A Flywheel of Innovation.
The corporate mission-scape is crowded with platitudes: “Our number-one goal is innovation.” “Our vision is to develop innovative solutions.” “Innovation is our only business.” Unfortunately, you can’t simply stick “innovation” in your tagline and expect magic to ensue. If you want to innovate, you have to build a CULTURE of innovation.
With the efficiency of a flywheel, a culture of innovation builds momentum with very small inputs, but can release large amounts of stored energy when needed. A culture of innovation combines a deep bench with a lightning response time.
Of course, it’s one thing to build a company from scratch on this principle. But how do you transform a going concern? The secret is to work the leverage points. In this part of the book I’ll share some of the levers we’ve used with our clients to launch them on a trajectory of change. Since every company is different, I’ll keep the descriptions general enough to leave room for interpretation. And while I’ve numbered the levers from 1 to 16, this doesn’t mean they must be used in a specific order. Neither does it mean that every company must use all 16 to create a shift.
Lever 1: Take on Wicked Problems
Tony Schwartz founded his firm, The Energy Project on an interesting premise: Energy, not time, is our most powerful resource. Individuals and organizations can expand their energy, but they can’t expand their time. Therefore, a leader must become a steward of organizational energy.
Okay, but how? Well, one way to start is by painting a vision so beguiling and inclusive that it rivets the attention of everyone in the company. You might then call for bold solutions to the wicked problems that stand in its way—especially problems that other companies have been too timid to tackle. You might also reward the behavior you want by giving visible support to employees and teams who align their actions with the vision.
A compelling core idea of what the company stands for can inspire a surprising amount of passion. When people have big enough goals, they tend to blow right by the little problems. The result is a culture that releases latent talent and constantly exceeds its own expectations.
FORTUNE’s “100 Best Companies to Work For” recently named Google number one. In fact, the company receives over a hundred applicants for every position. Why? Because of the free lunches? The day care? The stock options? Not likely, because many others on the list offer similar perks. Instead, it’s because of Google’s lofty vision. When employees are asked to help “organize the world’s information and make it universally accessible and useful,” hearts beat a little faster. Financial enticements and office perquisites pale beside the soul-stirring goal of a race to the moon.
Now let’s look at what happens when a company “under-envisions” its future. General Motors, one of the biggest successes of the last century, had the technology to make hybrid cars at the same time that Toyota did. Thanks to a “can’t do” culture, product leaders were afraid to approach the board with a program they knew would cost hundreds of millions of dollars. “In the end,” said product chief Bob Lutz, “it cost us much more than that. It cost us our reputation for technology leadership and innovation.” What happened is that they devalued their brand to protect their jobs. Theirs was culture of fear, not joyful creation, where latent talent stayed latent.
According to Robert Reich, former U.S. Secretary of Labor and author of SUPERCAPITALISM, the job of leadership is to help people overcome denial and cynicism so they can “close the gap between the ideal and reality.” This is the self-same “dragon gap,” the creative space between “what could be” and “what is.” The leader who can articulate a compelling vision gives people the courage to create.
It turns out that painting a vivid picture of the future is a pure design problem. When you infuse a vision with design thinking, you use “making” skills to discover and illustrate a wider set of options. You begin designing the way forward instead of merely deciding the way forward.
Companies don’t fail because they choose the wrong course—they fail because they can’t imagine a better one. Unimaginative leaders reach for a vision from the ready-made rack, then wonder why their leadership has no followship. Few people feel inspired by the safe and the easy. Starbucks founder Howard Schultz put it this way: “Who wants a dream that’s near-fetched?” If your goal is to out-perform the competition from day one, dream large.
Lever 2: Weave a Rich Story
While revolution must be led from the top, it rarely starts at the top. The spirit of revolution already exists in the hearts and minds of motivated employees and loyal customers. It shows up in the individual stories that employees tell about the work they do. And it shows up in the individual stories that customers tell about the products they love. Often a leader need only act as a kind of managing editor, shaping the stories to align with a shared vision.
To make the best use of this lever, all the little stories you tell about your company and its products should add up to one big story. For example, if you were to add up all the stories told about MINI COOPER, you would have one big story entitled “Let’s Motor.” Very few of the stories told by the company—or its customers—would be out of alignment with this main story. In two succinct words, MINI has captured the shared vision for the brand, which combines tribal inclusiveness and focused differentiation.
When JetBlue crafted its brand vision, it used a rich mix of witty sound bites to differentiate itself from the traditional carriers. It delivered these sound bites using “free media”—the instructional cards in the seat-back pockets, the touch screens on the check-in kiosks, and the seat-selection page of the website that clearly showed the extra legroom that only JetBlue was willing to offer. Callers who were lucky enough to be put on hold were treated to a shaggy-dog story about being put on hold: “Don’t think of it as being put on hold,” intoned a comforting voice, “think of it as being held.” It went on to enumerate, with increasing hilarity, all the joys of being held. Customers who WEREN’T put on hold began asking to BE put on hold.
When you added up all these sound bites, what you got was one big story: An airline with an unusual focus on passenger delight. This big story became the filter for every decision the company makes.
Stories seem to rise uncontrollably from a our desire to explain and share human experience. Yet some stories are “catchier” than others. In MADE TO STICK, authors Chip and Dan Heath give numerous examples of stories that cling to our brains like burrs on a Corgi. Some of the most instructive are urban legends, since they’ve proven to be the stickiest stories of all. What gives them their Velcro-like adhesion? According to the authors, it’s because they’re 1) simple, 2) unexpected, 3) concrete, 4) credible, and 5) emotional. When you apply these five principles to stories that align with your key messages, you deepen the emotional bond between your customers and your company.
When JetBlue launched its first long-haul route from New York to California, it faced a sudden problem. Its high-comfort-low-fare business model wouldn’t permit the traditional food service. Marketing VP Amy Curtis-McIntyre was given a meager budget of one dollar per passenger to solve this problem. Rather than hand out a rock-hard white bagel, a slice of lunch meat, and a Tootsie Roll, she decided to tell a story. Each cross-country passenger received an airline deli bag that contained—surprise!—a T-shirt. On the front was a picture of a chicken with the headline: “Nature never meant it to fly.” On the back it said: “Comfy leather seats, free DirecTV, low fares. No rubber chicken.” People got it. The media loved it. And the JetBlue brand took off.
Let’s compare this storytelling success against the Heath brothers’ checklist. 1) Simple? Check. 2) Unexpected? Double check. 3) Concrete? Sure, because of the rubber chicken. 4) Credible? You bet, because everyone knows they pay for airline food one way or another. 5) Emotional? Absolutely—feelings of relief, delight, and vengeful satisfaction tumble over one another as we recall the many “prison meals” we’ve endured in the cramped, humorless, expensive cabins of competing airlines.
Yet other stories can arise from outside the company, and these are not always flattering. In 2007, a severe winter ice storm disrupted JetBlue’s flight schedules on the eve of a busy holiday weekend, causing missed flights, lost luggage, long lines, and telephone delays that even a humorous on-hold message couldn’t fix. Customers and the media were not kind. The blogosphere was alive with horror stories that undermined the customer-centric brand that JetBlue had worked so hard to build.
The reaction of other airlines might have been to shift the blame. After all, the weather is not within anyone’s control. Yet CEO David Neeleman surprised his customers with a message that was simple, unexpected, concrete, credible, and emotional: He took complete responsibility. Within days he sent an email to every customer, placing the blame for the mishap entirely on the airline’s shoulders. He said, “Words cannot express how truly sorry we are for the anxiety, frustration, and inconvenience that we caused. This is especially saddening because JetBlue was founded on the promise of bringing humanity back to air travel and making the experience of flying happier and easier for everyone who chooses to fly with us.” He then announced a concrete, credible remedy—the JetBlue Airways Customer Bill of Rights.
At the bottom of the email, customers could click to see a video of Neeleman offering a sincere, emotion-laden apology. The media storm died down almost as quickly as the ice storm. JetBlue not only quelled a customer uprising, but used free spotlight time to add to its tapestry of stories and strengthen the bonds of customer loyalty.
Lever 3: Establish an Innovation Center
Stories can be powerful building blocks for culture. So can brand guidelines, process manuals, design standards, training videos, photo libraries, talent directories, collaborative spaces, blogs, and many other internal assets.
To create a lever for change, though, you’ll need to organize these assets into an innovation center—also known as a design center, or brand center. The most practical place to establish it is on the company intranet so that the tools are within easy reach of everyone. I find it helpful to think of an innovation center as a toolkit wrapped in a magazine. The tools are the ideas, formulas, processes, shortcuts, design elements, graphics, slides, training modules, and other shared assets. The magazine contains the stories, case studies, blogs, and other items designed to inspire creativity and excellence. It also contains a clear articulation of the company’s vision, mission, and goals. When all these assets are organized, designed, and linked, they have the power to transform the company into a sinuous creative unit.
Design is a key input here. Most intranet sites fail because they don’t compete on a par with other forms of media. People have choices, and they tend to choose “easy” over “difficult” and “attractive” over “ugly.”
The Information Age has been hailed as the successor to the Industrial Age. But the true gift of digital invention is not information. It’s collaboration. The ability to multiply talent by working in teams is at the core of continuous innovation. In many large companies, there are more than 10,000 professionals who contribute to innovation and brand-building. These 10,000 can account for up to 50 million collaborative relationships. As the number of professionals grows, the number of links grows exponentially, making collaboration a key leverage point.
We’ve barely scratched the surface of how intranet sites can mediate the process of working together, so those who master this lever can take an early lead in the race to wield culture as a competitive weapon.
Lever 4: Bring Design Management Inside
Most companies generate a steady stream of quotidian design materials—products, print communications, websites, signage, retail environments, packaging, trade show exhibits, advertising, manuals, financial reports—the “toasters and posters” of the 20th century. When you add the list of emerging opportunities—customer experience, wayfinding, service design, operational processes, branded training, organizational design, decision making, business strategy, and thought leadership—you begin to appreciate the need for strong design management.
But before you can think about building an in-house design capability, you’ll need to address the problem that has plagued internal design departments since the days of the cave painters. It can be reduced to seven letters: R—E—S—P—E—C—T. As soon as a designer is hired, the perceived value of his or her talents depreciates faster than a showroom BMW. Within months the new hire will be inundated with low-level tasks and excluded from high-level conversations.
Why this happens could be the subject of another book, so for the sake of brevity I’ll cut to the solution. The cure for vanishing value is to re-imagine the internal design function as an independent design studio. Since respect comes from a combination of performance and proactivity, mimicking a successful design studio can trigger the same level of respect usually reserved for external firms. Drawing on my experience at Neutron, I can offer three tips for making this transition:
COMPETE WITH THE OUTSIDE. Instead of expecting work to come in automatically, the internal team can adopt a more Darwinistic approach by developing skills that rival those of external firms. It can develop its own engagement processes, seek interesting problems to solve, and make “pitches” to internal clients. Like an external firm, it can prove its competence through performance metrics and design competitions. According to David Baker, a leading design management consultant, “Money is the currency of respect.” He recommends instituting a charge-back system, placing a dollar value on the department’s services.
And while traditional advertising is crumbling, the rules for selling online are still set in Jell-O. In-house departments may find a crucial role in mediating this conversation. Should we invest our budget in a mobile messaging campaign, or a music video service? Should we place our bets on search advertising, or on a banner-ad series? Who knows? Questions like these will baffle marketers for years until the unknowns finally become knowns. In the meantime, it’s a jump ball, so why not take a swipe at it?
OFFER THOUGHT LEADERSHIP. Using the Darwinistic model, not all company projects will come through the design department. That’s good. First of all, not all projects are equally important. Second, there are times when the design department doesn’t have the bandwidth to pay sufficient attention to a project. And finally, project owners may simply want work outside the system. As Yogi Berra put it: “If they don’t want to come along, you can’t stop ’em.” At HP, for example, design decisions are controlled by the business heads. Says corporate design chief Sam Lucente, “It’s all about persuasion.” He and his team make their best case for design, then let the deciders decide.
While the role of design manager is important, the role of design persuader may be even more important. What if the internal design department could jump-start design thinking by running educational programs on innovation, design thinking, and brand-building? The company that spreads the gospel fastest wins.
- KNOCK DOWN THE WALLS. There’s a reason design studios look the way they do: They work better that way. While tip number three may seem trivial after the first two, you’ll find that by knocking down the walls of your department—both physically and figuratively—you’ll clear a wide path for creative collaboration. Open spaces and high ceilings can quickly begin to unleash, unlock, and de-cube your company’s talent. In fact, it’s not a bad idea to extend this privilege to the rest of the company. In the no-collar workplace of the 21st century, the inspirational value of an open, creative environment cannot be overestimated.
So let’s say you’ve re-imagined your design department as an independent studio. You’ve acquired design management skills, built a core team of smart design thinkers, developed a professional process for engaging with internal clients, gained a reputation for thought leadership, and knocked down the walls to invite a higher level of creative collaboration. Respect is yours. Now you’re ready for the next big challenge.
Lever 5: Assemble a Metateam
In my first book, THE BRAND GAP, I made the case for building an integrated marketing team, or metateam. The concept of a metateam is both compelling and daunting. It proposes that the best way to manage large-scale creativity is by 1) hiring best-of-breed specialists, and 2) getting those specialists to work together as a single team. A metateam, therefore, is a team of teams.
It’s fairly clear how a best-of-breed specialist or specialist team can be effective in executing a creative project. It’s less clear how to get a whole metateam working together toward a larger goal.
The problem is that 20th-century business has been a training ground for non-collaboration. Companies have routinely rewarded employees, departments, and external firms for independent achievement. Schools have done the same, making collaboration look like a form of cheating. This may well account for the “Lone Ranger” model of creativity we all grew up with. It was exemplified by larger-than-life figures such as Frank Lloyd Wright, Pablo Picasso, and Sigmund Freud—people who tended to regard their peers not as collaborators but as competitors.
The benefits of reversing the Lone Ranger model are substantial. A high-performing metateam can turn an organization into a coherent, agile, muscular entity. It can raise innovation and lower costs. It can be scaled up or down at a moment’s notice.
As it turns out, we have plenty of exemplars to set against the lone genius view of creativity, including Hollywood’s dream factories, Kennedy’s space program, Edison’s industrial lab, and others. In fact, the closer you look at the history of design, the more you see that the lone genius is more myth than fact.
If the future of corporate design depends on the metateam, then the critical role of the internal design department is to manage it. And, like brand management, design management should NEVER be outsourced. It needs to remain strong and consistent through various strategy shifts, reorganizations, and changes in leadership.
Conversely, many of the design skills needed to execute brand-related projects should ALWAYS be outsourced, since the outside is where you find best-of-breed specialists. Possible exceptions to this rule are companies whose primary business is design, such as fashion houses, movie studios, publishers, and advertising agencies. Yet even for design-focused companies, some or all of the design can be outsourced, as long as the design strategy remains inside. P&G has recently redefined its R&D as “C&D,” or “connect and develop,” so it can benefit from a wider pool of independent inventors. The company now expects half of its new products to come FROM their own labs, and the other half to come THROUGH them. In 2004, the late management expert Peter Drucker took a more extreme stance. He said that companies should outsource every role that doesn’t lead to senior management.
It’s unlikely that an internal creative department will ever beat the outside experts at their own game, especially over time. The free market gives powerful incentives for specialists to acquire deep-domain experience in their practice areas. Yet the internal creative department has its own deep-domain experience—knowledge of the company itself—that enables it to act as the orchestrator of the metateam effort, keeping internal and external teams focused on shared goals, and on integrating all the elements into the long-range vision.
Lever 6: Collaborate Concertina-Style
Lest it seem that creative collaboration is a constant round of “Kum-ba-ya,” let me state for the record that metateams are strictly for grownups. Prima donnas, classroom bullies, and nervous nellies need not apply. Teamwork is an advanced form of creativity, requiring players who are humble, generous, and independent-minded.
How do you get a bunch of independent-minded professionals to play nice together? By establishing sensible rules of engagement. At Neutron we’ve discovered that strong-willed people love to collaborate when there’s a sharp delineation of roles, an unobstructed view of the goal, and a strong commitment to quality. Conversely, they hate to collaborate if they believe their work will be mitigated by pettiness, confusion, and low expectations.
Creativity can be exercised in two manners: team creativity and individual creativity. The key is finding a collaborative rhythm that incorporates both. A good rhythm looks a bit like playing the concertina, alternating between expression and impression—working separately, then working together. When small teams or individuals work separately (expression), they bring deep experience to bear. When they work together (impression), they expose their opinions to a wider view. By working back and forth from expression to impression, the result is not compromise but addition. The sum of each session is a measurable leap in shared thinking.
The primary tool for creative collaboration—and one that’s under-employed today—is the design brief. A well-conceived brief can focus collaborators on the common goal, reduce the costs of orientation, allocate roles and responsibilities, and provide a framework for metrics.
Yet no design brief, whether it guides, steers, or dictates, can address the psychology of human interaction. How do you navigate the treacherous waters of clashing opinions, narrow viewpoints, secret feelings, and asynchronous aspirations as you strive for consensus in a large group?
Lever 7: Introduce Parallel Thinking
Here’s some cutting-edge advice from a management guru: “Contentious problems are best solved not by imposing a single point of view at the expense of all others, but by striving for a higher-order solution that integrates the diverse perspectives of all relevant constituents.” Peter Drucker again? No. Drucker’s guru, Mary Parker Follett. Follett was born at the end of the Civil War. She attended Radcliffe (before it became Radcliffe), then ran a number of successful service organizations in Boston during the early 20th century. In 1924 she wrote a book called CREATIVE EXPERIENCE, in which she pointed out, “Adversarial, win-lose decision-making is debilitating for all concerned.” Unfortunately, win-lose decision-making was—and still is—the dominant mode of business.
A common problem with collaboration is that otherwise smart, well-meaning people disrupt the creative flow by disagreeing. This is not a habit we invented, but one we inherited. The Greeks, including Aristotle, Socrates, and Plato, believed that sound thinking came from discussion rather than dialogue—from finding flaws in the others’ arguments rather than advancing a concept together.
After a couple thousand years of beating each other up with our personal viewpoints, creativity expert Edward de Bono has found a way to circumvent the “Gang of Three” and show people how to work through problems constructively. Called parallel thinking, it gets everyone in the group to think in the same direction at the same time, thereby neutralizing our Socratic habit of shooting down ideas before they can fly.
De Bono’s book, SIX THINKING HATS, demonstrates the six ways a group can think as it works through an issue or opportunity. The “hats” are simply metaphors for different ways of getting at problems. Here’s a brief overview:
The WHITE HAT represents information. What do we know about this issue? What are the facts, figures, and other data that can guide our work?
The RED HAT represents hot emotion. Normally, there’s no room in meetings to display emotion, so it ends up coloring our “logical” conclusions instead. What are we feeling about this issue? Excited? Afraid? Curious? Get it on the table.
BLACK HAT thinking is dark and cautious. This is where most of us excel—the Socratic thinking of Western civilization that reveres the “devil’s advocate.” Why is it likely that this new idea will fail? What are its numerous weaknesses?
YELLOW HAT thinking is sunny and positive. Forget the devil’s advocate for a moment. What greatness could come from this concept? Where can we see optimism and hope?
The GREEN HAT represents growth and creativity. What could we do that hasn’t been done? How could some of our black hat fears be turned into opportunities?
The BLUE HAT is worn by the facilitator, who acts as referee and directs the use of the other hats. It represents cool objectivity.
By switching from hat to hat as the conversation requires, the group can quickly work through a huge number of ideas, unencumbered by flow-stopping arguments and emotion-laden attacks. The natural consequence of parallel thinking is large-scale buy-in, since the process is designed to be transparent and inclusive.
But how do you get the buy-in of those out-side the original group? Hint: Not by blasting them with bullet points.
Lever 8: Ban Powerpoint
“Death by PowerPoint” is more than a wry phrase in most companies today. It’s a full-blown epidemic. Tragically, the victims are company values such as collaboration, innovation, passion, vision, and clarity. Microsoft’s presentation program is so ubiquitous that the word PowerPoint has become synonymous with copy-heavy slides—as in, “Can I drop a stack of PowerPoints on you?”
If you truly want buy-in, give PowerPoint a rest. Substitute more engaging techniques such as stories, demonstrations, drawings, prototypes, and brainstorming exercises. Admittedly, these may require skills that many executives have yet to perfect, but they’re well worth mastering in the interest of a designful company.
Remember Richard Feynman’s historic demonstration of how the rubber O-rings failed in the Challenger disaster? He riveted the audience’s attention using a single O-ring, an ordinary clamp, and a glass of ice water. Of course, he could have picked his way through a deck of PowerPoint slides, reading bullet point after bullet point about safety factors, failure rates, resiliency ratios, and launch parameters, but somehow it wouldn’t have created the same drama as simply unclamping the frozen O-ring to show that it was brittle.
This is not to say that slide presentations CAN’T be exciting. PowerPoints don’t kill meetings, people do. There’s very little about the software itself that dictates bad presentations. But there’s very little that encourages GOOD presentations. The solution is to use presentation software in ways for which it was never intended—to communicate clearly, emotionally, and dramatically. Instead of using PowerPoint for convenience, use it the way Richard Feynman used his glass of ice water—to wake people up.
First, however, you’ll have to renew your creative license. I’ll quickly share three design rules we use at Neutron to turn slide shows into beacons of clarity.
EDIT TO THE BONE. Most slide presentations collapse under the weight of words. A good rule is ten per slide. This may seem strict, but limiting the number of words is the best way to make sure the ones you use will be read and understood. Ten words is about the maximum number that can fit on one line and still be read from the back row. If you need to use bullet points to make your case, create a “build”—adding one line of type at a time to keep your audience focused.
- USE PICTURES. Even after editing, a steady diet of words is hard on the taste buds. Give your audience an occasional palette cleanser with illustrations, charts, diagrams, or photos. Whenever Lerner and Lowe felt that the dialogue in their musicals couldn’t fully support the emotion of the story line, they inserted a song. Likewise, whenever you feel the text in your presentation can’t fully support your key points, insert a picture.
- KEEP IT MOVING. It’s better to break slides into bite-sized ideas—usually one idea per slide—than to squeeze everything on one slide. Slides are free, so use them freely. It’s preferable to see a hundred slides that move at a fast clip than be forced to stare a single slide for more than a minute.
If a business is really a decision factory, then the presentations that inform those decisions determine their quality. Decision making is subject to the same law that governs software programming: garbage in, garbage out.
Lever 9: Sanction Spitballing
A common theme in business management is how to “empower employees.” But wait a minute. Aren’t employees hired to empower the company? What IS the company, if not the employees?
If there’s a conceptual error here, it lies in thinking there are two distinct classes of employees: those who come up with ideas, and those who implement them. Naturally, it’s difficult to get employees excited about implementing initiatives they’ve had no hand in creating. You can empower like crazy and never generate enthusiasm among the disenfranchised class.
We’ve seen this happen in world governments as well. States that don’t permit the free circulation of new ideas—especially ideas that are challenging or unflattering—are necessarily weak states. Economic expansion depends on free expression, and governments that quash free expression inevitably lag behind those that encourage it.
The designful company, to a large extent, is a democratic company. While some organizational experts have suggested the company of the future will look like an “upside-down pyramid,” a more apt description might be a “bottom-up pyramid.” Clearly, leaders must lead. But this doesn’t mean they need to come up with all the ideas. In fact, you could argue that they needn’t come up with ANY ideas, as long as good ideas are flowing up smoothly from the bottom. To make this happen, leaders will need to lighten the reins a bit. As Richard Teerlink said about his remarkable turnaround of Harley-Davidson, “You get power by releasing power.”
FREE-SPEECH ZONES. The ability to speak freely should be an inalienable right in every company. Why? First of all, a broader dialogue yields better range of ideas. Second, when frustration is vented, it can’t build up pressure and explode inconveniently. And third, when cultural problems are spotted early on, they’re much easier to fix. As one embittered employee said, writing anonymously on an unsanctioned blog, “You have to wonder about a CEO that needs a survey to find out if his employees are happy.”
Instead of forcing employees to speak anonymously, why not encourage them to speak openly? Why not reward the messengers instead of shooting them? Facebook COO Sheryl Sandberg now asks her people to give frank feedback on whatever they see that is or isn’t working. It’s a lesson she learned early at Google before moving into the company’s Facebook unit: “I thank every person who ever raised a problem publicly.”
- CONCEPT COLLECTION BOX. Google also uses an “idea management system” that allows employees to email innovative ideas for products, processes, and even businesses to a companywide suggestion box. Once ideas are collected, employees can then make comments on them and rate their chances for success. This type of open brainstorm is an inexpensive tool that any company can use to build a culture of innovation. Anyone in the company can sift through the resulting ideas to find one or more ideas worth developing further. Companies who adopt this technique will soon discover that good ideas don’t care who they happen to.
THE 10% SOLUTION. Taking the collection box one step further, some companies are pushing employees to spend up to 10% of their time, or one day every two weeks, on the development of new ideas. Royal Dutch Shell, W.L. Gore, and Whirlpool are among the companies employing programs like these with notable success. Whirlpool expects their program to add more than $500 million a year to the top line. Google, in true Google style, has raised the amount of elective time to 20% every employee.
- GENIUS TEAMS. In addition to mining the wisdom of the crowd, companies can set up offline teams to crack any number of problems, whether routine or wicked. The advantage of this approach is that it moves a problem from the side of everyone’s desk to the center, where it can command the maximum attention. Genius teams can contain anywhere from five to twenty members—a small enough number so that the effort to collaborate doesn’t overwhelm the effort to solve the problem. To optimize the work of any team, small or large, you’ll need a facilitator to act as referee, coach, and trainer. In some cases it pays to bring in an experienced facilitator from the outside.
Innovation is a numbers game. Winners are the companies that can increase the total number—if not the percentage—of viable options. Out of 100 innovative ideas, only 15 may be worth prototyping and testing. Out of those 15, only five may be worth serious investment. Out of those five, one or two may produce game-changing results. It’s a formula venture capitalists rely on, and one that established businesses would do well to adopt if they wish to compete at the speed of the market. When Steve Jobs was interviewed about how he intended to battle the Wintel monopoly, he replied: “I’m going to wait for the next big thing.” Waiting, Steve Jobs–style, means bringing a large number of “insanely great” ideas to the brink of production, then focusing on the one or two most likely to succeed at any given moment.
Yet even a talented CEO-designer like Jobs can’t come up with all the ideas himself. Nor does he need to. All he needs to do is act as editor, subtracting the weak and superfluous ideas while augmenting the strong and essential ones. It helps, of course, that he can empathize with the desires of his customers, seeing not only the big picture but also able to zoom in on the details. He’s well equipped to act as master facilitator of his creative metateam, pulling ideas up through the pyramid instead of driving them down from the top.
Lever 10: Think Big, Spend Small
In ZAG I showed why companies repeatedly made the mistake of funding me-too projects—products, services, communications, businesses that have little hope of making a difference. To help decision makers fight a natural tendency to overvalue the proven and undervalue the new, I proposed a tool called the “good/different chart,” which groups new ideas into four patterns: 1) not good and not different; 2) good but not different; 3) good and different; 4) different but not good.
As you might guess, “good and different” is the combination that produces home runs. The Aeron chair, the Prius, Google search advertising, and Netflix are well-known examples of good and different. Yet companies are more likely to fund ideas that are either “good but not different” or “not good and not different.” The reason is simple: New ideas are unpredictable, while existing ideas—no matter how weak—seem safe. What the good/different chart does is let decision makers match a radical, unproven idea to a radical, proven idea from the past, thereby turning a leap of faith into a mere hop.
But how do you get a “good and different” idea past the hecklers and skeptics? It took 11 years for scientists Spencer Silver and Art Fry to run the concept of Post-it notes through the 3M product gantlet. Advertising genius George Lois had to threaten to jump from a 14-story window before the president of Levy’s bread would sign off on one of the 1960s’ iconic ad campaigns. Silicon Valley didn’t take off until the so-called Traitorous Eight left the authoritarian Shockley lab to start their own company, Fairchild Semiconductor, in 1957.
These experiences suggest that great ideas can only succeed through acts of bravery. Maybe, but the design process can reduce the amount of bravery required. Designers are adept at moving ideas from impulse to hunch, hunch to sketch, sketch to prototype, and prototype to test, all without demanding risky financial commitments.
The biggest hurdle to innovation is the corporate longing for certainty about costs, market size, revenues, profits, and other quantities, all of which can’t be known when an idea is new. Ironically, there seems to be no hurdle to investing in dying businesses, decaying strategies, and shrinking markets, all of which can be seen without a crystal ball. It seems we prefer the devil we know.
The best way to get around the devil—and all his advocates—is to allow the company crank up its confidence stage by stage. Luckily, there’s already a workable model for this process: stagegate investing. It was pioneered by oil entrepreneurs who lacked certainty about which wells would produce black gold and which would fizzle. It was further developed by venture capitalists who lacked certainty about how ideas, markets, and business models would combine to produce profits.
There are four funding stages in this process: 1) seed money to develop the idea; 2) a small investment to design a strategy; 3) a medium investment to prototype and test it; and 4) a large investment to launch it into the market. With stage-gate investing, an idea is vetted stage by stage using a kind of natural selection, so that big bets are only made after the idea has been largely de-risked.
Stage-gate investing works best when you have a portfolio of innovations in the pipeline. The vetting process then acts as a filtration system that separates the great ideas from those that are underpowered, short-sighted, unstrategic, or off-brand. The vetters themselves can be members of a specially selected innovation board, whose task it is to greenlight promising projects.
Lever 11: Design New Metrics
But how do you know if a project is promising, even WITH the stage-gate process? What formulas or measurements can you use to illuminate its chances at the next stage?
Here we enter one of the hottest debates in innovation: the value of metrics. It throws into sharp relief two seemingly opposed ways of thinking. The first is that decisions about new ideas should be based on evidence. The second is that new ideas can’t be measured in advance. These two views are born of bitter experience. The experience of traditional business managers is that it’s easy to be fooled by intuition, while the experience of traditional designers is that measurement can kill imagination. Yet what seems like a paradox actually hides a more interesting truth—that measurement and imagination are locked in a dance that they can do either badly or well.
The journey of the innovator, as one designer described it, is learning how to “cut cubes out of clouds.” How can you give sharp edges to a soft concept so everyone can see it? How can you make the intangible tangible? It’s folly to predict revenues, profits, costs, or market share for a product concept or business model that has yet to be introduced. But it’s also folly to launch it without a modicum of analytical rigor. In the end, ALL innovations get measured—by the marketplace. The trick is to get a preview of those results before you commit the bulk of your resources.
Here are some measurements we’ve used at Neutron to empower both partners in the dance of innovation.
PRODUCT METRICS. In the early stages of product design, one-on-one customer interviews can be used to measure reactions to prototypes. They can answer questions about usability, desirability, understanding, cultural meaning, and emotional response, all of which can indicate potential success. They can also inspire new iterations and help you track your progress. As the project continues, you can monitor the number of customers contacted for input, the number of business partners lined up, the pace of development, and so on.
Across a whole portfolio of products, you can track quantities such as average time to market, number of pilot projects underway, and number and size of online communities. And you can gauge the general quality of your company’s design from external sources such as blogs, professional reviews, and major award competitions. Don’t scoff—The Design Council found that over a ten-year period the 61 top winners of the leading awards competitions outperformed the FTSE 100 by 200%.
- COMMUNICATION METRICS. Here the aversion to being measured is actually measurable. In one study, over 90% of advertising creatives believed metrics to be “unhelpful,” and nearly 65% believed them to be “harmful” to the creative process. My experience as a creative person suggests the reasons for this are twofold: 1) most metrics are not aimed at enabling the creative process, and 2) creative people harbor a secret fear of losing their artistic freedom. Yet in reality, the testing of communication prototypes can be a creative person’s best friend—it teaches valuable lessons about audience cognition, and frees creativity from the whim-sical disapproval of uninformed decision makers.
As with products, many types of communications—ads, packages, trademarks, and messages—can also be tested in quick one-on-one interviews with members of the target audience. They offer insights about the meaning of what you’re presenting to people, allowing you to correct your course on the fly. And if you’re serious about communicating, what’s not to like?
Once communications are launched, you can measure outcomes such as audience awareness, comprehension, recall, and response. My preference, however, is to get a read on these levels BEFORE pressing the button.
BRAND METRICS. Since a brand is a commercial reputation, you can measure changes to the strength of that reputation year over year. You can also measure the asset value of a brand, as well as the brand’s influence on purchase decisions. You can monitor the number of brand-loyal versus non-brand-loyal customers, and measure their understanding and their recall of brand elements.
If your company is one of the top 100 brands, you can get a free valuation simply by looking it up on Interbrand’s Best Global Brands. If not, you can commission your own valuation. The main thing is to be consistent, using the same formula to measure your brand from year to year.
CULTURE METRICS. For many corporate managers, culture is a cloudy concept. So if you’re about to embark on a culture-change program, it pays to measure your progress every step of the way, from the original state to the desired state. This is not as difficult as it seems, since a lot of the work can be done with internal polls. In the case of a demoralized workforce, the act of polling itself can restart the flow of hope.
A culture change can begin by measuring the existing level of employee satisfaction. A neglected culture will often start out with very low scores, but the level will climb quickly as you apply the levers of transformation. As each lever is applied, there are multiple opportunities to measure the results.
Now, a caveat.
As handy as metrics are for de-risking innovation, they have their limitations. As Dr. Deming said, “The most important things cannot be measured.” In other words, measurability decreases as importance increases. Our penchant for metrics comes from the resounding success of industrialage finance. Yet there are no generally accepted accounting principles for new ideas. The yardstick has not been invented that can measure the precise long-term potential of a breakthrough brand.
In an era when financial performance comes more and more from intangible assets, we’ll need to invent sophisticated metrics to predict the value of innovation, and nuanced accounting principles to measure the return on creativity. Of course, truly innovative ideas shouldn’t need much help from metrics. If an opportunity is off the charts, there’s no point in saying it’s two times off the charts. Just make sure it’s good enough and different enough to sustain a business, then design it forward to see where it goes.
Lever 12: Institute Branded Training
Creative work can’t be mechanized. It can’t be reduced to a series of steps or run through a production line. No two creative solutions are alike, and no two creative people are alike. The best you can do is build a shared understanding of the principles of design so that everyone in the company has a chance to experiment, to learn, and to grow as a group.
In an age of accelerating change, HOW you learn is vastly more important than WHAT you learn. The ability to acquire new knowledge quickly is the fundamental skill that underpins a culture of innovation. “Every enterprise is a learning and teaching institution,” said Drucker. “Training and development must be built into it at all levels—training and development that never stop.” If you want a culture of non-stop innovation, you need a system of non-stop training.
What kind of training?
Training that bridges the gap between university knowledge and industry knowledge, and between industry knowledge and company knowledge.
Training that teaches personal mastery, and training that teaches collaboration, so that personal mastery can inform collaboration and vice versa. Training that explores how employees can build the value of the brand, how they can help create customer delight, and how they can align their individual actions with overall business strategy.
This is known as branded training. It’s a type of education custom-fitted to the company’s brand, culture, and mission. Without branded training, one company’s skills and knowledge would look much like another’s, and no company would gain a competitive advantage. If this is the situation in your industry, you have an unparalleled opportunity to steal a march on your competitors. If, on the other hand, your competitors are already using branded training, you can’t afford to let this threat go unchallenged. First they’ll woo your customers. Next, they’ll woo your employees.
Paychex is a national accounting service that uses training to build their brand and raise the bar against competition. They lavish an average of 107 hours of training on each employee. The company recently won a strong recommendation in FORTUNE’s “100 Best Companies to Work For.”
The Four Seasons Hotels and Resorts has invested heavily in training and recruitment to “make people feel great.” Now that the organization has raised its service to the first-class level, where do you think the young talent wants to work?
Whirlpool has made innovation a top priority. The company has trained more than 600 innovation mentors, and enrolled every employee in an online innovation course. Now every product development plan at Whirlpool contains new-to-market innovations.
In the 1990s, Samsung used branded training to lift itself from a me-too manufacturer to a maker of high-design products. Chairman Lee Kun-Hee backed up his demand for a more designful culture by building a $10 million, eight-story building in Korea to house Samsung’s Innovation Design Lab. For a full year, employees were paid their normal salaries to study there six days a week. The company soon increased its stake with more labs in San Francisco, Los Angeles, London, Tokyo, and China.
Today, Samsung has built a vibrant culture of innovation that includes 380 company-trained designers helping to launch 100 products per year. They’ve earned 18 major industrial design awards over the last five years, and five awards from BusinessWeek/IDSA alone, a total matched only by Apple Computer. Two years in a row, Interbrand’s annual brand survey declared Samsung the world’s “fastest growing brand.”
While large companies like Samsung can build their own learning programs, small companies and departmental teams can avail themselves of external courses and workshops, many of which can be customized for the company.
“Intellectual assets will determine a company’s value in the 21st century,” said VP of design Chung Kook-Hyun. “The age when companies simply sell products is over.” Today, winning companies are those that can respond to emerging opportunities and unmet customer needs at the speed of the market. There is no practical way to develop that ability without learning—as a collaborative community—new ways to be creative.
Lever 13: Learn Through Acquisition
A common observation of mergers and acquisitions is that they often fail, or at least fail to deliver on the full promise of synergy. Among the reasons given for bad M&A experiences are conflicting capabilities, cultural differences, operational distraction, and the inability to resolve identity issues. What gets lost in the analysis is the emotional resistance felt by the acquired or smaller company. The traditional impulse is to force it into an unfamiliar mold, which is exceedingly painful and unproductive.
In reality, it’s impossible to force one culture to conform to another. You can’t put braces on people’s brains, nor corrective shoes on their behaviors. If you try, what you get is an underground battle of wills that harms both sides of the acquisition and delays the benefits of synergy.
The solution? Reverse the impulse. Instead of viewing the acquired company as an uneducated child, view it as an inspired teacher. Smaller companies are usually acquired as a result of deep-domain knowledge, special focus, or extreme passion. By mining the acquired company for a better understanding of its success factors, both cultures gain and the marriage can more quickly succeed.
Lever 14: Add a Seat to the Table
Whether or not companies are acquisitive, as they grow they tend to put up organizational walls that inhibit collaboration and knowledge sharing. The quickest way to reconnect the silos is to encourage representatives from each silo to meet regularly to raise cultural issues and explore opportunities for cross-fertilization and creative collaboration. This committee, whether it’s called an innovation council, brand committee, or design board, should be led by an executive at the top of the company. This is not a part-time or temporary assignment. It can’t be managed from the side of the CMO’s desk or jobbed out to a consulting firm.
The simplest approach is to place a Chief Brand Officer in this role. The CBO’s task is to shepherd the growth and value of the corporate brand, including all its feeders—subbrands, identity systems, design inputs, innovation processes, advertising programs, communications, training—so that the whole is more than the sum of its parts. Depending on the strategic needs of the company, the actual title may vary—Chief Design Officer, Chief Innovation Officer, VP of Creativity, or any label that signals a serious commitment to design.
There’s only one problem: Where do you find a person who has both the strategic and creative chops to integrate the design of everything the company makes, says, and does? So far there are no university programs that graduate students with degrees in Innovation Administration. There are, however, a growing list of programs that combine business and design (IIT), art and engineering (Stanford), design and strategy (CCA), and brand and business (Kellogg).
Yet until graduates of these programs have proven themselves in the crucible of the marketplace, it’s best to fill this position from a pool of executives whose talents have led them on a tour of relevant, real-world experiences.
For example, Amy Curtis-McIntyre gained experience in various marketing, advertising, and communications jobs before heading up brand communications at JetBlue and later Hyatt Hotels. Claudia Kotchka held jobs in accounting, marketing, and management before rising to chief of design innovation at P&G. Sam Lucente was an industrial designer at IBM, the director of user experience at Netscape, and founder of his own firm before being tapped as vice president of design at HP.
Lever 15: Recognize Talent
As we move from the spreadsheet era to the creative era, economic value will come from human networks more than electronic ones. Companies will create wealth from the conversion of raw intangibles—imagination, empathy, and collaboration—into finished intangibles—patents, brands, and customer tribes. Economic value will be measured less in terms of return on capital than return on creativity. So how do you measure talent? How do you increase inspiration? How do you crank up creative joy?
The answer to all of these is the same: recognition. While the spreadsheet era was focused on perfection, the creative era is focused on excellence. And there’s no quicker way to get the flywheel of innovation spinning at high speed than to reward excellence through a high-profile recognition program.
Here’s the formula. Start with a clear articulation of the company’s goals (lever 3), so that you have the right criteria for judging the work.
Then define the categories in a way that places emphasis where you want it (for example, best product design, best sales event, best new process, best integrated program). Line up respected experts from inside and outside the company to judge the entries. Let the entrants know that the winners will be chosen not only for alignment with the company’s goals, but for the measurable outcomes of their individual projects (lever 11).
Next, celebrate the winning entries with an event. It can be as small as a modest dinner, or as large as a three-day conference.
Of course, you could stop right there. But you’d be wasting a priceless chance to turn recognition into education. What if you edited the comments of the external judges into lively video critiques? Published reviews of the entries on the online innovation center? Shared the learnings from this year’s output, so that next year’s output could stand on its shoulders? Even used the learnings, reviews, and critiques to build out a series of training modules? Then you’d have a perpetual-motion machine for driving higher and higher levels of design, and for spreading a culture of innovation into every corner of the enterprise.
Lever 16: Reward With Wicked Problems
While most employees appreciate public acclaim and the occasional monetary award, the highest achievers want something more. They want bigger problems. They want an opportunity to tackle mean, hairy challenges and make a significant contribution to the company.
In THE SUPPORT ECONOMY, authors Zuboff and Maxmin observe that companies haven’t kept pace with the culture at large, because people no longer want jobs—they want support to fulfill their dreams. IBM is a company that gets it. The company recognizes outstanding research scientists by bestowing on them the lifetime status of “IBM Scientist.” Along with this title comes several years of time and seed money to develop leading-edge science and technology for the company.
This is one reason why Google has been rated the number-one company to work for. Far from discouraging risk-taking, the company actually demands it. You can’t “organize the world’s information and make it universally accessible and useful” without overcoming a few obstacles.
What wicked problems exist at your company? How can you turn hairy obstacles into high-status rewards? Who out there looks hungry for a challenge?