Innovation Insights
by Stephen Shapiro

Tip 9 from Best Practices are Stupid. We dig even deeper into open innovation.

While attempting to find a suitable filament to make the incandescent electric light a viable device, Edison is famous for saying, “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.”

Innovators embrace this quote because it seems to validate the iterative development process used by so many.

There is a widely held belief that you should keep on trying and failing until you find a solution that works, because you learn as much from failure as you do from success.

However, if Edison had found a solution to the light bulb challenge on the first try, would he have continued to seek out 700 other ways that did not work? Probably not.

Think about it this way…

Look at the first graphic. With the traditional model (left) you fail over and over again until you are finally successful. Because your employees are working and investing their time on each attempt, it costs the organization payroll and overhead. And because the failure process happens serially, it takes a long time.

Is there a better way to find solutions that minimizes your risk, cost, and time – especially for technical challenges?

The graphic on the right is based on a challenge-centered open innovation model. Alph Bingham, founder of InnoCentive, describes it as a “massively parallel process where failures and successes happen at the same time.” With this approach, you have the same number of failures, but there are two differences:

One: The failures are happening in parallel rather than in a series, significantly speeding up your time to solution.

Two: The cost of failure is pushed into the market and you only pay for value received, instead of paying for the time invested. You only pay for a successful solution.

Say you post a challenge and you get dozens (or hundreds) of people working to find solutions. Some solutions won’t work, but all you need is one that does work, and with this form of open innovation, you only pay for successful outcomes (based on the value of the solution, not the time invested). 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? Probably not.

Edison was a great inventor.  However, I suspect that if Edison were alive today, given the tools available, he might have tried an entirely different approach to developing the sustainable filament.

Tip 8 from Best Practices are Stupid. This one further explores the needs for open innovation.

A well-known healthcare company, after launching an incredibly successful new product, turned their attention to creating new complementary offerings. Multiple failed attempts later, they came to realize they didn’t have the in-house expertise to crack the code. Not knowing what to do, they decided to try posting the challenge on an open innovation website. Their hope was that they could find someone outside their organization who could find a practical solution.

Unfortunately, some employees took this action as a slap in the face. Unfamiliar with the benefits of open innovation, they felt that someone within the organization could solve every challenge. To prove their point, several employees took it upon themselves to submit solutions to the posted challenge.

In the end, the solutions submitted by the employees weren’t chosen. The breakthrough answer came from someone not only outside of the company, but outside of the company’s industry. The successful conclusion of this challenge solidified the company’s decision to formally launch their open innovation efforts. Their conclusion?

No one person can solve every problem.

And it’s corollary: No one organization can solve every problem.

The late, great Will Rogers once said, “There is nothing so stupid as an educated man, if you get him off the thing that he was educated in.”

One of the challenges with driving innovation in organizations is that smart people are often more interested in being right than doing right.  That is, they want to believe that they can solve every problem under the sun.  This pervasive belief can circumvent your innovation efforts.

To be clear, the objective of open innovation is not to replace the smarts you already have in your organization.  It is to augment this brilliance.

Here’s a simple model I use to help companies determine which challenges should be solved externally, versus those that can be solved internally. Broadly speaking, challenges fall into roughly three categories (these are summarized for space):

Simple Challenges:  Challenges where there is a high probability that someone else has already solved this specific problem.

Complex or Unsolved Challenges: Challenges that are exceptionally complex and may have remained unsolved within your organization for years.

Challenges Within Your Discipline: The challenges that fall into the sweet spot of your organization.  These are the challenges that your experts are best equipped to solve.

People want to be (and should be) appreciated for their brilliance.  They have dedicated their lives to the pursuit of knowledge.  But everyone cannot be educated in everything.  Figure out what you (and your organization) do best, and find others to help with everything else.

Or, to quote Will Rogers again, “Everybody is ignorant. Only on different subjects.”

Today is a small snippet from strategy number 7 in Best Practices are Stupid.

Goldilocks enters the house of three bears and decides to go to sleep. One bed was too hard, one was too soft, and the baby bear’s bed just right.

The same is true when defining challenges.

They can’t be too big (broad or abstract, e.g., asking for new ideas) or too small (overly specific, e.g., extremely technical that can only be solved by one discipline). They must be “just right” – framed in a way that maximizes the likelihood of finding a workable solution.

When framing challenges, you must adhere to the Goldilocks Principle.

It is quite common for a company to ask its employees to find ways to increase revenue. This is a lofty goal and posing this type of general challenge usually results in fluffy solutions. Instead of asking people to solve broad problems, ask specific questions that will likely result in an implementable solution. For example, are there specific markets that you have not yet penetrated? Are you missing out on customer segments that present a greater opportunity?

NASA ran an open innovation challenge designed to find a “micro gravity laundry system.” However, the solutions they received were not as useful as they had hoped. In hindsight, they recognized two important lessons.

First, they realized that asking a “system” question might have been too complex and the larger challenge might have been more effectively solved by deconstructing it into a series of smaller challenges (e.g., a valve challenge).

Second, the potentially more important lesson was that they may have been better served by asking an even “higher level” question. That is, asking about a laundry system implied that the solution was mechanical in nature. However, they might have found more interesting solutions had they asked about how to eliminate the need for clothes laundering altogether. This might have led to a completely different breakthrough. So in this case, you could argue that the original challenge was too narrowly defined.

A critical step in trying to find solutions is to clearly define the challenge. The way a challenge is framed will impact the way it is solved.

Some may suggest that Goldilocks’ decision to enter the home belonging to the three bears in the woods was not very sound. However, it was her quest for “just right” that allowed her to rest peacefully. If you adopt this same rigor when defining your challenges, you too just might sleep a bit better at night knowing a workable solution is just around the corner.

One day, I was having lunch with a pharmaceutical client who said, “The problem with our innovation pipeline is it is really a sewer.” Ouch. But it was the inspiration for this tip from Best Practices are Stupid. Here’s a short snippet from that chapter:

We hear the expression “innovation pipeline” tossed around a lot.  But if you aren’t careful, your pipeline may get clogged.

The biggest challenge companies face is to figure out which challenges to solve.  I call this their “meta-challenge.” Given that organizations have limited resources and money, prioritization is critical.

You want to manage your innovation pipeline the way you manage your personal investment portfolio.  Putting all of your money in a saving account making 1% interest may be safe, but your investment will never grow and you will most likely end up destitute.  Then again, putting all of your money in risky derivatives and speculative investments that have a large potential upside also have an equally large downside and will most likely land you in the gutter.  The buzzword in the finance world is diversification.

Your Innovation Portfolio

Equally, your innovation portfolio should be comprised of a diverse set of investments in various types of challenges.  Include some safe bets (incremental innovation) along with some riskier investments (radical innovation). It’s up to you to decide the correct proportion of each one. You want a variety of challenges ranging from service to product enhancement challenges, and performance improvement to business-model changing challenges.

Challenges tend to fall into two broad categories: technical challenges (e.g., how do we create a new chemical compound with specific properties?) and marketing challenges (e.g., how to we get women to drink more beer?).

When you map these two dimensions, you get the following chart with four broad categories of challenges:

• Incremental Innovation: These are safe and yield returns.
• Adaptive Innovation: These are challenges that are easy to implement from a technical perspective, but represent a departure from a known market need.
• Technical Innovation: This category deals with any innovation that serves a well-established need, yet is technically complex to develop.
• Radical Innovation: These innovations are both technically complex and have a high level of market uncertainty.

In Lewis Carroll’s “Through the Looking-Glass,” the Red Queen said, “It takes all the running you can do, to keep in the same place.”  Only investing in incremental innovation results in a lot of hard work with little progress.  On the other hand, always swinging for the fences will have you striking out most of the time.  Diversify your innovation portfolio and you will keep your pipeline flowing smoothly.

Today we move to tip 5 from the book. People who know me, know I am a fan of open innovation and crowdsourcing – when it is done correctly. Today’s post shares why I am such a strong proponent…

Expertise can be the enemy of breakthrough thinking. The more you know about a particular topic, the more difficult it is for you to think about it in a different way. Your solutions will most likely be “been there, done that” ideas that are limited to your area of expertise. If you want breakthroughs, you need to bring together people from a wide range of disciplines, backgrounds, and experiences.

This idea was confirmed by research completed by Lee Fleming, a business administration professor at Harvard Business School. After analyzing 17,000 patents, he discovered that the breakthroughs that arise from multidisciplinary work “are frequently of unusually high value—superior to the best innovations achieved by conventional approaches.”

His research highlighted the pros and cons of each method. He learned that teams composed of people with similar backgrounds have a great number of successes, yet yield fewer breakthroughs. On the other hand, cross-disciplinary teams had a higher failure rate yet their innovations were more radical and had the potential to create incredible value.

Is there is a way to get all of the benefits associated with diversity without any of the negative effects?

Yes. It is called “open innovation.”

Open innovation is an innovation process where you engage people outside of your organization to help solve challenges. One common form of open innovation occurs when you post your challenges on a Web site and get responses from a diverse group of outside experts. Many organizations find that this is a useful tool for speeding up the innovation process because it taps into specializations that might not exist within your organization.

Back in 1989 the Exxon Valdez tanker crashed into a reef in Prince William Sound in Alaska, dumping 10.8 million gallons of crude oil into the water. Although some of the oil was recovered, a large amount remained trapped under the ice. When teams tried to move the oil, the water/oil mixture froze.  Oil engineers worked on this challenge for twenty years without any viable solution until they discovered open innovation. They posted a well-formed challenge to the website of an intermediary, InnoCentive, a company which has a large network of experts from a wide range of disciplines who solve complex problems for a monetary prize.

A solution to the oil crisis was found very quickly.  Interestingly, the winning solution did not come from the oil industry. Instead, it came from someone in the construction industry who had a similar challenge with pouring wet cement; he needed to find a way of preventing it from hardening right away. This chemist developed a device that vibrates the molecules so that they flow continuously.  He figured that if vibrating could keep cement from hardening, then a similar concept could be adapted to keep the oil in the tanks from freezing.
Sometimes the best solutions come from outside your area of expertise and beyond the four walls of your organization. By the end, you might just find solutions to problems that have stumped the experts for years.

***
I did a talk for NASA, and I made this point which illustrates it: If you are NASA and you have 100 aerospace engineers working on an aerospace engineering challenge, adding the 101st aerospace engineer may not help that much. But adding a physicist, a nanotechnologist, a chemist, a biologist, or even a musician may move your solutions in a completely new direction.

NOTE: These posts are summaries of each tip and represent less than 50% of the actual content

This is tip 4 from Best Practices are Stupid and is the basis of my Invisible Solutions® book. It is fundamental to all of my work with innovation: Start with a well-framed opportunity. Here is a snippet of the text for this chapter…

Leaders of organizations often use the expression, “think outside the box” while urging their employees to innovate.  The belief is that eliminating constraints and allowing people to think freely will increase creativity.

Although this Tabula Rasa or blank slate method to innovation is conventional wisdom, this unbounded approach actually reduces creativity and leads to abstract or impractical solutions.  A television script writer in Hollywood once told me that he liked the idea of “creativity within constraints” as it gave him a starting point and then he could “riff” from there.

Instead of telling your employees to think outside the box, give them a “better box” to innovate inside of.  These constraints will increase creativity and lead to useful solutions.

Albert Einstein is quotes as saying, “If I had an hour to save the world, I would spend 59 minutes defining the problem and one minute finding solutions.” In my experience, most companies spend the full sixty minutes finding solutions to problems that just don’t matter.

Well-defined challenges guide innovation efforts, provide useful constraints, and define that “better box.”

Challenge-Centered Innovation
Let’s face it: your organization has no shortage of opportunities or problems, and you can find them everywhere: from your customers, employees, shareholders, consultants, vendors, competitors, and more.

An organization’s ability to change (i.e. innovate) hinges on its ability to identify and solve these challenges.

Why Challenge-Centered Innovation?

There are a number of inherent advantages to using a challenge-centered approach over an idea-driven approach to innovation:

• Challenges are the best way to ask your employees, customers, or any community for help.  It allows them to focus their energies on finding solutions that will ultimately be relevant to the needs of the organization.
• When done properly, you can measure the ROI of each challenge and the overall challenge-driven program.
• With a challenge-centered approach, you can assign owners, sponsors, resources and funding, evaluators, and evaluation criteria before investing the valuable time of employees and others.

The idea-driven approach to innovation does not allow for any of the above.  With well-defined challenges, all of these are possible.

Establishing boundaries does not necessarily put constraints on innovation efforts.  In actuality, if done correctly, it has the capacity to dramatically enhance creativity and increase organizational effectiveness.  So, the next time you are tempted to say “Think outside the box” – think again.

P.S. A few additional points:

• The post above is a condensed version of the actual text
• The Einstein quote is a shorthand for what he actually said: “The mere formulation of a problem is far more often essential than its solution… To raise new questions, new possibilities, to regard old problems from a new angle requires creative imagination and marks real advances in science.”
• Clients have one quantitative studies and proved that the ROI on challenges was 10x great than those with ideas (sometimes a lot more)
• Learn more about Invisible Solutions here: https://stephenshapiro.com/invisible-solutions/

This is tip 3 from Best Practices are Stupid.

I love this one. It’s core to so much of my innovation work. The concept of the SIGNAL-TO-NOISE RATIO is overlooked yet critical.

Here’s a short snippet of the content:

A large European retail bank that was suffering from eroding market share thought they had a great idea to solve this emerging problem. They decided to get input from all their employees with ways to improve and grow the business. To collect employee ideas, they implemented an enterprise-wide electronic suggestion box. They believed that this would help them tap into previously undiscovered innovations. Sounds like a great idea, right? Wrong!

They received thousands of ideas. Evaluators looked at every one and, in the end, none were implemented. The company’s entire innovation program lasted a total of 18 months at which point it was shut down and deemed a huge failure.

In an attempt to be more innovative, many companies start by asking their employees for their ideas. This is a bad idea! The ideas that are submitted tend to be impractical and of low value and end up only creating an overwhelming amount of unproductive clutter in the system.

This points to one of the most important, yet under-considered measures in the innovation process: the “signal-to-noise ratio.”

The signal-to-noise ratio is an engineering term that is used to quantify how much a signal is corrupted by noise. For example, in an audio recording, the signal is the music and the noise is any background hiss. A higher ratio indicates more signal than noise, which is the ultimate goal. Many online discussion forums use the term to describe the ratio between useful information and spam or false/irrelevant information.

This latter use of the term is the one that best applies to innovation.

In innovation, the signal is comprised of solutions that are implemented and create value. The noise is made up of all of the ideas that never come to fruition, and the useless suggestions for problems that don’t matter and don’t create value.

To increase your innovation’s signal-to-noise ratio, the first thing you want to do is stop asking for ideas.

In yesterday’s strategy from Best Practices are Stupid, I talked about the three levels of innovation: event, capability, and system. In today’s post, we explore the capability level.

Here is strategy 2: Avoid Becoming a One-Hit Wonder

Do you know the bands Lipps Inc, The Sugar Hill Gang, or Haddaway?  You might know the song that each of these artists made famous: Funky Town, Rapper’s Delight, and What is Love, respectively.  These artists were “one-hit wonders.”  They climbed to the top of the music charts once and were never heard from again.

This is not too dissimilar to what happens with many businesses.  They generate one good idea to gain momentum but quickly fall from grace.  What can you do to prevent your organization from becoming a one-hit wonder?  Make sure that your innovation efforts are predictable and sustainable by treating them like any other capability in your company.

Five key components are required for successful long-term innovation capability:

Strategy: A strategy is needed to decide when, where and how innovation will be used within the organization.  Most importantly, it should address “why” you want innovation.

Measures: Innovation, as with any capability, needs to be measurable and measured.

Process: Innovation requires an end-to-end model for targeting, generating, selecting, and implementing innovative solutions.

People: Your people are your culture.  If you want a culture of innovation, your employees must embrace actions, values, beliefs, skills, and language that are consistent with this objective.  Everyone, at all levels, must appreciate divergent points of view.

Technology:  Innovative companies use collaboration tools to enable communication between employees, customers, suppliers, and external experts.

For too long, innovation has been relegated to the darkest recesses of Research and Development (R&D) departments and to the conference rooms of well-meaning brainstormers.  But now is the time to bring innovation to the forefront of your business.  Now is the time to make innovation a capability (but not a department!) with the same level of status as finance, sales, or marketing. Doing this will prevent your innovation efforts from becoming a one-hit wonder.

(please note that these posts are summaries of the actual book content and therefore many details are not included here)

As mentioned in yesterday’s blog post, I’m going to try an 8-week experiment. Back in 2011, I wrote Best Practices are Stupid (published by Penguin Portfolio). It was selected as the best innovation & creativity book of the year by 800-CEO-READ (now Porchlight).

The book contains 40 strategies for driving innovation.

The experiment is, for the next 8 weeks (5 days a week), I will post a very short summary of each strategy. It will be like reading the cliff notes version of the book – except it will take 2 months to read. I hope you enjoy these. And with that, here is the first strategy:

“Not Survival of the Fittest – Survival of the Adaptable”

When the pace of change outside your organization is greater than the pace of change within, you will be out of business. And as you know, the pace of change outside of your organization is faster than ever.

The only way to survive is to stop treating innovation as a one-time event. Innovation must be a continuous, never ending process and capability. The second you rest on your laurels, you can be certain that someone will catch you for breakfast.

There are three levels of innovation:

Level 1: Innovation as an Event: This is where most companies find themselves – holding workshops, doing brainstorming, or running hackathons.

Level 2: Innovation as a Capability: Here, the organization puts in place structures and processes to define problems/opportunities, generate and evaluate solutions, and develop action plans to implement those solutions.

Level 3: Innovation as a System: The ultimate level involves creating an environment where innovation is embedded in everything you do.

P.S. Please note that these are summaries of each chapter and not the entire text! Also, Best Practices are Stupid  is not available for purchase at this time. We acquired the rights back from Penguin and are now determining next steps for the content.