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Innovation Insights by Stephen Shapiro

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Last week, I had 3 conversations with 3 different companies.  And each had a complaint about the same group of people: lawyers.

If you think about it, innovators and lawyers have completely opposite objectives.

Innovators want to grow the business.  They believe that risk and failure are a natural part of the innovation process. Their mantra is “expansion.”

Lawyers, on the other hand, want to guard the business.  Their objective is to minimize risk and avoid failure.  Their mantra is “protection.”

But the issue isn’t really lawyers versus innovators.  The issue is how to balance an organization’s need to protect the business while enabling it to expand at the same time.

In my previous blog entry, I discussed how to redefine failure. The model proposed was to treat everything like an experiment.  While using this mindset, failure only occurs when the experiment does not give you the feedback you require.

However, sometimes even experiences can give you false positives.  That is, the experiment tells you a new product, service or market is a good idea, yet in the end it proves to be a total flop.

In those situations, you have a good ol’ fashioned failure on your hand.  What do you do then? Beat up the people involved?

I was having a conversation with the former head of innovation for a giant retailer.  In their quest for big successes, they had some colossal failures. Instead of chastising the people involved with the failed venture, they celebrated. They held a massive funeral.  There was even a coffin in which the project (not the project team) was buried.  In my mind I can imagine a New Orleans style funeral with music.

Several years back, Intuit, decided to target a younger population by linking tax filing with hip-hop.  They made large marketing investments and created partnerships with companies like Expedia and Best Buy.  But in the end, their marketing effort proved unsuccessful.  They attracted very few new customers and killed the program.

How did they handle the failure? According to Business Week

“The team that developed the campaign documented its insights, such as the fact that Gen Yers don’t visit destination Web sites that feel too much like advertising. Then, on a stage…in front of some 200 Intuit marketers, the team received an award from Intuit Chairman Scott Cook. ‘It’s only a failure if we fail to get the learning,’ says Cook.”

Successful companies don’t punish failure.  They don’t necessarily celebrate them either.  But there should be serious consequences if…

  • You try to sweep your failure under the rug
  • You try to blame someone else for your failure
  • You don’t learn from your failure and as a result make the same mistakes again
  • You create a colossal failure without first doing enough due diligence, often in the form of experiments

The point is not to glorify failure.  Although failures can give you useful input, success can do the same, at a much lower price.  But if you do fail, be sure to deal it head on.  Learn from the experience.

Or as Reverend Lawrence G. Lovasik once said, “Any fool can try to defend his mistakes – and most fools do – but it gives one a feeling of nobility to admit one’s mistakes. By fighting, you never get enough, but by yielding, you get more than you expected.”

business
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innovation speeches
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Watch Stephen Shapiro demonstrate some of his creative thinking techniques, including an introduction to innovation styles.

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speech about being creative in business
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Watch Stephen Shapiro on stage in various settings around the world. These video clips focus on his style rather than his content.

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I view life as a series of experiments.  When you look at it through this lens, failure means something completely different.

One definition of an experiment is: “A test or investigation, especially one planned to provide evidence for or against a hypothesis.”

The only way an experiment can fail is if you don’t get the evidence.

Even if the evidence proves your hypotheses was wrong, the experiment itself was a huge success.

When you view innovation through the lens of experimentation, it redefines failure.

When developing new ideas, the best approach (especially when there is “market” uncertainty) is to create small experiments that can be scaled over time.

The experiment can give you one of four outcomes:

  1. Our hypothesis was validated by the experiment.  Let’s make a larger investment in a larger experiment.
  2. Our original hypothesis was wrong, but we found a different direction that looks promising.  Let’s create a new experiment with the new hypothesis.
  3. Our original hypothesis was wrong and we should kill the idea.
  4. Our experiment did not give us enough data to determine whether or not the hypothesis was correct.

Of these four outcomes, only the last one is a failure.  With the other three, the experiment was successful.  It either confirmed that we are on the right path or it stopped us from making further investments.

The problem with some innovation efforts is that insufficient data is gathered throughout the process.  Experimentation is not the mantra.

When you view innovation as a series of experiments, you must make sure that the experiments don’t fail.  It is totally fine if your hypotheses are invalid, as long as you determine that early in the experimentation process.

P.S. One book I really like is “The Science of Success” by Charles Koch.  The entire book is about how experimentation made Koch Industries one of the most innovative – and successful – companies in history.

I recently spoke with a new client who shared with me their innovation measures.  When I looked at their measurement system, I immediately saw flaws.

But before addressing these imperfections, let me first provide you my perspective on innovation measures.

In general, there are three types of measures associated with “challenge-based” innovation (be sure to read this article if you are unfamiliar with the concept of challenge-based innovation):

  1. Process Measures – These measure the activity associated with your challenges (e.g., 500 registered solvers, 40 submissions per challenge, 80 votes per challenge, etc)
  2. Solve-Rate Measures – These subjectively measure how well you solved your challenges (e.g., 82% of challenges were partially solved, 61% of challenges were completely solved, etc)
  3. Value Measures – These measure the actual value accrued (e.g., increased revenues by $25M, reduced costs by $35M, etc)

The last measure (value) is where the rubber meets the road.  This is your ultimate goal.  But sometimes, value realization can take years (or in the case of pharmaceutical companies, decades).  Therefore, the second measure (solve-rate) is a good way to monitor progress with your program.  But what about process measures?

Process measures are leading indicators that can be useful in measuring trends over time for things like community engagement, effectiveness of internal communications, and quality of challenges.

Let’s look at one common process measure: the number of ideas/solutions submitted for a given challenge.  This was one of the measures that my new client used.

Imagine that you are using crowdsourcing to find a solution to a challenge.  You post the challenge on your website or intranet.  A month later you check to see how many responses you get.  In this scenario…

Which is better:

  • getting 100 ideas/solutions?
    or
  • getting only 2 ideas/solutions?

Most people intuitively think that 100 solutions is better than 2.  In fact, most organizations believe that more ideas equates to greater success.  The reality is, however, that 100 is not necessarily better than 2.

Let me re-frame the question…

Which is better:

  • getting 100 ideas where only 2 of them were exactly what you needed and the other 98 were duds?
    or
  • getting 2 ideas where both were exactly what you needed?

Now the correct answer is a bit more obvious.  In this situation, the latter is probably better.  The amount of work needed to sift through the solutions is a lot less when you have only 2 submissions.  Imagine if you received 10,000 ideas of which only 2 were good.  You can see now that the effort to find the best solutions/ideas might be overwhelming.

Although activity is good, too many submissions can indicate that you have a poorly defined challenge.  Therefore the ratio of good ideas to duds might be a more interesting measure.

The key is, make sure you understand the unintended consequences of your measurement system, especially when it comes to process measures. If done properly, process measures can help you drive higher solve rates (measure #2). And often, higher solve rates lead to greater value (measure #3) in the long run.  But not always.

High solve rates with low value can also indicate problems with your innovation program:

  • Poor implementation – You are unable to convert solutions into finished products/services
  • Poor commercialization – Your solutions do not meet the needs of the market/customers and therefore do not generate revenue
  • Poor relevance – Your challenges, although solved, are not important enough to “move the needle” of the organization’s innovation efforts

Measures are important for helping tracking your innovation efforts.  And they can help diagnose potential issues.  But it is important to measure the right things.

There is an old expression: “You will get what you measure.”

But the bigger question is, “Will you get what you want?”

OK, after 2 weeks of sleep deprivation due to manuscript deadlines, I am now back in action here.  The final version of the manuscript went to the publisher on Saturday.  I then played Personality Poker in Memphis with nearly 100 representatives from Penguin’s gift sales on Sunday.   These individuals sell books into non-traditional bookstores, gift stores, hospital gift shops, department stores, casino, and similar places.

Last weekend, I played Personality Poker with a couple hundred people at a conference in Canada.

After the event,  over a dozen of us decided to go to dinner together.  Half the people fit into taxis.   After the taxis departed from the hotel, the remaining individuals went in two cars, one of which I drove.  We had the address and a map. I, being Mr. Technology, plugged the address into the GPS.  The other individual had the map, but also relied on directions he received from the front desk.  I didn’t bother getting directions since I had the navigation system.

I was the first car out of the parking lot. After exiting the hotel, I turned left, just as the GPS told me to do.  The other car followed, but not for long.  David, the other driver flashed his lights.  I kept driving.  After a minute I realized David was no longer behind me.  Instead of believing that I might be going in the wrong direction, I just assumed that the GPS was taking me there via a shortcut.

After taking a series of turns – left, right, left, right, left, right – the final turn led us to a dead end.  In fact, this road was nothing more than a large pile of dirt.  So much for taking a shortcut.

Since my technology was not going to get us there, we needed to rely on the map.  Unfortunately, the map provided by the hotel only had the restaurant marked off.  The hotel was not to be found.  The reason we could not find the hotel on the map was because the map did not extend far enough to include it.

There we were, in the middle of nowhere, with a map that told us nothing – and a GPS that told us even less.

This got me thinking.

How often do we drive our innovation programs the same way I drove to the restaurant that night?

We create our plans for innovation and we start driving.  There might be signals along the way (like the flashing lights of the car behind us) that something is not right.  In the case of innovation, it might be signals from the customers, buyers, or vendors telling us we are going the wrong way.  But all too often, we continue to drive forward, arrogantly believing we are right and that those signs are all wrong.

No matter how great your plans are, you need to keep your eyes open.  Look for signs. Don’t assume others are wrong.  Maybe your blueprint/map is incorrect.

Or, as Scott Cook from Intuit so eloquently said, “For every one of our failures, we had spreadsheets that looked awesome.”

There are no accurate GPS systems in the world of innovation.  Your ability – and willingness – to adapt, evolve, and change your plans is critical to a successful innovation program.

If you don’t watch out for the signs and you blindly follow your plans, your innovation program will probably lead you to a huge pile of, um, dirt.

P.S. We did eventually get to the hotel.  We did what any sane person would do…we asked for directions.

Last week I spoke at an event hosted by NESTA – the UK’s National Endowment for Science, Technology, and the Arts.

The day focused on Open Innovation and had some spectacular speakers including Cheryl Perkins (the former Chief Innovation Officer for Kimberly-Clark), Karim Lakhani (an open innovation guru from Harvard Business School), Stefan Lindegaard (a well-known expert on open innovation), and Helmut Traitler (from Nestle).

You can watch my opening remarks here. (8 minutes)

On the NESTA website, you can watch all of the other videos including my panel discussion, some Q&A, the morning panel, and more.

NOTES: A few quick comments on my opening remarks video: 1) For those in the US…Pop Idol is the UK version of American Idol. 2) I was a little over eager with InnoCentive “Solver” count. We have over 200K, but not quite a quarter of a million…yet. 3) There are many versions of the Edison quote…the one I prefer is, “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.” Admittedly, I’m not sure what he actually said since I wasn’t there.

This weekend I am speaking at a very cool event!  And I would love to have you join me.

What: The Ultimate Success Event
When: Saturday April 17th, 2010 from 8am to 6:30pm
Where: Chateau Cartier Hotel close to downtown Ottawa Canada

But, to kick things off, the weekend starts Friday night with a private party that is totally free.

Peggy McColl is releasing her 7th book, “Viral Explosions,” and Friday is her book launch party.  I have known Peggy for years, and she is an amazing woman with life changing books.

The party will be a blast.  I will of course be there.  There will be lots of entertainment, free hors d’oeuvres, beverages, and give-aways galore.

Then…after celebrating the launch of “Viral Explosions” on Friday night, Saturday is a full day celebration of your success.

The Ultimate Success Event, Saturday April 17, will be a jam packed, seminar featuring a stellar line up of 13 luminaries in the field of personal and business success coaching, including yours truly.  I’ll be playing Personality Poker with the 250 people in attendance.  Other speakers will talk about marketing, sales, personality development and much much more.

Click here to get ALL the details of both the free Book Launch Party for “Viral Explosions”…AND the Ultimate Success Event.

I hope to see you there!

There was an excellent post by Hutch Carpenter on the blogging innovation website.  In the article, he asked the question – “Is Crowdsourcing Disrupting the Design Industry?”  He makes an excellent case for the value (and pitfalls) of crowdsourcing design work.  As readers of this site know, I have used design crowdsourcing on several occasions.

In response to the article, I wrote…

I use crowdsourcing for some of my designs. And I have to admit, I do sometimes feel a little bad. It’s clear some people put a fair amount of thought into their designs. Sadly, there is typically only one winner.

Having said that, as a consultant, no one feels bad for me when I spend days or weeks developing a proposal that does not get awarded to me. We recognize that it is the cost of doing business.

Let’s face it…for some design work, it might be just as fast to develop a rough concept as it would be to develop a compelling proposal. Crowdsourcing can reduce the time and effort involved in selling design services.

And crowdsourcing, when done correctly, can give you (the “Seeker”) benefits that you would not get through conventional means.

Right now I am running a crowdsourcing competition for a design for my Personality Poker cards. The competition has been running for 2 days, and I received some amazing designs. Because I did a blind competition, everyone has to develop their own idea, rather than simply build on the idea of someone else. This is enhancing the level of creativity significantly.

The winner will get follow on work from me in fleshing out the concept and in future design work. [NOTE: The competition is over and I received 32 designs of which a half dozen of them were fantastic]

I used to use eLance (an eRFP site) for design work. But the results were not always great. Plus each designer has to submit a proposal and decide upon a fee. With 99designs, the designer knows the “prize” and can decide if they want to invest any effort at all.

It’s not spec work that is changing the rules. It is access to the masses. Personally, I would prefer to pay for a solution than a proposal.

I do think, if done well, design crowdsourcing can be beneficial to all involved.

Crowdsourcing has the potential to give designers a reach they have not previously had.  Although their cost per design might go up, their cost of acquisition might actually go down. Proposals are a cost of doing business – and you don’t win every proposal.  Spending time/money on finding customers who want the proposal in the first-place is another cost – and you don’t acquire every customer you target.  Mailing marketing materials to potential customers is another real cost.  The list goes on.   The real cost/time associated with marketing/selling design services is not insignificant.

Crowdsourcing allows you to convert your marketing/selling time into design time.  Your only cost is your time to develop the submitted designs.  This feels like a much better use of design resources.

Bring Stephen’s innovation insights to your next event!