Six Steps of CEO Decision Making

by Mike Myatt

You cannot separate leadership from decision making, for like it or not, they are inexorably linked. Put simply, the outcome of a CEO's decisions can, and usually will, make or break them. Those CEOs who avoid making decisions solely for fear of making a bad decision, or conversely those that make decisions just for the sake of making a decision will likely not last long. The fact of the matter is that senior executives who rise to the C-suite do so largely based upon their ability to consistently make sound decisions. However while it may take years of solid decision making to reach the boardroom, it often times only takes one bad decision to fall from the ivory tower. As much as you may wish it wasn't so, as a CEO you're really only as good as your last decision.

"CEO Decision Making" is a skill set that needs to be developed like any other. As a person that works with leaders on a daily basis I can tell you with great certainty that all CEOs are not created equal when it comes to the competency of their decision making skills. Nothing will test your metal as CEO more than your ability to make decisions. I happen to be the type of person that would rather make the decision than have to live with someone else's decisions. In fact, I absolutely love to make decisions, and whether it is in my role in the business world, or my role as a husband and father, I want to be the one making the tough calls. That being said, nobody is immune to bad decision making. We have all made bad decisions whether we like to admit it or not. Show me someone who hasn't made a bad decision and I'll show you someone who is either not being honest, or someone who avoids decision making at all costs, which by the way, constitutes a bad decision.

For more than 25 years I have either served in the capacity of a principal owner, senior executive, or professional advisor, and have generally been well regarded for my decision making ability. However like everyone else, I have also made some regrettable decisions along the way. When I reflect back upon the poor decisions I've made, it's not that I wasn't capable of making the correct decision, but for whatever reason I failed to use sound decision making methodology. Gut instincts can only take you so far in life, and anyone who operates outside of a sound decision making framework will eventually fall prey to an act of oversight, misinformation, misunderstanding, manipulation, impulsivity or some other negative influencing factor.

The complexity of the current business landscape, combined with ever increasing expectations of performance, and the speed at which decisions must be made, are a potential recipe for disaster for today's executive unless a defined methodology for decision making is put into place. If you incorporate the following metrics into your decision making framework you will minimize the chances of making a bad decision:

1. Perform a Situation Analysis: What is motivating the need for a decision? What would happen if no decision is made? Who will the decision impact (both directly and indirectly)? What data, analytics, research, or supporting information do you have to validate the inclinations driving your decision?


2. Subject your Decision to Public Scrutiny: There are no private decisions. Sooner or later the details surrounding any decision will likely come out. If your decision were printed on the front page of the newspaper how would you feel? What would your family think of your decision? How would your shareholders and employees feel about your decision? Have you sought counsel and/or feedback before making your decision?


3. Conduct a Cost/Benefit Analysis: Do the potential benefits derived from the decision justify the expected costs? What if the costs exceed projections, and the benefits fall short of projections?


4. Assess the Risk/Reward Ratio: What are all the possible rewards, and when contrasted with all the potential risks are the odds in your favor, or are they stacked against you?


5. Assess Whether it is the Right Thing To Do: Standing behind decisions that everyone supports doesn't particularly require a lot of chutzpah. On the other hand, standing behind what one believes is the right decision in the face of tremendous controversy is the stuff great leaders are made of. My wife has always told me that "you can't go wrong by going right," and as usual I find her advice to be spot on. Never compromise you value system, your character, or your integrity.


6. Make The Decision: Perhaps most importantly you must have a bias toward action, and be willing to make the decision. Moreover as a CEO you must learn to make the best decision possible even if you possess an incomplete data set. Don't fall prey to analysis paralysis, but rather make the best decision possible with the information at hand using some of the methods mentioned above. Opportunities and not static, and the law of diminishing returns applies to most opportunities in that the longer you wait to seize the opportunity the smaller the return typically is. In fact, more likely is the case that the opportunity will completely evaporate if you wait too long to seize it.

If you develop the appropriate blend of a bias to action with an analytical approach to decision making your stock as CEO will surely rise. Good luck and good decision making...


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Mike Myatt, is a Top CEO Coach, author of "Leadership Matters...The CEO Survival Manual", and Managing Director of N2Growth.

Your Smartphone Could be a Spy Phone

It can broadcast your location without your knowledge. There's no place to hide.

by Idris Mootee

I was watching Eagle Eyes last weekend, I was thinking what happened there is actually not unlikely - we're being watched every second. Forget about PC spyware, they're nothing compared with mobile phone spyware that enables call- and text-monitoring. But worst of all, mobile phone spyware allows anyone to tap into the phone remotely and activate its microphone, even when it is turned OFF.

So It doesn't matter if you have an iPhone, Blackberry or any Android phones. These spyware programs are not expensive (often free), or difficult to purchase or install. Your smartphone can also tell your location. We all need our mobile phones, so now there's no place to hide. There are several spy services out there for people who are desperate to monitor their children or employees. Companies such as Mobile Spy will help you monitor their call, mobile web browsing and text message activities. You can just log into your Mobile Spy account from any computer and see everything - including GPS locations too! Scary!

One popular spyware for mobile phones is Flexispy. It comes in four packages, with the high-end Flexispy Pro-X having features such as live-call listening, secret mobile GPS tracking, SMS message reading, phone call history, email, and the ability to secretly listen in on the phone's surroundings. The entry level product is Flexispy Bug which allows remote listening only. It turns your phone into a bug so someone else can listen to everything.

Are you safe? Probably not. A quick way to check if you phone is bugged, look for sudden drop in battery power, and then unusually billing activity with random numbers. If you for whatever reasons need to engage in a secret conversation, take the battery out of your smartphone.

As early as 1997, the National Reconnaissance Organization warned that any mobile phone can be turned into a microphone and transmitter for the purpose of listening to conversations in the vicinity of the phone. This is basically done by transmitting to the mobile phone a maintenance command on the control channel. This command places the mobile telephone in 'diagnostic mode'. When this is done, conversations in the immediate area of the telephone can be monitored over the voice channel. This diagnostic mode was originally designed for remote software update. Now with GPS, not only they can listen in, they can locate you within feet. So, when do they start making anti-spy software for cell phones?

Don't expect these privacy risks to go away. The reality is all governments have no desire to fix this problem or to make these products illegal. The more they can find out about you the better protected they feel. It is like 1984.


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Idris Mootee is the CEO of idea couture, a strategic innovation and experience design firm. He is the author of four books, tens of published articles, and a frequent speaker at business conferences and executive retreats.

Top 100 Lamest Excuses for Not Innovating

by Mitch Ditkoff

Recognize any of these? If so, find your way pass the 100th and learn how to go beyond them. Takes less than five minutes. (Or maybe a lifetime).

1. I don't have the time.
2. I can't get the funding.
3. My boss will never go for it.
4. Were not in the kind of business likely to innovate.
5. We won't be able to get it past legal.
6. I've got too much on my plate.
7. I'll be punished if I fail.
8. I'm just not not the creative type.
9. I'm already juggling way too many projects.
10. I'm too new around here.


11. I'm not good at presenting my ideas.
12. No one, besides me, really cares about innovation.
13. There's too much bureaucracy here to get anything done.
14. Our customers aren't asking for it.
15. We're a risk averse culture. Always will be.

16. We don't have an innovation process.
17. We don't have a culture of innovation.
18. They don't pay me enough to take on this kind of project.
19. My boss will get all the credit.
20. My career path will be jeopardized if this doesn't fly.

21. I've already got enough headaches.
22. I'm no good at office politics.
23. My home life will suffer.
24. I'm not disciplined enough.
25. It's an idea too far ahead of its time.

26. I won't be able to get enough resources.
27. I don't have enough information.
28. Someone will steal my idea.
29. It will take too long to get results.
30. We're in a down economy.

31. It will die in committee.
32. I'll be laughed out of town.
33. I won't be able to get the ear of senior leadership.
34. If it ain't broke, don't fix it.
35. The concept is too disruptive.

36. I won't be able to get enough support.
37. I don't tolerate ambiguity all that well.
38. I'm not in a creative profession.
39. Now is not a good time to start a new project.
40. I don't have the right personality to build a team.

41. Our company is going through too many changes right now.
42. They won't give me any more time to work on the project.
43. If I succeed, too much will be expected of me.
44. Nothing ever changes around here.
45. Things are changing so fast, my head is spinning.

46. Whatever success I achieve will be undone by somebody else.
47. I don't have enough clout to get things done.
48. It's just not worth the effort.
49. I'm getting close to retirement.
50. My other projects will suffer.

51. Been there, done that.
52. I don't want another thing to think about.
53. I won't have any time left for my family.
54. A more nimble competitor will beat us to the punch.
55. Teamwork is a joke around here.

56. I've never done anything like this before.
57. I won't be rewarded if the project succeeds.
58. We're not measured for innovation.
59. I don't have the right credentials.
60. We need more data.

61. It's not my job.
62. It will hard sustaining the motivation required.
63. I've tried before and failed.
64. I'm not smart enough to pull this off.
65. I don't want to go to any more meetings.

66. It will take way too long to get up to speed.
67. Our Stage Gate process will sabotage any hope of success.
68. I'm not skillful at building business cases.
69. Summer's coming.
70. The marketplace is too volatile.

71. This is a luxury we can't afford at this time.
72. I think we're about to be acquired.
73. I'm trying to simplify my life, not complicate it.
74. The dog ate my homework.
75. Help! I'm a prisoner in a Chinese fortune cookie factory.

76. My company just wants to squeeze more blood from the stone.
77. My company isn't committed to innovation.
78. I don't have the patience.
79. I'm not sure how to begin.
80. I'm too left-brained for this sort of thing.

81. I won't be able to get the funding required.
82. I'm getting too old for this.
83. We're too competitive, in-house. Collaboration is a rarity.
84. Spring is coming.
85. I'm hypoglycemic.

86. That's Senior Leadership's job
87. I'm thinking of quitting.
88. Market conditions just aren't right.
89. We need to focus on the short term for a while.
90. Innovation, schminnovation.

91. What we really need are some cost cutting initiatives.
92. Six Sigma will take care of everything.
93. Mercury is in retrograde.
94. IT won't go for it.
95. Maybe next year.

96. That's my boss's job.
97. That's R&D's job.
98. I would if I could, but I can't, so I won't.
99. First, we need to benchmark the competition.
100. It's against my religion.


How to Go Beyond These Lame Excuses

1. Make a list of your three most bothersome ones.


2. Turn each excuse into a question, beginning with the words "How can I?" or "How can we?" (For example, if your excuse is "That's R&D's job," you might ask "How can I make innovation my job?" or "How can I help my team take more responsibility for innovating?"


3. Brainstorm each question - alone and with your team.


4. Then, DO something about it within the next 48 hours.

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Mitch Ditkoff is the Co-Founder and President of Idea Champions and the author of "Awake at the Wheel", as well as the very popular Heart of Innovation blog.

Reducing the Risk of Innovation

by Dr. Mike Shipulski

Though we can't describe it in words, or tell someone how to do it, we all know innovation is good. Why is it good? Look at the causal chain of actions that create a good economy, and you'll find innovation is the first link.

When innovation happens, a new product is created that does something that no other product has done before. It provides a new function, it has a new attribute that is pleasing to the eye, it makes a customer more money, or it simply makes a customer happy. It does not matter which itch it scratches, the important part is the customer finds it valuable, and is willing to pay hard currency for it. Innovation does something amazing, it results in a product that creates value; it creates something that's worth more than the sum of its parts. Starting with things dug from the ground or picked from it - dirt (steel, aluminum, titanium), rocks (minerals/cement/ceramics), and sticks (wood, cotton, wool), and adding new thinking, a product is created, a product that customers pay money for, money that is greater than the cost of the dirt, rocks, sticks, and new thinking. This, my friends, is value creation, and this is what makes national economies grow sustainably. Here's how it goes.

Customers value the new product highly, so much so that they buy boatloads of them. The company makes money, so much so stock price quadruples. With its newly-stuffed war chest, the company invests with confidence, doing more innovation, selling more products, and making more money. An important magazine writes about the company's success, which causes more companies to innovate, sell, and invest. Before you know it, the economy is flooded with money, and we're off to the races in a sustainable way - a way based on creating value. I know this sounds too simplistic. We've listened too long to the economists and their theories - spur demand, markets are efficient, and the world economy thing. This crap is worse than it sounds. Things don't have to be so complicated. I wish economists weren't so able to confuse themselves. Innovate, sell, and invest, that's the ticket for me.

Innovation - straightforward, no, easy, no. Innovation is scary as hell because it's risky as hell. The risk? A company tries to develop a highly innovative product, nothing comes out the innovation tailpipe, and the company has nothing for its investment. (I can never keep the finance stuff straight. Does zero return on a huge investment increase or decrease stock price?) It's the tricky risk thing that gets in the way of innovation. If innovation was risk free, we'd all be doing it like voting in Chicago - early and often. But it's not. Although there is a way to shift the risk/reward ratio in our favor.

After doing innovation wrong, learning, and doing it less wrong, I have found one thing that significantly and universally reduces the risk/reward ratio. What is it?


Know you're working on the right problem.

Work on the right problem? Are you kidding? This is the magic advice? This is the best you've got? Yes.

If you think it's easy to know you're working on the right problem, you've never truly known you were working on the right problem, because this type of knowing is big medicine. Innovation is all about solving a special type of problem, problems caused by fundamental conflicts and contradictions, things that others don't know exist, don't know how to describe, or define, let alone know how to eliminate. I'm talking about conflicts and contradictions in the physics sense - where something must be hot and cold at the same time, something must be big while being small, black while white, hard one instant, and soft the next. Solve one of those babies, and you've innovated yourself a blockbuster product.

In order to know you're working on the right problem (conflict or contradiction), the product is analyzed in the physics sense. What's happening, why, where, when, how? It's the rule (not the exception) that no one knows what's really going on, they only think they do. Since the physics are unknown, a hypothesis of the physics behind the conflict/contradiction must be conjured and tested. The hypothesis must be tests analytically or in the lab. All this is done to define the problem, not solve it. To conjure correctly, a radical and seemingly inefficient activity must be undertaken. Engineers must sit at their desk and think about physics. This type of thinking is difficult enough on its own and almost impossible when project managers are screaming at them to get off their butts and fix the problem. As we know, thinking is not considered progress, only activity is.

After conjuring the hypothesis, it's tested to prove or disprove. If dis-proven, back to the desk for more thinking. If proven, the conflict/contradiction behind the problem is defined, and you know you're working on the right problem. You have not solved it, you've only convinced yourself you're working on the right one. Now the problem can be solved.

Believe it or not, solving is the easy part. It's easy because the physics of the problem are now known and have been verified in the lab. We engineers can solve physics problems once they're defined because we know the rules. If we don't know the physics rules off the top of our heads, our friends do. And for those tricky times, we can go to the internet and ask Google.

I know all this sounds strange. That's okay, it is. But it's also true. Give your engineers the tools, time and training to identify the problems, conflicts, and contradictions and innovation will follow. Remember the engineering paradox, sometimes slower is faster. And what about those tools for innovation? I'll save them for another time.


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Dr. Mike Shipulski (certfied TRIZ practioner) brings together the best of TRIZ, Axiomatic Design, Design for Manufacturing and Assembly (2006 DFMA Contributer of the Year), and lean to develop new products and technologies. His blog can be found at Shipulski On Design.

Heads of Banking Innovation are Now Bottoms

by Chris Skinner

Over the past year, most of the banks I deal with have dropped the word 'innovation' from their mantra. It's strange but true that the focus upon being innovative had been such a focal point during the 2000s and now it's all over.

To illustrate the point, the Top 10 American banks used the word innovation' an average 1.2 times per annual report in 2000, rising to over six times per report by 2007.

Heads of Innovation were popping up everywhere and innovation was the key to being different, attracting customers, growing business and increasing revenues.

Now the Heads of Innovation have all gone and Innovation is at the bottom of the banks 'to-do' lists... in other words, the Heads have become Bottoms.

Banks have realised that the last thing they want to be is innovative.

They want to be boring.

So innovation has disappeared over the parapets as fast as Tiger Wood's pants.

But that's not the end of the story.

There will still be some innovation in banks. The question will be: which ones?

Let's roll back to the beginning.

Innovation became a focus for banks because technology was moving at such a pace, and client demands with it, that any bank which was not seen to be innovative felt they would lose business.

Hence, as is the way with banks, they all appointed a head of innovation, used the word 'innovate' in all of their customer marketing materials, and appeared to be innovative by doing funky things like using employees to advertise the bank and giving away pens in branches.

That's all the token gestures of innovation.

Meanwhile, some banks were actually being innovative, but just weren't talking about it that way.

Banks such as Goldman Sachs who were creating incredibly innovative trading systems that ensure best price for their investors, which is why they get so much investment business, whilst creating huge market volatility.

Banks like JPMorgan Chase who invented the whole concept and trading of Credit Default Swaps. By being the first mover to invent and then trade these products, JPMorgan were not only the first into profits from such instruments but the first out of the losses created by them, as were Goldman Sachs.

Very clever.

Banks such as Wells Fargo meanwhile, have made it a clear focus to engage customers using social media, and see this as a differentiation in the customer experience. Rather than having a head of innovation in this area however, they instead invest in creating platforms to engage customers in remote social interactions via blogs, virtual worlds, YouTube, Facebook and Twitter.

That's innovation, but it is not seen as token innovation but core developments in customer engagement.

For the average bank however, innovation is not in their blood.

This is because innovation demands doing things in a different way, and banks don't like to be different. They want to be the same.

They don't want to break away from the crowd, but want to do things in robust, proven, low risk ways.

They don't want to be leaders but lemmings, all running in the same direction doing the same thing in a nice, safe, undifferentiated manner.

They cannot invest in something new and different, because it has to have a clear business model, financial analytics to support the investment, clear returns on investment and absolute management buy-in and commitment.

All of the above would never happen with something that is not proven, not clear, not justified, and unable to be supported by a strong financial business case.

Hence innovation lies in a heap at the bottom of the bank's corporate agenda.

So what are we really talking about today, when it comes to innovation in banking?

We are talking about banks that create cultures of being prudent risk avoiders, entrepreneurial innovators, excellent customer engagers, aggressive market makers or active acquisitors.

These cultures sit at opposites with each other and rarely would you find a bank that could be all in one.

For example, I wouldn't put Wells Fargo in the bracket of prudent risk avoider as they see themselves as an excellent customer engager; Goldman Sachs are an aggressive market maker, as are JPMorgan, but they probably wouldn't use the word prudent; Citi are now a prudent risk avoider having learned their lesson of being an active acquistor; and Lloyds TSB were always a prudent risk avoider until they became an active acquistor.

These cultures are driven from the man or woman at the helm - a fish sets its direction from the head but also begins to rot first from the head - and it is the man or woman in the driving seat that creates the innovation and risk culture of a bank, not the label 'innovation'.

That is why you can find banks that are hybrids of this model - such as Barclays where John Varley has created a retail and commercial banking operation that is prudent whist Bob Diamond runs an aggressive market making operation in BarCap.

There are other banks that demonstrate this mix, and it is purely a reflection of the management team.

For example, HSBC is a prudent risk avoider under Chairman Stephen Green and CEO Mike Geoghagan, but is also an entrepreneurial innovator thanks to Chief Technology and Services Officer Ken Harvey.

All in all, the lesson learnt for most banks is that innovation is not a function or label, but a culture and so it is gratifying to see innovation has been removed from the mantra of the banks as a label.

Now let's see which banks create innovative cultures over the next decade, and watch them grow.


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Chris Skinner is Chairman of the Financial Services Club and regular commentator on banking at The Finanser.

Study of Innovation Risks

Building upon the Boston Consulting Group innovation study, Altin Kadareja has configured a research study for his graduate thesis titled: "Quantification of Innovation Risks".

He is focused on developing a model that can identify, analyze and quantify the risk of innovation projects. This model stands besides innovation project management practices and is based on a step by step structural framework empowered by a PRA (Probabilistic Risk Assessment) analysis.

He is closing out his research this week, so please help him out by filling in a
short online survey (only 13 questions).

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

56 Reasons Why Innovation Initiatives Fail

by Mitch Ditkoff

Innovation is in these days. The word is on the lips of just about every CEO, CFO, CIO, and anyone else with a three-letter acronym after their name. As a result, many companies are launching all kinds of "innovation initiatives" - hoping to stir the soup. This is understandable. But it is also, far too often, very disappointing...

Innovation initiatives sound good, but usually don't live up to the expectations. The reasons are many.

What follows are fifty-six of the most common ones - organizational obstacles we've observed in the past twenty-two years that get in the way of a company really raising the bar for innovation.

See which ones are familiar to YOU. Then, sit down with your Senior Team... CEO... innovation committee, or best friend and jump start the process of going beyond these obstacles. Let the games begin:

1. "Innovation" framed as an initiative, not the normal way of doing business
   
2. Absence of a clear definition of what "innovation" really means
   
3. Innovation not linked to company's existing vision or strategy
   
4. No sense of urgency
   
5. Workforce is suffering from "initiative fatigue"
   
   
6. CEO does not fully embrace the effort
   
7. No compelling vision or reason to innovate
   
8. Senior Team not aligned
   
9. Key players don't have the time to focus on innovation
   
10. Innovation champions are not empowered
    
    
11. Decision making processes are non-existent or fuzzy
    
12. Lack of trust
    
13. Risk averse culture
    
14. Overemphasis on cost cutting or incremental improvement
    
15. Workforce ruled by past assumptions and old mental models
    
    
16. No process in place for funding new projects
    
17. Not enough pilot programs in motion
    
18. Senior Team not walking the talk
    
19. No company-wide process for managing ideas
    
20. Too many turf wars. Too many silos.
    
    
21. Analysis paralysis
    
22. Reluctance to cannibalize existing products and services
    
23. NIH (not invented here) syndrome
    
24. Funky channels of communication
    
25. No intrinsic motivation to innovate
    
    
26. Unclear gates for evaluating progress
    
27. Mind numbing bureaucracy
    
28. Unclear idea pitching processes
    
29. Lack of clearly defined innovation metrics
    
30. No accountability for results
    
    
31. No way to celebrate quick wins
    
32. Poorly facilitated meetings
    
33. No training to unleash individual or team creativity
    
34. Voodoo evaluation of ideas
    
35. Inadequate sharing of best practices
    
    
36. Lack of teamwork and collaboration
    
37. Unclear strategy for sustaining the effort
    
38. Innovation Teams meet too infrequently
    
39. Middle managers not on board
    
40. Ineffective rollout of the effort to the workforce
    
    
41. Lack of tools and techniques to help people generate new ideas
    
42. Innovation initiative perceived as another "flavor of the month"
    
43. Individuals don't understand how to be a part of the effort
    
44. Diverse inputs or conflicting opinions not honored
    
45. Imbalance of left-brain and right brain thinking
    
    
46. Low morale
    
47. Over-reliance on technology
    
48. Failure to secure sustained funding
    
49. Unrealistic timeframes
    
50. Failure to consider issues associated with scaling up
    
    
51. Inability to attract talent to risky new ventures
    
52. Failure to consider commercialization issues
    
53. No rewards or recognition program in place
    
54. No processes in place to get fast feedback
    
55. No real sense of what your customers really want or need
    
56. Company hiring process screens out potential innovators

Others we may have missed?


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Mitch Ditkoff is the Co-Founder and President of Idea Champions and the author of "Awake at the Wheel", as well as the very popular Heart of Innovation blog.

Balancing Intuition with Analysis

Interview - Roger Martin of "The Design of Business"


I had the opportunity to interview Roger Martin, the author of "The Design of Business" about the challenges companies face when they fail to balance analytical thinking with intuitive thinking. We also discuss a variety of other innovation topics including: barriers to innovation, education, and risk taking.

Roger Martin has served as Dean of the Rotman School of Management since 1998. He is an advisor on strategy to the CEO's of several major global corporations. He writes extensively on design and is a regular columnist for BusinessWeek.com's Innovation and Design Channel. He is also a regular contributor to Washington Post's On Leadership blog and to Financial Times' Judgment Call column. He has published several books, including: "The Design of Business" and "The Opposable Mind".

Here is the text from the interview:


1. When it comes to innovation, what is the biggest challenge that you see organizations facing?

It is the dominance of analytical thinking which holds that unless something can be proven by way of deductive or inductive logic, it is not worthy of consideration or investment. No new idea in the world has been proven before being tried. So as long as analytical thinking is allowed to dominate, innovation is deeply and profoundly challenged.


2. Why is it so important that organizations teach their leaders to be design thinkers?

Design thinkers are capable of balancing the inductive and deductive logic of analytical thinking with the abductive logic of intuitive thinking. So they are capable of both honing and refining the past and inventing the future. Thus they can overcome the innovation challenge. Without design thinking leaders, an organization is likely to slowly but surely stultify - like most large corporations over time.


3. Why is it so hard for hard for managers to take valid risks?

Two main reasons. First, they live in cultures that value only analytical thinking. And second, they get Stockholm syndrome and begin to believe that is right. First they get dissuaded from innovating by others, then they dissuade themselves.


4. What most impedes the risk-taking necessary for innovation?

The problem is processes that imbed requirements for proof through inductive or deductive logic. And then the culture that this breeds.


5. Since the book was published, have you come across other leaders that have transformed their organizations to take more of a design approach?

Leaders from two of the world's largest companies read the book and both have asked me to help them transform their organizations to take a design thinking approach. So far, so good. They are very committed.


6. People often talk about not having time to innovate. How can people find the time for themselves or their employees?

That is a lame argument. People have time to do anything for which they are passionate. People blame lack of time for every single thing that they think they would like to do but lack the sufficient passion for. Innovators innovate regardless of their environment. Some get fired for it and go somewhere else and start over again. A leader can make it harder or easier for employees to innovate. But the innovators innovate regardless and the non-innovators complain about the difficulty finding the time to innovate - regardless.


7. What skills do you believe that managers need to acquire to succeed in an innovation-led organization?

They need to nurture their originality. Very few people in life are good at anything without practice. If you practice mastery all your life, you will be masterful. If you practice originality, you will get good at innovation. Most managers spend their time deepening their mastery and not nurturing their originality. Over time, they become fearful of innovation.


8. If you were to change one thing about our educational system to better prepare students to contribute in the innovation workforce of tomorrow, what would it be?

Make art a required subject for as long as we make math a required subject. We send a powerful signal to students that analytics are important and artistry is not. Artistry is the foundation of innovation. Most technologists will never innovate a single thing because their training drove out any artistry from them.


My book review of "The Design of Business" can be found here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

The Innovator Within

by Matt Heinz

I'm constantly blown away by the brilliant, innovative ideas around us. It's a shame that so very few of those ideas see the light of day.

Brilliant people with innovative ideas are everywhere, but most of their ideas get caught in one of three traps:

Fear/Risk: Innovative ideas are inherently risky. They buck trends, go against the status quo. The risk of failure is quite high. It's why most people keep their day jobs and merely dream about their ideas vs. taking action on them. Oftentimes this is born out of income risk. I can't quit my day job to give this a shot - if it fails, my income and family suffers. Or it could be the risk of ruining your reputation. Try something innovative at work, and if it fails that may damage your success record. Or your promotion. Or raise. This is why so many great ideas, innovations and start-ups are born in a recession. Individuals with great ideas lose their secure jobs, so the risk of starting or trying something totally different goes down significantly.

Rejection: Because innovative ideas aren't what people expect, they get rejected easily. If you raise an innovative idea in a big company, it's likely to get squashed. If you run a new idea by someone who's embedded in the status quo, they won't understand what you're saying. Worse, they'll tell you it will never work. Innovators get rejected - a lot - but for many would-be innovators, that rejection is too much to overcome. Either they can't move forward in their existing organization, or become convinced that the nay-sayers are right. That's a travesty.

Bandwidth: Who has time for new ideas anyway? You woke up this morning with too much to do as it is - current projects, current deadlines, current initiatives. We then go home to family, kids, chores and a thousand things pulling at our time. Innovations usually start in someone's spare time, but finding that time can itself be a significant challenge. If you get laid off, and suddenly have a plethora of time, the bandwidth limiter is eliminated. But for the rest of us, finding time to triage and pursue our new ideas can often be an insurmountable challenge.

For every entrepeneur, no matter how confident or determined, these hurdles exist. For the majority of individuals with great ideas, these hurdles can in fact be crippling.

But there are equal but opposite attributes that successful innovators have that anyone can learn and/or adopt. These include courage, tenacity, passion, organization and thick skin. But perhaps most important is conviction. Conviction that you're onto something, that you're right, conviction that it doesn't matter if others can't see it, if it's risky, or if it takes a few extra hours in the evening and weekends to tinker with it.

There are innovators within all of us. Everyone has these amazing ideas - be they recurring or fleeting - that can create massive change, efficiency and betterment in the world around us - at a micro and macro level, and everywhere in between.

Perhaps part of the solution isn't to convert innovators into entrepreneurs, but to create a better channel of innovative ideas into the hands of those with the time, courage and tenacity to make them happen. Make the idea exchange easy, but with all the right attribution and financial rewards available to the originator.

Your neighbor has an idea that could change the world, but isn't doing anything about it. How do we change that?


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Matt Heinz is principal at Heinz Marketing, a sales & marketing consulting firm helping businesses increase customers and revenue. Contact Matt at matt@heinzmarketing.com or visit www.heinzmarketing.com.

A Branding Lesson From Leno

by Steve McKee

The big news this week in Medialand is NBC's decision to cancel The Jay Leno Show and move the eponymous comedian back to a late-night time slot. About the short-lived experiment, Jeff Gaspin, NBC Universal's Chairman of Television Entertainment, said, "I don't think it's wrong to take chances... Sometimes they work. Sometimes they don't."

Fair enough. But with a little more imagination, NBC might have been able to predict the outcome. The much-hyped decision to launch The Jay Leno Show was made in part based on economics - it's a whole lot cheaper to produce an hour of live TV than an episode of Law & Order. While the show was profitable for NBC, it's not terribly surprising that it would lag its competition in the ratings - especially in its first season, when loyal viewers of competitive offerings were caught up in current storylines.

The Jay Leno Show's low ratings created a "lead-in" problem for NBC affiliates, who rely on audience carryover to provide viewers for their late local news. Michael Fiorile, chairman of NBC's affiliate board, said NBC's Leno strategy "has been devastating for a number of late newscasts around the country."

While that's unfortunate, it also underscores an unhealthy dependency that too often blinds local news providers to their task. And it provides a valuable business lesson for us all.

Most people tend to think of the television industry as something "other" than the product and service sectors that comprise the rest of the economy. But in reality it's no different. Television news is a "product" that consumers "buy" (we pay for free TV with our time), and competitors are called to offer their prospective customers an experience that is unique, relevant, and valuable, just like any other business.

When a local affiliate complains about the network not offering a good enough lead-in for its local news, it's like McDonald's complaining that the Burger King across the street has better access to traffic. While that may be true, it can also serve as an all-too convenient cop-out. McDonald's job is not to complain about the way the street is designed, but to get people to cross it - by offering something intriguing and unique (a task the company has performed quite well in recent years).

That's where TV news falls down. Local news directors too often live in a "be better" bubble. That causes them to overstate the impact of their slogans, overvalue being first on the scene of an accident, and overpromote their handsome/pretty/ smart/honest/capable/talented/sincere news anchors. If they instead applied their intelligence and intensity (the news directors I've met have both in abundance) to seeking new ways to truly differentiate their offerings from the competition, we could see some real innovation in how local news is delivered. I suspect most viewers - and most people in the industry - would agree that there's plenty of room for improvement.

Jay Leno is proven product whose success is in part dependent on how well he's packaged and distributed. Local news is no different, and as Gaspin said, it's not wrong to take chances. If only more news directors would.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Should you be measuring ROR instead of ROI?

by Ric Merrifield

For literally decades, the notion of return on investment, or even more specifically return on invested capital (R.O.I. either way) was the gold standard for justifying a business decision. If the return exceeded the investment enough (also weighing risk, disruption, and many other factors) then it would get the green light for funding.

This was, and is, especially common in investments in enterprise software. But I predict we will see a (long overdue) rapid decline in the use of R.O.I. as the gold standard for project justification for these four reasons:

1) Smart organizations have figured out that you can justify almost anything with R.O.I. math. Someone recently said "if you do project X at a cost of $2 million and it saves you $5 million per year, then you should do it, right?" Many people would say yes, I would say there's nowhere near enough information. For large companies, a $5 million savings could be a distraction to more important activities, just to name one reason, but too often I see these sorts of projects approved.

2) The metrics are often very squishy. Organizations don't generally have great metrics to begin with, but especially when anchored to the process view (which is often very volatile, with a short half-life), and when the process changes, organizations end up comparing apples to oranges. The simple solution there is to use the business capabilities lens described in the pages of Rethink, starting with the "what" outcome you are measuring, and then looking to the "how" of process.

3) There needs to be larger context setting. What overall goals is the department, division, or enterprise setting? It isn't enough just to cover costs for a lot of projects. These days, it's about staying ahead of competition, differentiating, and knowing who your most valued customer is (see #4 below). If the $5 million in savings in #1 above doesn't connect to a key performance indicator, you need to be certain that it's not going to be too distracting or disruptive in an area in need of much more attention someplace else and the "shiny object" project selected out of context from the rest of the organization always has that risk.

4) Many organizations need to look at their R.O.R. (Return On Relationship). How much do you spend on each customer and how much do you get in return. Someplace in almost every industry, their is a vital set of relationships, sometimes it's partners, sometimes it's customers or sales channels, and sometimes it's employees and you have to know what is most valuable to your most valued relationships so that when the least valued relationships whither, you don't worry, but when you see blinking red or yellow lights in the most valuable relationships, nothing can get in your way of fixing that.

So as we enter this new decade, and hopefully start to get further out of a recession, start to measure your R.O.R., do better context setting in terms of the value of a project to the overall, be sure you have concrete metrics, and be leery of the R.O.I. math of the one-off "shiny object" projects.

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Ric Merrifield is known at the "Business Scientist" at Microsoft Corporation in Redmond, WA and is the author of "Rethink". He blogs about ways to rethink through getting out of what he calls "the 'how' trap".

Realistic Impossibilities

by Kathy Robison

Being on the wrong end of the continuum between realistic and impossible is what plagues many of today's large multi-national corporations. The fear of failure by employees who are only partially engaged and don't entirely feel like valued members of the team, will always translate into goals and ideas that are mediocre and achievable and never ones that are innovative or impossible. In the 21st century, which is fraught with global economic adjustments, global-interdependence, developed world saturation, and a consumer base that is rapidly changing, creating the impossible is the only way to break away from the competition, ensure success and create a meaningful impact on the world.

Unfortunately most large companies live in the land of the realistic. It has permeated their business model, their culture, and the expectations of their customers. Many of these companies are starting to realize that creativity, thinking differently, and innovation are the keys to success in the future, but they feel stuck in how to achieve such goals. Hopefully some will view them as impossible and find the courage to achieve them anyway. You see, if you want to create a culture that reaches for the impossible, despite the odds, it must begin at the top and it often begins with an updated and innovative business model.

Designing an innovative and exciting business model with impossible goals is often a much easier and less expensive way to creating a culture of creativity and innovation that trying to dictate it. Processes, procedures, and changes in organizational structure can be dictated; innovation and creative thinking must be experienced and nurtured. The act of dictating, making rules, and imposing your will on others are the very things that have turned off our creativity, thinking, and innovative traits in the past. It was OK in the last century where the goals were to build, duplicate, and be efficient. The difference now is that we are moving from a world of industrialization and knowledge to one of conceptualization and connection.

Yes, there will be impediments and unforeseen circumstances that get in the way of creating the impossible, but they must be viewed as learning and growth opportunities. And, yes, there is always the possibility of failure, but failure is not altogether a bad thing. We must learn to accept failure as a part of the process of success. Unfortunately, many corporate cultures are so anti-failure that they no longer reach for anything exciting, tantalizing, or remotely interesting, which are the very things that improve productivity, reduce turnover, attract talent and create cultures that regularly innovate.

The disillusionment with big business and the realization that job security was really an illusion anyway is the fuel for new competition that will come charging out of the gates with all of these new attributes in tact. During the next 50 years, we will see some of the biggest companies in the world come crumbling down as well as the birth of some of the greatest companies in the world. It will be an interesting game to watch and fascinating to see the rules of play take a completely new direction. Here are a few of my favorite new perspective one-liners to start 2010:

• Do as Wayne Gretzky and "Skate to where the puck will be"


• Have the capacity to collaborate with the most unlikely of players


• Create something larger than the products you sell


• Lead with the tenacity of an underdog

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Kathy Robison is the CEO of YURU, (The Guru Is You), dedicated to assisting businesses to realize the full potential of their success through innovative business strategies, executive coaching and leadership development.

Do you have an innovation blind-spot?

by Mike Myatt

My experience with most executives and entrepreneurs is that they are totally committed to and focused on success. As a result, many of them tend to have a major blind-spot (translation: weakness) when it comes to the anticipation of set-backs. While this is understandable, it is nonetheless naive, and it constitutes a major flaw in the business logic of most strategic plans. This is so much the case that the most often overlooked aspect of strategic planning is adequately addressing contingencies as part of the planning process. As you get ready to usher in 2010, my suggestion is to take one final look back at your planning and assure that you've anticipated all the ways in which things can go wrong, and what you'll do when the inevitable happens...

The reality surrounding the success of any implementation is found by understanding that no matter how smart you are, things rarely go as planned. Those that plan in advance for changes in circumstances can adroitly address issues when they occur, while those who must deal with "unforeseen" circumstances don't tend to fare as well. Smart leaders view obstacles as a constant rather than a variable, and incorporate that thinking into their planning. Any well crafted strategy anticipates obstacles and factors in multiple "what if" scenarios. Leaders that wait until a problem occurs to deal with it place themselves and their organization at a huge strategic disadvantage.

The two most common outcomes created by a lack of contingency planning are: 1.) watching things grind to a halt as you scramble to evaluate options, and; 2.) having fewer options to assess based upon the new found time constraint. Speed is your friend and should be leveraged to your advantage. Speed is aided by anticipation and slowed by a lack thereof. Smart leaders will do everything in their power to keep a decreae in velocity from becoming a self imposed adversary due to a lack of contingency planning.

It is important to remember that contingency planning is a key to avoiding costly mistakes. In most cases your wins won't put you out of business, but your losses most certainly can. The three most critical items to focus on when conducting your planning are:

1. Insure that personal accountability is present on any major benchmark, milestone or deliverable.


2. Make sure that someone has identified the 5 worst things that could happen with any initiative, what steps can be taken to prevent their occurrence, and what measures will be taken to overcome them if they happen?


3. Make sure that advance warning signs for potential failures are identified and understood so that you have plenty of runway in front of you to implement your contingency plans.

Good luck and good planning.

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Mike Myatt, is a Top CEO Coach, author of "Leadership Matters...The CEO Survival Manual", and Managing Director of N2Growth.

The Paradox of Innovation from 30,000 Feet

It's About the Journey, Not the Destination

by Robert F. Brands

In the C-suites of corporate America, innovation has become a mandate. Executives - from CEOs to marketing officers - believe that to innovate is to embrace the Holy Grail of 21st Century business.

But is innovation alone the answer? Is the end - innovation - capable of surviving solely as a mandate?

Or is innovation a process, journey that seeks a destination refined and polished along the way? "Total Innovation" is a sojourn that mandates a total approach philosophy.

However, to create the Culture, foster Ideation and sustain a focus on thoughtful New Product Development, innovation requires a complex combination of and continued adherence to imperatives that must be introduced, embraced and nurtured. Innovation imperatives must start at the top, the CEO. They must be written into the Mission Statements; "Innovation" must have the backing in the strategic plan.

To thrive, Innovation must have the support of long-term growth objectives and capital support. Beyond support, Innovation must gain Inspiration from leadership, who will create and foster a Culture of innovation and motivate the organization. Leadership must acknowledge the role of Risk, and understand the possibility and benefits of failure.

For without such inspiration and continued communication, Innovation will not survive. It will become little more than a once-promising concept left to wither on the vine of fanciful corporate initiatives that never quite took root.

Therein lies the paradox of innovation. Companies cannot succeed without innovation. Yet few executives understand how to introduce, nurture, or capitalize on the promise of innovation within the organization.

Planned well, the Imperative of Innovation can impact the New Product Development process. It can encourage fertile Ideation, welcoming input from associates to customers and users alike. It feeds the machine, providing methods of collecting, vetting, ranking and considering the Next Big Idea or future new products or processes.

The Innovation Imperative insists on Ownership and Accountability. It requires a Champions - and Chief Innovation Officer, if you will - be named to oversee teams Trained, coached and mentored to shepherd projects through the system, all the while adhering to each Imperative.

The Imperative requires Observation and Measurement of performance and results to ensure they deliver Net Result and Reward, and that they meet or remain focused upon an established set of objectives - and those involved are recognized accordingly.

Ultimately, innovation done well leads to Value Creation - for the organization, its stake holders and customers.

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Robert F. Brands is President and founder of Brands & Company, LLC. Innovation Coach Robert Brands has launched a new site - www.RobertsRulesOfInnovation.com - to complement his upcoming book.

Will Avatar Spark More Originality?

by Kevin Roberts

Avatar, opening in the US tomorrow, has Hollywood holding its breath. The $350 million spectacle by writer/director James Cameron seems destined to one of only two possible fates: spectacular blockbuster or massive bomb. The middle road never seems open to Cameron, who famously drives Tinsel-town bean-counters bonkers with his uncompromising vision and gargantuan budgets. Sigourney Weaver calls him an "idealistic perfectionist", which is a pretty good aspiration for all of us.

I haven't seen the film yet, but I wish it well for three reasons.

One, Peter Jackson's Weta Workshop in New Zealand has been responsible for the special effects, which are said to take 3-D animation to a different plane. Another hit for Weta would be great for this awesome Wellington Lovemark - and for the city itself.

Second, I love James Cameron's gutsy approach. In an industry teeming with yes-men, corporate cronies and wannabes, Cameron stands apart as a maverick who rises and falls on the size of his talent, not his Rolodex. He put his philosophy this way:


"If you set your goals ridiculously high and it's a failure, you will fail above everyone else's success."


Most importantly, I hope that Avatar succeeds because it represents something that has all but disappeared from mainstream film - a truly original idea. It is not recycled from a TV show or old movie, nor is it based on a book, play, musical or comic book. James Cameron is the sole writing credit, and the story is woven entirely from his imagination.

The rise of innovation in Hollywood (and Wellywood and Bollywood) has been startling, but it has not been matched by the rise of great originality - in fact, the opposite has happened. The graphs below show how the number of films made from an original idea - as opposed to sequels, book or musical adaptations, comic books or earlier films - has declined dramatically in the past decade. Instead, we are saturated by sequels. 15 of the top 20 box office hits of the 2000s were sequels (and some of them were brilliant, but the point is valid).

The last decade will be remembered for awesome innovation we used to help tell stories on screen. Let's hope that the '10s is known more for the creativity and originality we bring to storytelling itself.





Image source: http://www.topnews.in/avatar-will-make-titanic-look-picnic-says-james-cameron-2244474

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Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Why does Roger Federer serve Double Faults?

by Paul Sloane

Why does Roger Federer serve double faults? Every double fault is a failure - it gives a precious point to his opponent. He could easily cut out all double faults by slowing down his second serve to ensure that it lands safely in the service box. Yet in most long matches Federer, like most other top players, will serve at least 3 double faults.

Clearly the tennis champion has made a careful calculation of the trade-off between being bold or cautious on his second serve. He knows that if he makes his serves safe he will make the returns easier for his opponent. He wants to win a high percentage of points on his serve and use it as an attacking tactic. He is quite prepared to lose some points as double faults if it means that most of the time his serves are difficult to return. There is an optimum number of double faults that a tennis player should serve in a match and the number is not zero.

The same principle applies to us in our enterprises. Caution can be an enemy of success. If every new thing that we try works it almost certainly means that we are not being bold enough. We should take some courageous initiatives. We should sometimes fail. We should serve some double faults.

What innovations have you tried in the last three months? Make a list. How many succeeded and how many failed? For those that failed, why did they fail? What lessons can you learn? Obviously you aim for success and you want to win. But there will be failures on the road to success. If you cut out the possibility of failure then you limit your chances of success.

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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Innovation Perspectives - Hidden Human Dimensions

This is the ninth of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'What is the most dangerous current misconception in innovation?'. Now, here is Paul Hobcraft's perspective:

by Paul Hobcraft

Why do so many of us get fixated on new technologies, discoveries, inventions, the process, the structures, even the art of creativity within innovation? Certainly each of these have their important contributing part to play in building a coherency for innovation, but the ingredient that tops them all and often forgotten or assigned as the afterthought is people. People making innovation work, all the rest are the enablers to help them.

The Australian Business Foundation published a report earlier this year- the Hidden Human Dimensions of Innovation (http://www.abfoundation.com.au/research_knowledge) and in part of a speech given by its Chief Executive, Narelle Kennedy at an Innovation 2009 conference where she spoke of this people factor. Let me quote as her comments are really powerful and help encourage people to conceive that innovation is more of a social process first, and not a technical one so often a misconception of many.

• "People are innovation's active ingredient, the catalyst that turns novelty into real benefits for economies and communities. Benefits like jobs, wealth, productivity and life-changing progress"


• "The role of people in innovation is a fact that remains hidden in plain sight. It is axiomatic - everyone says it and believes it, but few understand anything at all about the human factors in innovation"


• "It is the pivotal role of people as innovation carriers - their networks, collaborations, knowledge flows, interactions and tacit knowledge - and how innovation itself is a potent competitive force that drives productivity"


• "People who innovate together capitalise on their tacit knowledge and informal know-how and on past strategic investments to "navigate the white-water risks" of innovation more successfully than their competitors."


• "It is tacit knowledge, accumulated experience and learning by doing result in a highly valuable intangible asset that boosts the innovation odds"


• "(It is people who) form a community of practice with a clear intangible asset value in the form of intellectual capital and human capital"


• "(People rely) on long term and sustained investments in strategic capacity-building and continuity of interpersonal innovation networks and gains in value by sharing and usage".

Where I do feel Narelle Kennedy nicely sums up is a much needed re-think for innovation for it to really work and be valued for what it can truly offer comes from this statement:


"drawing on knowledge and creativity to add value in products and processes is an expansive view of innovation - new things or ways of working; knowledge and creativity; add value; products and processes - it is a dynamic view"


Everything else today that does not place people in the centre of the innovation equation offers a dangerous misconception about innovation and why it should work. It is our people that make it happen and we need to make innovation the social process it needs to be.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'What is the most dangerous current misconception in innovation?' by clicking the link in this sentence.

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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.

Do people seek risk only to minimize losses?

by Stephen Shapiro

Back in the 1980's, executives used to joke that you would never get fired for buying "Big Blue" (IBM) computers. It's not that IBM was the best, but you knew they would not screw up.

When I worked for Accenture (then Andersen Consulting), the Economist once called us "The McDonalds of the consulting industry. You know what you will get and it's not fillet mignon." People hired us not to get highly creative solutions, but rather to be assured of a successfully implemented solution.

There is a reason why consulting firms are so successful.

People choose safe, tried and true solutions over those which may be better yet have a risk of failure.

This is human nature. People take risks to minimize losses, yet play it safe when it comes to increasing gains.

But how much of a gain must be dangled in front of us before we will risk giving up the sure thing? I've been conducting a survey to find the answer.

Here's the first question posed to respondents:

Which would you choose?

• Option 1: A guaranteed gain of $75K or


• Option 2: An 80% chance of getting $100K and a 20% chance of getting nothing

Our survey found that 75% of the people go for the sure thing, option 1. People play it safe when it comes to increasing gains. But how safe?

What if the upside is increased to an 80% chance of getting $150K? Now, 57% take option 2. Still, 43% play it safe, even though there is an 80% chance of doubling their money.

What if the upside is increased to $225K? 76% choose option 2. This means that, 1 in 4 people still play it safe even when the potential upside is 3 times the original amount. When we increase the upside to $450K - 6 times the original amount - we still have 20% of the people who go for the sure thing.

It appears that people believe the expression, "A bird in the hand is worth two in the bush." Interestingly, the original Old English expression was, "Better one byrde in hande than ten in the wood." That seems even more accurate.

Ok, let's look at the loss side of things.

Here's the first question posed to respondents:

Which would you choose?

• Option 3: A guaranteed loss of $75K or


• Option 4: An 80% chance of losing $100K and a 20% chance of losing nothing

This time, when presented with a loss rather than a gain, 71% go for the riskier option 4. People take risks to minimize their losses. [As an aside, when I ask audiences this question, the percentage of risk takers is closer to 90%]

Increase the potential loss to $125K and 44% still go for the riskier option 4. When the potential loss is increased to $250K, 22% of the respondents still opt for option 4.

If you plot these responses (risk-taking probabilities against expected gains), they make a nice 'S' curve as depicted in the graphic left.

What does this graph tell us?

It clearly supports the premise that people take risks to minimize losses, yet play it safe when it comes to increasing their gains. The loss of $1,000 hurts more than a gain of $1,000 feels good.

This means that you can sell someone more easily when you focus on losses rather than the gains. This might explain why Al Gore has been so successful with his "Inconvenient Truth." Instead of focusing on the benefits of a cleaner environment, he focused on the 'meltdown' associated with the status quo. Can anyone say Nobel Prize?

The shape of the curve also gives us a bit more insight. First, the gain of $2,000 does not feel twice as good as the gain of $1,000. Equally, the loss of $2,000 does not hurt twice as much as the loss of $1,000. There is a point where we become numb to the increased gain or loss.

Another potentially useful take-away is what I call the "risk/reward tipping point." This is the point where the 'S' curve flattens out on both the loss and gain side. This occurs at the point when 80% of the people take the desired action. And based on my research, this ratio is a little under 3.

What does this mean?

The hoped for win (the upside) must be three times the guaranteed amount in order for most people to risk the sure thing.

There is a reason why the status quo wins out in business, politics, and life. Rarely are we given options where the benefit is three times the sure thing/current situation.

On a final note, there was some interesting research on this topic...but with a twist. Researchers at Duke University, in a paper entitled "Sleep Deprivation Elevates Expectations of Gains and Attenuates Response to Losses Following Risky Decision" (Venkatraman, Chuah, Huettel, Chee), wrote that this risk-taking profile changes when someone does not get enough sleep.

When kept awake for 24 hours, the study (supported by brain scans) showed a double whammy: people became more optimistic about potential gains and they were also numbed to the negative feelings associated with losses. They would act riskier and have less regret (distinct from disappointment) about bad decisions. Their decisions were often bad decisions. If you go to Las Vegas, be sure to get plenty of sleep!

Our ancestors lived in a world of scarcity. Therefore it is not surprising that we do everything in our power to horde what we have. Unfortunately, our desire to play it safe can cause us to miss out on big opportunities. Risk taking is fundamental to innovation. And innovation is critical to long-term success.

If you want to see some of this stuff action, be sure to read my entry on 10 1/2 Ways to Improve Your Life - By Losing. This may give you some tools to enable you to take healthy risks to improve your life and business.

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Stephen Shapiro is the author of three books, a popular innovation speaker, and is the Chief Innovation Evangelist for Innocentive, the leader in Open Innovation.

Find Your Nerve Guest Post

Over at www.findyournerve.com I have written a guest post about strategy in the downturn. The central question being:

Are you going to be nervous in the downturn, or nervy?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Innovation Leadership versus Traditional Leadership

by Paul Sloane

There are many different ways to lead. CEOs with markedly divergent styles can be successful in different ways. The same leader will often adopt different styles in different circumstances. There is no one correct way to lead or manage. Ultimately the right way is the one that works for you and for the organization in delivering the goals you set out to achieve.

Let's contrast two extremes of leadership style that I have designated as the command and control leader and the innovative leader. The command and control leader is goal-oriented, authoritative and decisive. He or she is well suited to a structured regime with clear tasks. The innovative leader, on the other hand, is better suited to an ambiguous or fluid situation. He or she is much more focused on creativity, innovation and helping the team to find new ways forward.

The command and control leader...	The innovative leader...
Leads from the front.	Leads from the side.
Directs.	Inspires.
Checks and controls.	Trusts and delegates.
Improves effectiveness and efficiency.	Finds new approaches.
Thinks he knows best (and often does).	Harnesses the abilities of others.
Has a strong sense of direction and purpose.	Has a clear vision and communicates it.
Prioritizes operational over strategic issues.	Prioritizes strategic over operational issues.
Gives directions and orders.	Asks questions and solicits suggestions.
Treats staff as subordinates.	Treats staff as colleagues.
Is decisive, often without prior consultation.	Ponders and solicits input before making decisions.
Builds a team who can execute policy and implement plans.	Builds a team who can create and innovate.
Instructs.	Empowers.
Hires based on experience, track record and qualifications.	Hires based on attitude, creativity and latent capabilities.
Discourages dissent.	Encourages constructive dissent.
Cares about results above all.	Cares about ideas, peoples and the vision.
Promotes himself as the leader and figurehead.	Shares exposure and prestige with the team.
Encourages action, activity and work.	Encourages ideas, innovation and fun.
Rewards performance.	Rewards entrepreneurial action.
Is numbers-oriented and analytical.	Is ideas-oriented, analytical and intuitive.
Sees technology as a means to do things better, faster and cheaper.	Sees technology as a means to do things entirely differently.
Minimizes risk.	Takes calculated risks.
Abhors failure.	Is comfortable with failure.

It may appear that I am painting one of these characters as a saint and the other as a sinner but it is more complex than that; each has a role to play. There are times when you need take command and there are times when you need to empower. But you cannot micro-manage everything in a large organization - especially in turbulent conditions. You must inspire and delegate.

The command-and-control leader's approach is fine for improving operational efficiency in a well-defined environment. However, in today's fast moving, complex situations, we need to supplement conventional approaches with more of the skills of the innovative leader.

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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Innovating with Constraints

Our October Innovation Contest winners won a signed copy of "7 Lessons for Leading in Crisis" by Bill George and the right to have their article re-published here on Blogging Innovation. Here is the first of the three winning entries:

by Tim Kastelle

I've been giving further thought to the issue of public sector innovation which I discussed briefly last week. John and I do a lot of work with people in the public sector as that makes up a fairly big part of Brisbane's economy, and I know that people often find it difficult to be innovative in that area. However, it is essential that we have good public sector innovation because large parts of our economies are in the public sector, and these parts are often very important. We just can't afford to have industries like health and education stagnate - innovation is critical in these fields, as it is in the other areas that fall within the public sector.

So what's the problem? There are a few. One is that overall, the public sector is not viewed as being very dynamic. Consequently, it does not attract a lot of attention from those of us that are interested in innovation. The Australian government is currently undertaking a review to try to devise strategies to improve public sector innovation. The website for this project includes a list of links to resources on public sector innovation (at the bottom of the page) - and you can see that there are not a lot of resources available (the project has a twitter feed too which updates new resources as they find them). This reflects a lack of interest at the levels of both research and policy.

The second issue is that government departments are often fairly risk averse - which makes innovation challenging. This issue is consistently raised by people in our innovation classes that come from the public sector, but it is a common issue for many people in other sectors as well - particularly middle managers that don't have much scope for action. When I talk to people in this situation they often say that the only way they can be more innovative is if they get more support from top management. It is true that top level support generally helps improve innovation. However, if you are waiting for increased upper management support before you start trying to innovate, in most cases, you're likely to be waiting for a long time.

There are a few things you can do to get out of the straightjacket. The main thing is to figure out how to try things. Experimenting is the key to innovating.


"The secret of fast progress is inefficiency, fast and furious and numerous failures." - Kevin Kelly


Now, obviously, failure is not a very popular idea within most government departments. The key to the whole idea though is to figure out ways to generate ideas and discard the ones that don't work as quickly and cheaply as possible. There are three steps here.

The first is to generate ideas.


"The secret to having good ideas is to have a lot of ideas, then throw the bad ones away." - Linus Pauling


Usually, this isn't the problem. People are naturally creative, and the number of untapped ideas that are in your organisation will probably surprise you. One way or another, you need to figure out how to tap into these. If you want some place to start, go to the Tom Peters site and download the Innovation Tactics paper that he has there.

The second step is the tricky one in public sector organisations - you have to select which ideas to try out. The central idea here is to look at how much authority you have. This might be as simple as signing authority - if you can authorise items worth up to $100, then what new ideas can you try to implement for $100 or less? What if you can't authorise any expenditures? The two jobs in which I've been the most innovative have actually both been in the public sector. In the first, I worked out at the start 47 ideas that I thought might make my section run better. Over 18 months, I tried out 45, at a total implementation cost of $0. At the end of that time, my section was just under 20% more effective in turning enquiries into new students, in part as a result of some of those 45 ideas that we tried. Not all of them worked, but a lot of them did - and some of the simplest had the biggest impacts. My bosses weren't too enthusiastic about new ideas when I started, but they were very enthusiastic about results. Most bosses are. So the second step is to figure out what you can get away with, and start trying things that fall within your scope of power. That's how select the ideas to try - you may have to wait on the big ones that will change the world, but if you succeed with some small ones, you may eventually get to try those out too.

The final step is getting the ideas that work to spread.


"Some people look for things that went wrong and try to fix them. I look for things that went right, and try to build off them." - Bob Stone


You need a strategy for amplifying the good ideas. Part of this is selling them to the people around you. To do this, you need to figure out which of the ideas are working. An important activity here is measurement - if you're able to measure the outcomes of your ideas, it is easier to gain support for trying more things.

Innovating is always hard. It's especially hard if you don't feel supported. But the key to innovating when you have constraints is to try things. Try as many as you can, figure out what works, and do more of that. It's a formula that you can follow in nearly every work setting. Instead of telling me why it won't work in yours, why don't you spend the time figuring out a new idea to try yourself instead?


"We have a 'strategic plan'. It's called doing things." - Herb Kelleher (Southwest Airlines)


(photo from flickr/djwudi - creative commons licensed)

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Tim Kastelle is a Lecturer in Innovation Management in the University of Queensland Business School. He blogs about innovation at the Innovation Leadership Network.