Entrepreneurs and Innovation

"Mr. Edison, please tell me what laboratory rules you want me to observe?"

by Janine de Nysschen

A good friend of mine once sat down to lunch with Stephen Covey and a group of fellow executives. During the course of the meal, one of the men commented on the unusual tablespoons, and said "Look at the backend of it." All the people at the table flipped their spoons over, but my friend - quite unintentionally - angled it up so he could look at the bottom tip of it. Laughter ensued. But Covey raised a hand and pointed out that my friend's actions suggested something interesting in his behavior: the ability to look at the world in an unexpected way. So I guess it's not surprising to hear my friend is one of the most innovative entrepreneurs I know, as well as a successful millionaire who has transformed the industry he is in.

The story reminds me of an important fact. Entrepreneurs are often at the forefront of innovation. They possess a unique set of skills that lends itself to inspired invention and driven change. Really good business solutions and radical transformations in history have one thing in common. Somewhere, someone believed that you could do something better, different or completely new. Someone challenged the status quo or saw failure as an opportunity to try again. Often, those people were entrepreneurs.

One reason is that entrepreneurs tend to see the world around them differently. As Thomas Edison said to his laboratory assistant:


"There ain't no rules around here. We're trying to accomplish somep'n!"


Innovation is most often simply a matter of having a different perspective than everyone else, and the perseverance to make it happen. For example, some of the most creative people I know had learning disabilities growing up. Forced to adapt so they could fit into a rigid school format, many developed alternative ways of making sense of the world.

Tony Buzan, father of the world-renowned creative technique of Mind Mapping, is a point in case. Tony admits he came up with mind maps because he was "doing badly at school." He was also smart enough to realize that the way people were measuring intelligence was rather limited. Quick experiment: in your mind's eye, picture the moon, the sun, the earth and a lemon. Which one is different? While you may be like most people and select lemon as the odd-one-out, Tony would point out that if you were using color as your filter, earth would be odd because it's not yellow.

Innovation is therefore inspired by understanding that there's not always only one right answer. Or realizing you may have an answer to a problem that doesn't yet exist. Did you know that the parachute was invented before powered flight? In a "fascinating facts" piece about Sir James Dyson, you'll read that his inspiration for cyclonic technology happened one day while he was vacuuming his house (in itself, fascinating!) and he realized his top-of-the-line machine was losing suction and getting clogged. Dyson refused to accept there was only one good way to build a vacuum cleaner, and the cyclonic suction, roller-ball Dyson vacuum cleaner was born.

Innovation is also about seeing an idea for what it's really worth. Think about all those stories of accidental invention. Like Wilson Greatbatch back in 1956, who was experimenting with a device he was building to record heartbeats. He grabbed the wrong resistor and connected it, and discovered that the circuit emitted a pulse. Voila, Greatbatch realized his device could be used to control heartbeat, and the pacemaker was invented.

Which brings me to a final point on inspired innovation. I believe the most profound and valuable innovation and creativity has to come from a sense of purpose or a powerful cause - it is unbounded thinking about how to make life and the world more meaningful that leads us to solve great challenges and achieve impossible objectives. Just look at how one company's mission transformed the lives of millions of people: Microsoft, with its tagline of "A PC on every desk." And behind that audacious goal, an inspired cause to find ways for people and things to achieve their greatest potential.

Innovation comes in many forms and is a tool that's wielded well by many entrepreneurs. Having a different perspective has inspired many of Apple's products - simply because Steve Jobs refused to accept that everyday things such as radios and phones and computers had to be mundane and ugly. Ergo: Apple is synonymous with easy, simple and beautiful. Sometimes the entrepreneurial way out has to be invented. Understanding that there's not always only one right answer gave us solutions like Galileo's telescope and Sir James Dyson's vacuum cleaner. Then there are the accidental innovations, like 3M's experimental polymer that turned out to be less of an adhesive and more of a sticky fix that today everyone calls a Post-It^TM note. Ultimately, there's the kind of innovation that really makes this world a better place, because it comes from a passionate sense of purpose. Like Google's search engine, motivated by the cause of organizing the world's information and making it universally accessible and useful.

Because entrepreneurs have had the courage to ask questions and take risks - wheels were invented, men learned to fly, machines were made to work more efficiently, and the world has moved forward. The spirit to invent and innovate lies at the heart of true entrepreneurship. Or, to loosely paraphrase Peter Drucker:


innovation is the specific tool that entrepreneurs use to increase their capacity to create wealth.


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Janine de Nysschen uses purpose dynamics to create unique change strategies for difficult problems, helping CEOs and companies increase their impact and performance.

To Uncover Great Ideas, Generate a Large Quantity of Them

by Paul Sloane

One of the great problems with the Western education system is that it teaches that for most questions there is one correct answer. Examinations with multiple choice questions force the student to try to select the right answer and avoid the wrong ones. So when our students leave school they are steeped in a system that says find the "right answer" and you have solved the problem.

Unfortunately, the real world is not like that. For almost every problem, there are multiple solutions that may solve the problem with varying degrees of effectiveness. In other words, in the real world, there is more than one "right" answer. We have to unlearn the school approach and instead adopt an attitude of always looking for more and better answers.

To be really creative, you need to generate a large number of ideas before you refine the process down to a few to test out. To make your organization more innovative, you have to increase the yield. Why do you need more ideas? Because when you start generating ideas you generate the obvious, easy answers. As you come up with more and more ideas so you produce more wacky, crazy, creative ideas - the kind that can lead to really radical solutions.


Real-world examples

The management guru Gary Hamel talks about "corporate sperm count" - the virility test of how many ideas your business generates. Many managers fear that too many ideas will be unmanageable but the most innovative companies revel in multitudes of ideas.

When BMW launched its Virtual Innovation Agency (VIA) to canvass suggestions from people all round the world it received 4,000 ideas in the first week. And they continue to roll in. You can even make your own contribution to BMW's idea bank.

The Toyota Corporation in-house suggestion scheme generates over 2 million ideas a year. Over 95% of the workforce contribute suggestions; that works out to over 30 suggestions per worker per year. The most remarkable statistic from Toyota is that over 90% of the suggestions are implemented. Quantity works.

Thomas Edison was prolific in his experiments. His development of the electric light took over 9,000 experiments and that of the storage cell, around 50,000. He still holds the record for the most patents - over 1,090 in his name. After his death 3,500 notebooks full of his ideas and jottings were found. It was the prodigiousness of his output that led to so many breakthroughs. Picasso painted over 20,000 works. Bach composed at least one work a week. The great geniuses produced quantity as well as quality. Sometimes it is only by producing the many that we can produce the few great works or ideas.


Putting these lessons to work for you

When you start brainstorming or using other creative techniques, the best idea might not come in the first twenty - or even in the first 100 ideas. The quality of ideas does not degrade with quantity. Often the later ideas are the more radical ones from which a truly lateral solution can be developed.

What do you do when you have a mountain of ideas and suggestions? You sort them, analyze them and try out those with the most potential. The really promising ideas are critically examined from the perspectives of technical feasibility, customer acceptance and profitability. If they pass these hurdles, they move rapidly to a prototype phase. They are then tested in the harsh reality of the marketplace, where a sort of accelerated Darwinism occurs - only the fittest survive. The interesting ideas should be kept in a database and allowed to incubate. When you revisit them later, you may well find that you now see a way to adapt or combine them into something worthwhile.


The venture capitalist's strategy for testing promising ideas

The most innovative companies have an approach to trying out promising ideas that is like the philosophy of a venture capitalist. The VC invests in a portfolio of different start-up companies, fully knowing that most will fail. A few may break even, and one or two may become successes. But one big success can pay back the costs of all the failures.

Even though he is smart, the VC does not know which ventures will succeed and which will fail, so initially he backs all of them. As time goes on, he cuts funding for the failures and gives it to the winners. It is the same with prototypes in business. The leading innovators run many different pilots and measure progress carefully. They cut funding the losers, but nurture the successful trials with additional resources. That way they are first to market with the real winners.


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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.

Creating an Improved Environment for Innovation

by Robert F. Brands

Thomas Alva Edison was a failure. It has been said that he "went back to the drawing board" more than 6,000 times before finding the right plant to produce a carbonized filament for his incandescent light bulb.

Six thousand times. Do you have that kind of innovative stamina?

It's been said that:


Risk + Experimentation (+ Failure) = Improved Environment for Innovation


Put another way:


Innovation = Creativity x Risk Taking


Innovation is an experiment of sorts. It requires a culture of risk, opportunity and challenge. Moreover, for an organization to benefit from innovation, leaders and team members alike must welcome - and grow from - failure.

Rather than view failure as inherently bad, successful innovation requires that executives and teams commit to learning from each experiment gone bad - and incorporate those teachings into the next endeavor.

The successes and failures borne of innovation experimentation perpetuate innovation. When strategies are emerging, innovators test their hypotheses and gather information to continue forward with their ideas. Whether the innovation is a consumer product, a software application, or an internal process for an existing business enterprise or workflow strategy, the question remains:

• How will the idea resonate with the target audience or user?


• What costs are reasonable?


• Can the audience (consumers, manufacturers, employees) be convinced to shift well-established habits to embrace The New?

Because of a high failure rate, organizations pursuing the practice of Innovation must have a tolerance for failure. Not every idea will win. But each failure must be perceived as valuable in the trial-and-error process as a team seeks improvement. Tolerance for failure must be encouraged, as well as enthusiasm for risk-taking. Without risk, there can be no reward.

To create a culture of innovation, organizations should:


Encourage Well-Reasoned Risk-Taking

• The pursuit of innovation isn't some fool-hardy flight of fancy. Encourage - or insist upon - a plan to be presented first, to ensure understanding and buy-in across the affected organization. Know your tolerance for risk and failure in the pursuit of innovation.

Test

• True innovation requires thorough testing in pursuit of success. Testing, measurement, and an accounting of what's been learned - even in failure - brings measurable outcomes from successes and failures alike.

Trust

• Do you - as a CEO or team leader - trust your people to pursue new ideas on behalf of the company? Build a culture of trust in the individual's pursuits - so long as safety-measures are in place to safe guard against failure damaging the organization.

Most of all, avoid letting a failed concept kill your team's motivation. Every idea should be given positive acknowledgment, every failure should be studied for "what went wrong," and every success should receive appropriate reward. By providing your team with a culture of Innovation, their risk-taking abilities will improve. And, as was the case with Mr. Edison, they eventually will see the light borne from their successful innovations.

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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.

Why Edison Was Wrong

The other night I had an enlightening conversation with Alph Bingham, the co-founder of InnoCentive from Eli Lilly. This guy is fascinating!

Alph suggested that many people do not like open innovation (external crowd sourcing) because it runs counter to a widely held belief of the R&D community. Researchers often throw around the Edison quote, "I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work."


Researchers use this quote because it "validates" the iterative development innovation process; the cornerstone of most R&D departments. They have convinced themselves that they learn as much from their failures as they do from their successes. Call it what you want, the 700 attempts were failures.

When some R&D people look at open innovation, they see it as linear rather than iterative: post a challenge and get a solution. This seems inconsistent with their belief in learning from failures.

Alph made the point that in the R&D world, the value of iterative development is overrated.

What if Edison found a solution to the light bulb challenge on the first try? Would that be bad? Would he have continued to find the 700 ways that did not work? Did the 700 failures really add that much value? Can R&D organizations afford to fail 700 times? Not in today's competitive environment.


Alph suggested that open innovation is a massively parallel process where failures and successes happen at the same time. You post a challenge and you get dozens or hundreds of solutions. Some won't work. But all you need is one solution that does work. And with open innovation, you only pay only for the solutions that do work. Failures cost you nothing in terms of time and money. With internal iterative development, you pay for the successes and the failures. Do you really learn enough from your failures to justify the extra cost and time involved?

Alph's perspective is fascinating and I fully agree with him for analytical/deterministic challenges. Creative challenges and their solutions, on the other hand, often can't be proven correct until they are tried out in the real world. Iterative development - via small and scaling experiments - may still be the best approach for solving less deterministic problems. I call this approach the "build it, try it, fix it" model. Having said that, the iterations could potentially be staged as a series of open innovation challenges that continue to refine concepts until they are market ready. This would be a massively parallel iterative creative development. Very cool.

This got me thinking about a conversation I had with an executive from Chrysler many years ago while I was working at Accenture. I asked him who he felt his biggest competition would be in the future. He pointed at me and said, "You." Although he was half-joking, it's true that the role of car manufacturers these days is less about manufacturing and more about integration. The Accentures of the world are masterful at integration.

And maybe this integration skill is the MOST important skill for your organization to have.


As platforms like InnoCentive continue to grow, problem solving of all types - creative and analytical - will be outsourced in a massive parallel way to a huge network for solvers. If we take this to an extreme where all challenges are outsourced via crowdsourcing, the role of a company would only be to integrate these solutions together into a seamless offering.

Although this is easier said than done, this one skill may be critical for the survival of your business...and maybe even the US economy.

China and India have a growing base of highly educated engineers and experts. Eastern European countries and parts of Asia have large creative bases. The world is truly flat. And all of these countries have people who are willing to work for pennies on the dollar.

If we try to beat these countries at their game, we will lose. We could never educate enough people. And even if we could, our workforce would probably not be willing to labor for lower wages.

Integration is the key. Yes it is difficult. And that is good news. While the rest of the world is focused on the trees (the point solutions to specific challenges), we need to become masterful at defining the forest (the strategy, architecture, and integration of the point solutions). This is where value is created. And this is much harder to outsource.

It reminds me of something from my "24/7 Innovation" book I wrote back in 2001...

"(As innovators,) we are architects of companies and industries. An architect is not a 'reengineer.' To illustrate this point, I often ask clients what is the difference between an optimist, a pessimist, a reengineering consultant, and an architect. The optimist looks at a half filled glass of water and sees it as half-full. The pessimist looks at the same glass and sees it as half-empty. The reengineering consultant sees too much glass. Cut off the top. Downsize. An architect looks at the same glass and asks questions such as 'Who's thirsty?' 'Why water?' Or 'Is there another way to satisfy the thirst?' It is this questioning, challenging and rethinking that differentiates architects from those who rearrange the deck chairs on The Titanic."

Find solutions everywhere. Embrace open innovation. And think like an architect. Ask the difficult questions. Assess what matters most. And build a core competency around integrating point solutions.

Remember, we are no longer in the tree business...we are in the forest business.

Bonus: An interview with Alph Bingham and Dwayne Spradlin of Innocentive

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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.

Is Innovation Dead in Consumer Packaged Goods?

I was having an interesting discussion this morning with a couple of innovation colleagues of mine. One is an entrepreneur with an outsourced "skunk works" business. The other is a creator and inventor who led disruptive innovation efforts at a major office products company. We came to a sad conclusion, at least for us innovation-oriented types.

Innovation is dead in Consumer Packaged Goods (CPG) Corporate America.

Well, maybe dead is too strong a word. Morbidly thin, perhaps. To be sure, there are some notable exceptions. But as we looked around in today's economy, we concluded that in spite of corporate leaders' recognition of the importance of innovation, the focus tends to remain on incremental, "safe" projects. Failure is not tolerated (let alone encouraged), and employees are rewarded equally for changing the color of an existing product or changing the dynamics of the marketplace.

Is this gloomy assessment accurate? If so, what should be done about it? Is this just the result of trying to weather the economic storm, or is this an ongoing trend?

Fortunately, innovators are not going extinct. Their habitat, though, seems to be changing. Would Thomas Edison survive an annual performance appraisal in a typical 21st century CPG company?

Manager: Tom, you know, I'm not seeing a great deal of progress on this "Project Lightbulb." You've failed to make anything we could possibly sell, and the fiscal year ends next week.

Edison: I haven't failed. I've just found 10,000 ways that don't work.

Manager: We're paying you to find ways that do work, not ways that don't. I think it's about time we gave up on this.

Edison: Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.

Manager: Sorry, Tom, but our stockholders think our greatest weakness lies in not launching this product in time for the Walmart shelf reset. All I see in your lab is a pile of junk.

Edison: To invent, you need a good imagination and a pile of junk.

Manager: No, what you need is to get some revenues out of all this money we're spending on you. Your research is like a black hole! Money goes in, but never comes out. You've spent a fortune, with no sign of a fortune coming back

Edison: Good fortune is what happens when opportunity meets with planning.

Manager: Well, I think you ought to start planning on updating your resume.

Companies that really want to innovate, and not just pay lip service to innovation, need to do a few things:

1. Encourage good failure


• As Jeffrey Meshel said in his book One Phone Call Away, "Good judgment comes from experience. Experience comes from bad judgment." Good failure comes from trying to achieve, not quite getting there, and learning something in the process that will lead to future success. When failure is punished, risk acceptance and employee effort are stymied. Find ways to reward "good failures," and provide public recognition for such things, so people know that trying, failing, and getting up to try again is not only acceptable, but encouraged. The Apollo 13 mantra, "Failure is not an option," is a great motivator, but I am certain that the engineers who famously modified the CO2 filter with plastic bags, cardboard, and duct tape had several failures on the way to their eventual solution. Not tolerating failure leads to Homer Simpson management: "You tried your best and failed miserably. The lesson is: never try."


2. Change accounting practices


• I know that there are Generally Accepted Accounting Principles established, but at least one of those principles is wrong (at least in the US). Forcing all R&D expenditures to be expensed distorts the value of R&D spending. R&D is like any investment - you spend money now in the hopes of excess future returns. In fact, some project evaluation models are now based on options valuation theory. Many, if not most, R&D expenditures should be capitalized. Studies in countries outside the US have shown the value of this treatment (e.g. The Canadian Academic Accounting Association study). Economic Value Added accounting does this, with the result that investment in innovation is recognized for its true worth, and is encouraged accordingly.


3. Implement innovative compensation systems


• Metrics for innovation are always tricky, but this is a problem that firms must tackle if they are to genuinely encourage innovation. The rewards for incremental innovation and breakthrough innovation should not be the same. Measures such as percent of revenue from new products or number of new product launches can be gamed – what constitutes a "new" product? Venture capitalists are rewarded for finding the diamonds in the rough. Innovative employees should be as well. An internal royalty system is one intriguing possibility.


4. Manage for cash flow rather than short-term profitability


• Sometimes, the pressure to meet short-term profitability targets cause companies to look for spending to hack away. All too often, this spending comes from what should be seen as investment in the future. Evaluate your present and future cash flow, and keep the company healthy from that perspective, even if it means missing profits now. Maintain sound R&D investment, and the present value of the future rewards will compensate for the current profit shortfall. Warren Buffet avoided the dot com bubble burst by sticking to a long term investment strategy that skillfully avoided the rush to find someone, anyone, in the dot com world to invest in. Short term pressures can lead to suboptimal business decisions. When possible, remember to think long-term.

All of this, of course, is not to say that deadlines are unimportant, spending should be unrestricted, or managers should not drive for achievement. Going back to the Apollo 13 engineers, they had absolute deadlines and minimal resources with extremely serious consequences that could not be ignored. Their success came from combining that urgency with a willingness to do what it took to get the job done. Corporate business practices should also encourage such willingness, and will find greater innovation and financial success by doing so.

So, what are your perspectives on the state of innovation in the CPG world?

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Brad Barbera is the founder of KAB Business Research, a consultancy focusing on Innovation Training, Ideation Facilitation and Management, and Business Intelligence.