skill to beat the odds, rather than to play the odds. So, they squelch trial-and-error in the company in favor of their grand plans. They don’t give luck a chance. The thought of admitting that the future of the company depends on a bit of serendipity seems like madness to them.

Sometimes they are lucky to beat the odds, but more often the house wins and they leave the business less healthy than where they started.

Those in charge of US Soccer also do not give luck a chance, while soccer federations in other countries do. I believe that’s the the #1 or #2 reason why U.S. men’s soccer has trouble cracking the top 10 and has to generally rely heavily on dual citizens, that as a product of their dual citizenship spent good chunks of their lives in those soccer environments that do give luck a chance.

A huge eye opener in my early days in soccer was how dual citizens seemed well over-represented at the top of our player pool. That was the first hint something was up and I believe Ridley’s view helps explain why.

Great ad/magazine article innovation

Magazines have always been more upfront with their connection between content and ads that other forms of journalism.

I mean, it never surprised when a bicycle with good review from a bicycle magazine’s writers was also advertised in the same issue. I figured that was part of the deal. Buy ad space, supply a bike to be tested and you get a review along with your ad.

A trend over the past decade or so has been to be even more upfront about this connection, with magazines giving advertisers more reign and input over content, with blah results, in my opinion.

I’ve read articles that seemed like legit articles and then realized a few paragraphs in it was an informercial and felt deceived.

I’ve seen sidebars to articles contributed by sponsors that were wholly whatever plain vanilla would be if you took out the vanilla.

But, the latest Bicycling magazine had the coolest attempt at this that I’ve seen.

Suburu wanted to advertise its Outback, and Bicycling editors sent a couple employees on a trip to a cool place to ride — they ended up at a mountain climb near Tuscon, AZ that I never heard of — to ride it and write about the ride and their experience in the Outback. Plus the whole thing was foldout ‘centerfold’.

It’s also a good example of good innovation. In hindsight this seems like an obviously good way to combine interesting content and ads. But, I hadn’t seen this variation before. It’s taken quite a few years and trial-and-errors to get to this, what seems like an obvious and natural, mutation.

Why many companies don’t innovate well

While discussing this post about innovation with a friend, it occurred to me why so many managers “don’t put enough hooks in the water” with their innovation efforts.

That post likened primitive survival fishing to business innovation.

A good primitive survival fishing strategy is to put 10 or more hooks in the water. This recognizes that any one hook has a 10% chance of catching a fish each day. If you want to catch a fish every day, you need to put 10 hooks in the water.

This is also a good business innovation strategy. Each innovation experiment has a low chance of success (even the ones that sound like sure winners), so best to get as many hooks in the water as possible, to improve your chances of finding a few that work.

Many primitive survivalists don’t consider those odds or think they can beat them by knowing the best spots to fish. This is like managers who think they know how to pick winning innovations.

These types of managers tend to view the ‘putting more hooks in the water’ strategy as a sign of weakness, an admission that they don’t have the answer to lead the organization forward. And, they believe their job is to have that answer.

Sometimes they are lucky and catch a fish. They then mistakenly view that as a success of knowing where to fish instead of chance.

Over the course of their career they are likely to hit a one or two successes, which is enough for them to believe it was their skill, instead of luck. The failures, though, they write off as bad luck.

When they fail, they move on to their next employment and hope for the best.

The core problem is with who hires them. They hire people who exude confidence in knowing where to fish and, like the less successful primitive survivalists, don’t find putting more hooks in the water as desirable.

I can envision how these interviews go.

“What are your ideas for moving the company forward?”

“I don’t know. I like to try a lot of stuff and see what works.”

If your mindset is in the ‘knowing where to fish’ camp, this does not sound acceptable. You might think, ‘Well, if it was as simple as that, we could do that without you. Why do we need you?”

More on how I would answer that in a future post.

A good innovation lesson from “Naked & Afraid XL”

I’m a fan of the Discovery Channel show, Naked & Afraid. I have a lot of respect for anyone that can make it a single night on that show, let alone going the whole distance.

I just remembered something from last summer’s Naked & Afraid XL season that is a good lesson on innovation for business.

First some background on the show…

The regular Naked & Afraid show pairs a man and woman on a 21 day primitive survival challenge in a remote wilderness. Participants start with no clothes and one survival item of their choosing.

The XL version of the show puts several groups of previous Naked & Afraid participants in the same wilderness for a 40 day challenge. The groups eventually meet over the course of the 40 days and decide how to work together, or not.

In last summer’s XL, a super skilled pair, Jeff and Laura, started 20 days ahead of everyone else to try for a 60 total day challenge (spoiler alert: they succeeded).

Participants lucky enough to survive the 21 day challenge usually do it by starving most of the way, while burning calories stored in their body fat. Most are lucky if they get a few bites of food in the 21 days.

How does this relate to business and innovation?

I think the show provides an apt and tangible analogy to how business works.

The participant’s fat stores, survival item and skills are like the existing value proposition of a business, those products that are selling well enough to keep the business going.

On the show, this is translated into making and maintaining a shelter, fire and obtaining water. This activity takes a good deal of the participant’s energy resources.

Acquiring food on the show is like a business’s innovation efforts. Acquiring enough calories in an unfamiliar wilderness to maintain body weight is a low probability game of chance.

Few participants ever have have enough success at gathering calories to make it out of the challenge without consuming a good deal of their own fat stores (i.e. losing weight). At the end of the show, the narrator summarizes how much weight each participant lost over the course of the challenge. It’s usually 20-30 pounds.

This caloric deficit is okay for a challenge with a definitive end. But, to survive longer participants would need to find ways to take in more calories than they burn.

Good innovators

Jeff and Laura were very successful at finding food, which is a key reason they made it 60 days.

After they met some of the other participants, they chose to live separate, for awhile. But, they were in close proximity of the other groups.

Those groups got annoyed at Jeff and Laura’s success at catching eels in a creek. Those groups were also trying to catch fish in the same creek and near the same spots.

This is my paraphrased recollection of how Jeff explained their success:

One hook as a 5-10% chance of catching a fish each day. With one hook, it might take you 10 days to catch something. With 10 hooks in the water you should catch something on one of them every day or two and with 20 you can catch 1-2 things a day.

In other words, it’s all about playing the odds. It paid off because he and Laura were catching something about every day or two.

The other group caught one thing after 5 days of anguish.

At one point, earlier in the season, another guy who (like Jeff) had brought a set of fishing hooks as his survival item, spent hours on the ocean fishing with one hook. He really, really wanted to catch something for his teammates.

He didn’t catch anything except a really bad sunburn that put him out of commission for a day or two.

Jeff and Laura’s success resulted primarily from having 10-20 hooks in the water. The other groups were using 2-3 hooks at a time.

The odds never seemed to occur to the other groups. They just kept plugging away with their belief and hope that they should get enough food with 2-3 hooks.

The difference in recognizing the odds and not recognizing them reminded me of how various company managers approach innovation.

Companies that innovate well tend to approach innovation like Jeff and Laura approached fishing in the wild — put out as many hooks as possible. They see it as an odds game and they play the odds.

They know the odds of any one project succeeding are low, so it’s best to try lots of things.

Companies that don’t innovate well remind me of the less successful Naked and Afraid XL groups, who put two to three hooks in the water at a time and hope for the best.

Sometimes, they even remind me of the guy who spent the day fishing in the ocean with one hook, hoping for the best, with the only result being a really bad sun burn.

They simply don’t know the odds or they think they can overcome them by doing “smart” things like picking good spots to fish or choosing the right bait.

In the business world, this is called market research and consultants that help devise plans that are ‘sure to work.’

Eventually, these companies starve themselves because they don’t find enough viable innovations to keep the competition from getting an edge on them.

When they look back on the decline of their business, they often mistakenly attribute the lack of success to picking the wrong spots to fish.

Even then, they don’t realize that they were putting an order of magnitude fewer hooks in the water than they needed to survive the long-term.

I will add that Jeff also was good at picking out spots. With many more trials behind him, because he used more hooks each day, he learned about good spots faster.

That may have helped him, but it still didn’t materially improve his chances over the 5-10% chance per day of catching something on one hook.

The lesson there is that doing smart sounding things might help your odds, marginally, but that is likely to be an order of magnitude less effective as getting more hooks in the water.

Get more hooks in the water.

David and Goliath, not what I thought it was

Like many kids, I learned the story of David and Goliath as a parable to illustrate that underdogs can overcome seemingly insurmountable obstacles.

As an adult, going through a children’s bible with my kid, I saw it differently. It’s a story of how knowledge, skill and innovation can win out.

David had lots of experience taking out coyotes with a sling and stone. David should have won. He wasn’t the underdog. It’s just that everyone else on the battlefield was unaware of David’s skills and were locked into thinking of the traditional way of fighting.

My guess is that David never doubted that he could take out Goliath. But, he knew why. He had lots of trial and error practice to back himself up. The others didn’t know about it or hadn’t thought to apply his stone slinging skills to a 1v1 human battle.

But, I think the traditional telling of the story is dangerous. It gives the impression that David improvised in the moment and succeeded against the odds and encourages people to take stupid risks and hope they’ll just figure it out in the moment, like most Hollywood action plots.

What it should really teach is that practice makes perfect. Like many Hollywood stars will tell you, what appears to be their overnight success successes was years in the making, with thousands of rejections.

It also reminds me of something one of my navy pilot friends told me one time. Russian jets were designed to be superior for dogfights. The US military decided a better strategy was to knock out the enemy from 20 miles away to avoid the dogfights as much as possible.

Accidents are the mother of invention

Here’s a nice piece on the invention of the Slurpee (via Marginal Revolution). An excerpt:

Knedlik’s [Dairy Queen] franchise didn’t have a soda fountain, so he began placing shipments of bottled soda in his freezer to keep them cool. On one occasion, he left the sodas in a little too long, and had to apologetically serve them to his customers half-frozen; they were immensely popular.

When people began to show up demanding the beverages, Knedlik realized he had to find a way to scale, and formulated plans to build a machine that could help him do so.

You never know what customers are going to like. Here’s a secret, kids,– they do not teach you how to figure that out in business school. There’s not a formula or process to follow to do it, other than trial-and-error.

I think executives who are trying to find ways to grow their company should consider using more low-cost, trial-and-error discovery .

Innovation Clinic

In a recent issue, Forbes held a valuable camp on innovation.

First, I agree with what Leonard Schleifer, CEO of Regeneron (a drug research company), had to say about innovation in his Entreprenuer Clinic in Forbes.

I believe that companies rot, and they rot from the top down. Too often the keys to the kingdom are given to commercial folks who don’t value long-term research. When you don’t value something, you don’t get good results from it, and the bottom line is that then, all of a sudden, the long term becomes the short term, and you don’t have anything.

“Focus” is a dirty word for us, okay? It’s a big mistake to think that you can pick the very best thing that you should focus on and then ignore all the other things. Wouldn’t it be wonderful if we could pick only the things that work in our business? Amgen’s new CEO, I heard, said they only were going to work on the things that work. Good luck to him. We are just not that smart.

Second, the short description of the article, The Secret to Unleashing Genius, says a lot:

Companies suffer when the boss comes up with all the new ideas. Shrewd leaders build organizations that think for themselves.

I’ve seen my share of executive teams where the long-term turned into the short-term and they didn’t have anything and where they were never willing to admit that they are just not that smart.

I think realizing that, is the key that the “shrewd leaders” understand and why they build organizations that think for themselves.

However, in depressing news, Forbes had this article where Google appears to be headed the other direction in what Larry Page described as “more wood behind fewer arrows”.

Google previously had a rule that you could spend up to 20% of your time on side projects. Now they are pulling that rule back a bit. The author of the piece asks a good question:

Now that Google has put some rules  around “20% time,” the one day a week an employee spends on side projects, people are having a field day forecasting the end of innovation at the company that claims to “use their powers for good, not evil.” To those people, I ask one question: Can a company in today’s highly competitive environment survive if they allow 1/5th of their employees’ time to be devoted to work that has no clear alignment with the company’s strategy?

Her answer: “of course not.”  I think there’s a better answer: Google’s stock price. Apparently it has been working for them, so far. In the words of Leonard Schleifer, ‘good luck to him.’

Update: Brian Carney and Isaac Getz agree with my take on Google’s rule change in the Wall Street Journal.