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.

Advertisement

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 .

Why didn’t I think of that?

Immerse yourself in a game as you run with the Zombies, Run! app. On your run, you’ll get to pick up munitions for your base and outrun heavy breathing zombie herds.

What a fantastically creative way to shake up those boring trods and add some sprints and interval workouts.

Sometimes innovations seem so obvious. I’m amazed it took so long for something like this to emerge. Can’t wait to see what follows.

 

 

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.

Simple Rental Car Innovation

A new airport car parking/rental model? Instead of paying to park at the airport, while you are away, let this company rent your car out to someone in your hometown.

I love this observation from the company’s CEO:

“How does it make sense that there’s one parking lot at the airport where there are thousands of cars sitting there and people are paying for them to sit there and do nothing, and there’s another parking lot with thousands of cars owned by Hertz?” 18-year-old FlightCar CEO Rujul Zaparde said.

Of course, it can’t be that simple. Bureaucrats are having conniptions about it because it hurts their rent-seeking model.

Innovation is a discovery process

I also enjoyed this Wall Street Journal article about innovation and Thinking Inside the Box.

Yep:

How could business leaders rate innovation as so important yet feel so dissatisfied with their own organizations’ performance? Because what they really want to know is how: How do you actually generate novel ideas and do so consistently, on demand?

The article goes on to provide five suggestions for taking a different approach to innovation by taking an existing idea and doing things like removing essential elements, combining unrelated tasks, and so on. Less ‘pie-in-the-sky’ thinking.

They provide good real world examples of each. One such, under the combining unrelated tasks, was the online security measure where you have to type in the letters of a fuzzy image to prove you’re not a computer.

The unrelated task is that those images are old texts that haven’t been converted to digital format yet. So, as we all verify that we’re not computers trying to buy tickets to our favorite sporting events, we’re also helping someone digitize an old book.

Even though I found their examples interesting, I’m still skeptical that their recommendations would improve effectiveness in producing innovation on-demand.

I think there’s 20/20 hindsight bias in their observations. They key in on the innovations that work, but don’ts consider the innovations that used the same approaches and didn’t work.

What “works” isn’t obvious. Even the people who eventually get the most out of an innovation would never had guessed that they would find that value prop useful prior to its existence. The Sony Walkman is a good example:

Even Akio Morita, Sony’s chairman and the inventor of the Walkman, was surprised by the market’s enthusiastic response.

Here are the suggestions for innovation that I’d add to the authors’:

Try stuff in the real market, even on a small-scale. It doesn’t have to be perfect or refined to the level of your other products to find out if you have something. The things that I’ve worked on that have worked were not pretty in their initial stages, but they still ‘moved some numbers’ and refining them didn’t seem to improve the effectiveness.

Don’t let your biases get in the way of trying something. Let the market test it.

I’ve seen too many things that are actually working get canned because someone with political clout didn’t like it. They didn’t like it because it wasn’t their idea. Or, they didn’t feel it ‘fit with the brand’, though customers did. Or, they simply relied on poor business analysis that focused on a negative trade-off and ignored the positives.

When people have ideas, encourage them to put their money where there mouths are to try to prove it out. Reward them handsomely if it works. Encourage them to try again if it doesn’t. Understand, failure is likely and not a sign of incompetence. Good baseball players strike out much more often than they hit home runs.

Alos, read Nassim Taleb’s trilogy: Fooled by Randomness, The Black Swan and Antifragility.  Then read F.A. Hayek’s The Fatal Conceit. And, finally, read Russ Roberts’, The Price of Everything.

After reading these, you may see the world differently. Innovation is not a planning process, it’s a discovery process.

Good assignment

Here’s a nice assignment (via Instapundit):

If you want to introduce someone to libertarian thinking, encourage them to try this experiment. Spend a few days reading nothing but technology news. Then spend a few days reading nothing but political news. For the first few days they’ll see an exciting world of innovation and creativity where everything is getting better all the time. In the second period they’ll see a miserable world of cynicism and treachery where everything is falling apart. Then ask them to explain the difference.

– Andrew Zalotocky

If you accept this challenge, I’d love to hear your thoughts.

 

“Innovationism”

In a post about styrofoam, Don Boudreaux points out Diedre McCloskey’s better name for capitalism, innovationism. I couldn’t agree more. The word capitalism sterilizes what’s really happening. Innovationism captures it much better.