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Innovation Insights
by Stephen Shapiro

Latest Posts

The brain loves to be correct, so even when you are wrong, you get a “rush” that can increase innovation failure rates….

In a previous article, I wrote about why “wow this is a great idea” can lead to higher failure rates of your innovation efforts. This results in wasted time, money, and effort that could be invested in more valuable solutions.

We now have scientific evidence as to why this is true.

According to a recent study, “When updating beliefs about their future prospects, people tend to disregard bad news.” This has traditionally been called Confirmation Bias.

According to researcher Bojana Kuzmanovic, “In complex, confusing situations, we run the risk of making a biased judgment as soon as we prefer one conclusion over another.”

The study goes on to indicate that these judgments are not influenced by new information that contradicts the original conclusion. In other words, we ignore information that is not aligned with our beliefs.

Why?

The Brain Rewards Being Correct, Even When It’s Wrong

Any time we hear information that supports our beliefs, the brain activates a region of the brain that is associated with other rewards such as food or money. Given this, we look for information that supports our desires, because we receive a reinforcing boost. Even when you are wrong, the brain find a way to say, “Hey, you were right about this decision. Congratulations!”

Interestingly, the study also concluded that, “The influence of preferences is independent of expertise. We can benefit from this pleasant self-strengthening effect as long as our judgments do not have serious consequences.”

This implies that even when you have little experience, your confidence levels might be overly inflated. (NOTE: Sometimes a lack of expertise can sometimes help innovation as I discussed in this earlier article).

The study concludes, “When making important decisions, we should be aware of our tendency to distort judgment and apply strategies to increase objectivity.”

This is great advice.

Simply being aware of these biases is a good first step, as is supported by another research study.

Awareness is the First Step

Researchers gave trained U.S. Army intelligence analysts a battlefield scenario. After forming an initial hypothesis, the analysts were given updated intelligence reports. Even though these reports contained significant evidence that disproved their beliefs, the analysts held on to their initial hypotheses and in fact increased their confidence levels.

Researchers ran the test again with the same participants, but before doing so they showed participants how confirmation bias negatively impacted their decision making the first time around. During the second trial, the participants were given visual reminders designed to help foster their awareness of alternative hypotheses.

The result? There was a “lower level of confidence, greater consideration of alternative enemy courses of action, and more willingness to reverse early decisions based on new evidence.” In fact, during the second trial, 50 percent of the participating teams changed their hypothesis at least once during the exercise.

Therefore, be sure to remind yourself and others that we all have these tendencies.

Drop Your Ego and Work With People Who Have Opposite Beliefs

Another good step is to partner with people who have a bias that is opposite yours. Someone who thinks your idea is not good as it is currently proposed. Of course, in order for this to work, both of you need to be open to the other’s perspective.

Egos and arrogance can kill innovation. A willingness to be wrong is critical for reducing failure rates.

The brain loves to be correct. It will therefore give you the equivalent of an adrenalin rush, even when you are wrong. By acknowledging this, and taking corrective measures, you can reduce your failure rates and ultimately develop better solutions. This apply not just to business, but to all areas of your life.

This article originally appeared on the Inc. website

Your best source of revenue typically does not involve chasing new customers…

Over the years I have tried many methods for growing my business.

I’ve hired internet marketing firms to implement outbound marketing programs or improve my Search Engine Optimization (SEO). I’ve worked with public relations (PR) firms who secured me key spots in national newspapers, magazines, and television. And I’ve paid out large sums of money for online advertising campaigns.

The objective in each case was to expand my network, increase traffic to my website, build my mailing list, and raise awareness of my brand and services.

After all of this work and expense, I conducted a post mortem and discovered something quite interesting.

With the exception of one, all of my speeches from the last 18 months were generated from previous relationships. They were either past clients, audience members, bureaus with whom I’ve had strong relationships, or someone who was following up on a recommendation. Nearly all of my bookings were a result of my existing network.

I guess I shouldn’t be surprised. Statistics show that the probability of selling to an existing customer is a hefty 60 to 70 percent, whereas the probability of selling to a new prospect is only 5 to 20 percent. To compound things, it costs over six times more to acquire new customers than it does to keep current ones.

Despite this, we’ve been brainwashed to focus on growing our network with people who neither know us nor have a prior connection to us. Of course there are times when attracting new prospects is valuable, for example, when you are in the early stages of building your business or if volume truly matters.

However, if you are more established and have a track record, nurturing – not growing – might be the name of the game.

Unfortunately, we typically treat most customers like transactions. Get the sale and move on. But we miss the possibility that they can either be a repeat consumer or a referral to a new customer. Admittedly, I have been guilty of this in the past and am now working on making things right.

Think about the books you’ve recently purchased. I bet most were due to a recommendation by someone you know and trust. I suspect it is less often that you buy a book on a whim based on an advertisement or an Amazon.com recommendation.

The same is true with most businesses. Someone who has a past relationship with you, and is a fan, is the best advocate.

For example, if you run a restaurant, common methods for attracting new customers include offering deep discounts through Groupon or paying for expensive listings on OpenTable. These are designed to attract those individuals not already familiar with your business. Instead, consider giving existing customers – your fans – an incentive to recommend your restaurant to others. Provide free appetizers to past patrons who bring along new diners. Grant gift certificates for frequent referrals. Create a “wall of fame” with the pictures of the customers who refer the most business. Or, better yet, find ways of creating even more value for your customers, regardless of whether or not they bring you new business. Show your appreciation by buying them a bottle of wine on their birthday. They will most likely repay the gratitude by excitedly sharing the experience with all of their friends.

Over the years I have invested heavily in my website. Each year there is another iteration. Although having a website is critical, in hindsight, I might have been better off investing the money spent in the creation of a formal advocacy program where I strategically contact and cultivate relationships with former customers. Fortunately, this is something I launched earlier this year and it is already paying dividends.

I’ve found that sometimes simply calling or writing a past client to say hello is enough. In doing so, when a new need arises, they think of me first. I often introduce clients to one another so that they learn about innovation from a peer, not just me. Sometimes I’ll send a small, personal gift. Or if I find a relevant article, I mail it. The key is not to sell to these customers, but to provide value. You want them to view you as an ally, not a vendor. And this repeated, friendly contact keeps you front and center in their minds. Should they (or a colleague) require someone with your skills, they will think of you first.

Where do you invest your marketing time and money? Do you go to networking events to hand out business cards? Have you created a shiny new logo and website? Do you run Google AdWords or do a direct marketing campaign to attract new customers? Or how about cold calling?

Of course all of these can be valuable. However, I want to get my business to the point where my business cards, websites, logos, taglines, and brochures are irrelevant and unnecessary.

If you already have a nice following, don’t try to attract new customers, nurture the people who know you best. Or as the old song goes, “Love the ones you’re with.”

This article was originally posted on the Inc. website

We can learn a lot about innovation by studying linguistics…

The other day I found some old VHS tapes (for those a bit younger than I am, this was the predecessor to the DVD). On one was a speech I gave to a couple thousand executives about 20 years ago. I talked about a topic that fascinated me at the time, yet I did very little with the concept since. But it is as relevant today as it was two decades ago.

In linguistics, there is the concept of deep structure and surface structure. By digging into these, we can gain some insights into the way innovation really works.

Deep versus Surface Structure

The deep structure is the meaning; what you want to convey.

The surface structure is the actual configuration of words, used to express what you want to say.

When a client asked me to help them polish the words in their mission and vision statements, I passed. I didn’t feel it was a worthwhile endeavor.

When you debate the specific words that should be in your mission or vision statement, you are automatically focusing on the surface structure.

But if your goal is alignment and understanding, the words are not as important as the intent – the deep structure.

Access to the deep structure is not intellectual. It is visceral.

To do this, I suggested that the team visit/interview clients. Talk to individuals and organizations that have been impacted by their work. Talk about “why” you are in business. Have each person on the team share personal stories. Get emotional.

The specific wording of a purpose, mission or vision statement (the surface structure) is not as important as the meaning behind the words (the deep structure). This is where you tap into implicit motivations.

The Deep Structure of Your Business

The key to convincing people that your innovation is great is to sell them on something other than your innovation…

“What’s the best way to sell innovation?” This was a question I was recently asked by a client.

He’s an innovation leader in his company and he wanted to sell the concept of innovation internally, to sell specific ideas internally, to sell the solutions externally, and maybe even pitch to potential investors.

I thought about books he might read. For his last need, I recommended Pitch Anything: An Innovative Method for Presenting, Persuading, and Winning the Deal by Oren Klaff. This is a book I’ve read twice and listened to on audio book. It’s a brilliant approach for pitching to investors.

There were other books I considered. But in the end, when I looked at the bigger picture of his innovation challenge, I recommended some ancient wisdom: Aristotle’s “Rhetorical Triangle.” This was his approach to using language to persuade others.

The three corners of this triangle are “ethos, pathos, and logos.” Ethos is credibility, pathos is empathy, and logos is logic. I find that selling your ideas using this construct, typically in that order, leads to more persuasive arguments and more effective sales pitches.

Ethos: Credibility

First, establish your credibility. You need people to listen to you before they can truly hear your ideas. They will only listen if the think you are worthy of their time. Why should they believe you? So, before trying to sell your ideas, make sure people believe you, trust you, and want to listen to you. You want to do this without it sounding like you are hyping yourself, because that can quickly turn off listeners. Therefore it is useful to get someone else to sing your praises. Testimonials and social proof can build credibility. A warm introduction from someone who has already established credibility with your target audience can go a long way. In my role as a professional speaker, this “warming up the audience” is critical. Therefore, before taking the stage, it is customary for an executive from the client to read an introduction that establishes my credibility. If you are selling internally, then maybe this step is not necessary, or can happen very quickly.

Once people are bought into “you,” it’s time to build an emotional connection.

Pathos: Empathy

Price drives the perception of value, and unfortunately most customers don’t understand value…

Do you know what your customers really value? When I first started my business as a professional speaker, I realized that I didn’t have a clue.

In order to find out, I did an experiment called PW3 – “Pay What We’re Worth.”

Instead of using the traditional model to determine speaking fees (where the speaker sets the rate before the work is done), with PW3, as an experiment, I turned this model upside down. Instead of quoting a standard rate, the client would determine my fee after the work was done.

The plan was to send the client a blank invoice after I gave a speech, and they would pay “what they thought it was worth.”

The only stipulation was that we would have a conversation about value up front. I wanted to learn the value they got from previous speakers. How were the concepts reinforced after the presentation? How were ideas implemented? How was value measured?

What did I learn? Surprisingly, none of the companies I worked with were able to define value, at least in terms of tangible results. In fact, in nearly every situation, when I asked them how they would determine what to pay me after an event, they said, “Um, I guess we’ll pay you what we paid the last speaker.” In fact, with 90 percent of my speeches, the client asked me for my standard fee and just paid that.

If our customers aren’t the ones defining value, what drives the perception of value?

Pricing Can Determine Perception

One week after starting my speaking business back in 2001, I met with the owner of a speaker’s bureau in London to discuss representation. Bureaus are agents who place speakers with events. In the meeting he expressed serious interest. So much so that a few days later he called me about a potential gig.

The call came to my mobile phone as I waited for a train. It was difficult to hear him due to the noise on the platform. However, through the ruckus I could hear “What is your speaking fee?” I was ill prepared. I honestly had never thought about it. I did some quick calculations and pulled a number out of the air. “Thirty Five Hundred” was my response. He thanked me and hung up.

Later that day he called back. I quickly realized that he too must have had a hard time hearing me during our previous conversation, because he asked me, “Was that Thirty Five THOUSAND dollars or Thirty Five THOUSAND pounds (at the time about $60,000)?”

I stumbled for a moment, debating how to answer. I then sheepishly responded, “Thirty Five HUNDRED DOLLARS.” Again, he thanked me and hung up.

There are two types of games. One kills creativity and the other is for kids…

Business is serious. Right?

But what if we could game playing to enhance our businesses? Games can be a useful tool for enhancing creativity. They make work more fun, they reduce stress, and they get people in action.

However, not all games are created equal. There are adult games and kid games.

Adult Games

With adult games, there tend to be rigid rules, the games have an ending, and there are winners and losers.

Think about nearly every adult game we play: Monopoly, poker, or basketball.

They typically have a complex set of rules that all of the players need to adhere to. If you break the rules you “go to jail,” are disqualified, or get penalized.

Adult games end. The game is over when all of the other players are out of money, when the “clock” says there is not more time, or when everyone has had their turn.

And nearly every adult game has a winner and one or more losers. They are competitions.
The world of business is an adult game. Deadlines. Budgets. Failures. Losers.

Contrast this with kid games.

Kid Games

Kids play games with very loose rules, the game continues until they say it ends, and there is no concept of winner/loser.

Is your organization a cult? Most are, and this high level of commonality can hurt your innovation efforts…

The recruiting and retention efforts of most organizations are not designed to attract and retain a diverse group of innovation personalities: analytical, methodical, creative, people-oriented. They are designed for one style only–the style that is consistent with an organization’s overall personality. This can leave an organization unbalanced and unable to innovate at full capacity. If you then layer in leadership and cultural issues, you will see why it is so difficult to get the right people in the right roles.

The Leader May Drive Personality

Consider a Fortune 100 technology company that has been wildly successful for many years, but recently has struggled to grow. The longtime CEO, tested out as highly analytical. He is an incredibly bright individual who loves data. When I polled the leadership, it became clear to me that what they valued above all was a data-driven approach to business. In fact, the company loves data so much that, during lunch, I had one of the employees print off all of the measures used to monitor one aspect of the business. When the sheets of paper were spread out, they ran from one end of the room to the other. And this was a large room.

Although measures are useful, too much data can be detrimental to innovation. If you only focus on the numbers, sometimes you will miss big opportunities. It’s a classic situation of not being able to see the forest for the trees. The leader was data-driven which cascaded to every top leader.

The Downside of a Strong Corporate Personality

A side effect of this particular culture is that it was known as a company “with no heart.” If not managed properly, the individuals with a people-oriented personality would struggle in an environment like this. But it doesn’t have to be this way. There are a number of methods that can be used to attract and retain talent, regardless of the company’s personality. For example, given that hearts are often less motivated by hard numbers, using subjective feedback can help increase their level of engagement. Praise people on what they value, not on just what the company values… Continue reading >>

I first met Paul Golding 10 years ago in the UK when we were both doing innovation work for a mobile phone company.

I always admired Paul’s understanding of technology – not just from a bit and bytes perspective, but from a business perspective. He knows how to extract value from everything he does.

We were recently chatting about some work he’s doing in blockchain, and I thought it would be great to capture the conversation for everyone. If you watch this 45-minute video, I am convinced you will significantly increase your knowledge of blockchain and how to leverage it for your organization.

It is with great pleasure that I introduce you to Paul Golding…

Being different is not the same as being differentiated…

After years of development and $2.4 billion in investment, the Revel Casino opened its doors to the Atlantic City Boardwalk on April 2, 2012. This beautiful hotel is top-notch, sophisticated, and classy. I know. I visited it.

To differentiate themselves from other casinos in the area, the Revel did not allow smoking anywhere and they didn’t offer a players’ club. They also decided to nix the buffet and bus trips to/from the casino. Oh, and there was a two-night stay minimum along with a wall that blocked easy access to the casino from the Boardwalk.

The goal was to create an exclusive and high-end experience.

Unfortunately, the typical person who visits Atlantic City isn’t looking for an East Coast version of Las Vegas. Let’s face it, the Boardwalk attracts families with children who want to eat cotton candy and hot dogs.

Combine their design decisions with a tanked New Jersey economy, increased competition from Pennsylvania casinos, and bad investment decisions (such as building their own power plant), and you have a recipe for disaster.

The Revel Casino opened April 2012. Two and a half years later it went bankrupt and closed its doors September 2014. One year after that, the casino was sold for pennies on the dollar at $82 million and remained closed until June 2018, when it opened with a completely different name and concept.

What can we learn from this? Continue reading >>

I am on the road nearly 200 days a year. With over 30 years of travel under my belt, I’ve discovered many simple and free ways to make your travel more enjoyable. Here are my four favorites. I hope you like them as they’ve made my life a lot better.

Keeping Window Shades Closed

After a long flight, it feels to great to hop into bed for a good night’s sleep. Although I typically need to wake up relatively early the next day, sometimes the sun wakes up before I need to. The bright light shining through curtains that are not completely closed is sure to wake me up. How do you keep the shades tightly closed? I used to travel with clothes pins or chip clips, when I realized that I could use the clips on the hangers provided in most hotel closets. Simply place the clips where the two shades meet and you will be able to sleep as late as you want.

A Disposable Neck Pillow

This one is technically not 100% free, as you need purchase a beverage. But the hack involves the part of your purchase that you would typically throw away: the bottle. Continue reading >>

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Innovation Insights
by Stephen Shapiro

Latest Posts

The Brain Rewards You, Even When You Are Wrong. This Is Bad for Innovation (and Life)