INNOVATION

Good and bad ideas are almost identical at birth

by Rita Gunther Mcgrath: Associate professor at Columbia Business School.

Great new ideas, and terrible new ideas, unfortunately are almost identical at birth. This is why author, entrepreneur and biotech CEO Safi Bahcall has suggested an important dynamic for innovating organisations.

These are:

The most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy.
Large groups of people are needed to translate those breakthroughs into technologies that win wars, products that save lives, or strategies that change industries.

These realities reflect a core tension for innovation metrics. This is that paradigm-shifting discoveries begin, imperfectly formed, in areas in which organisational slack provides resources for experimentation and tinkering. While the vision for how an idea might solve a problem might be clear, figuring out the path to get there is often a winding one, with doubters challenging the advocates for the idea, even as the advocates remain convinced that it has potential.

Here’s the problem: during the early wandering around period, these ideas need support. They have no way of producing anything remotely resembling a return on asset projection. In many cases, they produce failure for a long time before things begin to go as hoped for.

The long and tortured history of overnight successes

Here are a few examples:

Famous entrepreneur James Dyson began working on his iconic vacuum cleaner in 1979. Frustrated, he would later say, by the ineffectiveness of even the best vacuum cleaners of the day, he was inspired by the cyclonic separators used in industrial sawmills. He spent five years doing nothing but creating and testing prototypes (5,127 of them), supported by his wife, who taught art. Today, his company is worth billions but is still privately held as he doesn’t believe being a public company would allow the patience he believes breakthroughs require.

The Nespresso coffee pod system invented by Eric Favre, a Nestle engineer, was inspired in 1975 by his visit to a popular espresso bar in Italy (during which he learned that the skills of the barista had an outsized impact on the taste of the coffee). His inspiration was to create a machine that would provide coffee so good that it reflected the skill of the barista so that anyone could make coffee like that at home. It took over ten years – till 1986 – before the parent company thought enough of the idea that they issued patents on it and until 1988 before the company marketed it to individuals as a machine that could produce coffee bar beverages at home.

Steven Ausnit, the inventor of the Ziploc bag, needed 17 years after purchasing the rights to the idea in 1951 before it could be commercialised in 1968.

Optical cables were conceived in the 50’s, specified in the 60’s, first patented in the 70’s and eventually commercialised toward the end of that decade, a decades-long journey to provide technology that is essential infrastructure today.

Subjecting these ventures to a cost-benefit analysis too early would almost certainly have doomed them. As Safi points out, such ideas are “fragile.” So how do we somehow protect them, when they seem crazy?

Slack resources that can follow the talent

At the earliest stages of an innovation, the true believers in an idea need to be passionate, patient and perseverant. They benefit from having access to slack resources which are not optimised around delivering a specific output efficiently. They benefit from having multiple resources pools that they can appeal to, and multiple paths to receiving funding. The companies that benefit from their initiative often have a “follow the talent” approach to providing access to resources.

Jayshree Seth, the Chief Science Officer of iconic innovator 3M describes these principles at work in that company. As she says, “We have a ‘15% culture’ that empowers employees to allocate 15% of their time to work on projects outside of their daily focus. We have grassroots initiatives and grant programmes like Genesis that empower process over outcome for new and disruptive ideas. Our Tech Forum events, by the technical community for the technical community, allow 3Mers the opportunity to learn, network and share context around our 46 Technology Platforms. Our ‘Dual Ladder’ career track allows technical people to have tremendous influence despite not being in people management.”

The point here is that companies such as 3M have created processes in which small ideas that might eventually become big ideas can be nurtured. The concept is really that of what I have called creating “real options”. A real, as opposed to a financial, option is a small investment made today that provides the right to make a larger investment in the future.

Many corporate investments – from employee development to brand building – have this quality. So too with innovation programmes. The best practices here are to create pools of resources that may be used without conventional financial justification.

Making modest resources available to the “edges”

Loonshots, Bahcall points out, would almost certainly be killed by the existing approval structures of most corporate investment evaluation structures. This is why smart innovators figure out how to get the people with ideas access to resources without approvals required from people who are embedded in the current paradigm.

In Nokia’s heyday, anyone in the company could obtain what they called “V1” resources to tinker with an idea simply by putting together a short written description. At V1, a venture might be allocated €10,000 or so (not more) to do some experimenting and market research. At the next stage, V2, they might be allocated to a dedicated team. Full market launch wasn’t until V3, when the idea became material for the company. This structure, by the way, was disassembled in the mid 000’s with subsequent very negative consequences for the company.

Adobe’s “Kickbox” programme offers employees the chance to win a Kickbox, which includes a $1,000 gift card that they can use for any kind of experiment they would like to conduct with a customer. Anyone in the company – technical or not – is entitled to request a box and join the programme. An admiring article specifies the results – faster prototypes, more experiments and far more employees engaged with the innovation process. As it says, “Previously, Adobe prototyped 12 to 24 products each year, but in the first year of Kickbox, Adobe tested nearly 1,000 ideas for less money than we used to spend on a dozen ideas.” Cisco adopted the idea for itself, calling the kits “adventure kits.”

Founder of Blinds.com, Jay Steinfeld, cites as one of his core values, “experiment without fear of failure,” and backs this up with resources that employees can tap into to try things without requiring permission.

Amazon exhibits perhaps an extreme version of this behaviour, arguing that it cannot separate out continuous improvement and experimentation from its routine operations, with a spend of $42 billion on “technology and content” in 2020 alone. Where other companies might put their budgets for experimentation in an R&D bucket, Amazon suggests that this doesn’t suit their business model, which includes plentiful resources for experimentation.

At some point, however, to become material to the parent company, the larger group of people who are essential to commercialisation need to be engaged. This is the point at which the somewhat protected group nurturing the loonshots and the groups managing the development of major new programmes and even the core business benefit from exchanges of ideas and mutual support.

Bahcall describes the social engineering necessary to make this work, with respect to Vannevar Bush and the development of technologies that would eventually lead to the Allies’ victory in the second world war:

Rather than a holy leader standing high atop a mountain, raising his staff, anointing the chosen loonshot, Bush was a careful gardener. He created a nursery to shelter and grow fragile loonshots. He recognised that the weak link in the chain of innovation is not the supply of new ideas, but the transfer of those ideas to the field. So he managed the transfer rather than the technology: ensuring that loonshots are brought into the field neither too early nor too late. He intervened only when that transfer broke down.

Transfer in the opposite direction is equally important. Early aircraft radar, for example, nearly failed. Bush nudged scientists into cockpits to see why pilots weren’t using it. In the heat of battle, the scientists discovered, pilots had no time for the early boxes’ complicated switches. The technology was fine; the user interface was lousy. Scientists quickly created a custom display — the sweeping line and moving dots now called PPI. Within four weeks, Allied planes sank one third of the German U-Boat fleet. Six weeks later, the head of the German Navy declared defeat in the Battle of the Atlantic. The lanes were cleared for an Allied invasion of Europe.

Rather than looking for a specific return on investment or net present value number, what we are after at the project selection stage is the “shape” of the opportunity to be explored. We can think of this in terms of option value – the commitment of a modest downside investment to identify (and potentially capture) the value of an enormous upside.

Specific indicators I look at:

Is the champion for the idea truly convinced that it might work?
If it does, will it change the contours of what is possible, potentially sparking an inflection point?
Are the naysayers reflecting the constraints of the previous paradigm?
Is it really new?

Food for thought the next time you hear about a crazy idea… that just might work!

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