Leadership

Closing the Innovation Gap

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Does innovation come about by luck or hard work? Is it a flash of inspiration or the result of careful management? Are innovators born or taught?

My book, “Closing the Innovation Gap,” examines these and other issues that are critical for executives to consider in order to successfully lead their organizations to the frontiers of twenty-first century innovation. This excerpt takes a closer look at the innovation process and the most effective ways to organize innovation teams.

The process of innovation

There is no one predictable path to successful innovation. “Half of the great innovations in the world happened from great insights, the other half happened by accident, and none of them happened on a schedule,” says long-time technology investor Roger McNamee. But behind the chaos there is a process:

  • Identifying a need and a set of questions to explore
  • Trying and testing new ideas
  • Assessing whether to go forward or to return to generating more ideas, questions, or needs

The innovation process is driven by the need to understand how something works or why it doesn’t; to grow revenue, reduce costs, or increase productivity; to solve a customer’s problem; or to keep people healthy and save lives.

“If done well, this process of identifying and characterizing needs becomes the DNA of invention,” says Paul Yock, a professor of bioengineering at Stanford. In business, the trick is to identify the needs of your potential customers before they do. “By the time your customers tell you they want something, it’s too late,” says Carol Bartz, executive chairman and former CEO of Autodesk.

By designing inexpensive and powerful software products like Quicken, QuickBooks, and TurboTax, Intuit has revolutionized the ways in which individuals and small businesses pay their bills and taxes, manage their accounting, and handle their payroll. At first, it seemed that the company could do no wrong. But when Intuit introduced eight new products that flopped between 1994 and 1999, founder Scott Cook was determined to find out why.

Analyzing these failures, he was surprised to discover that the same employees, types of technology, brand names, distribution channels, and target customers were often involved in both the company’s flops and its successes. The difference was that “the successful products addressed an important unsolved customer problem,” he says. “Nobody had tried to solve the problem yet because they didn’t see it. But suddenly we did. That required us to undergo a mindset change, so that we could see a different paradigm from what we and others had believed.”

Even noncommercial organizations can think in terms of their “customers” whose needs must be met. For an academic institution, the customer is society at large-the people and organizations that leverage the institution’s research and hire its students. Government organizations must be clear about the evolving needs of the country’s citizens as changes in demographics, economics, or foreign affairs affect defense, education, health care, and business policies. Funding agencies can learn to allocate their funds more effectively by viewing the recipients of their grants as their customers, understanding how best to enable the grantees to do their research, enhance their education, launch businesses, or lead productive, independent lives.

Behind each need is a set of questions to explore:

  • Is there a better way of doing this?
  • What if we?
  • How does this work?
  • Why doesn’t this work?
  • What does the customer really need?
  • What will the problem look like 10 years from now?

Learning how to frame the right questions is not easy. Asking a customer, “What features do you want in this product?” is certain to evoke a much more limited set of answers than “What problems are you trying to solve?”

Going a step further to understand the specific requirements and constraints of an application enables innovators to anticipate the customer’s unarticulated needs as well, which can lead to even more significant innovation. Questions can also be employed to add useful constraints to a project. There are times when it is important to focus on a specific problem and times when you want to encourage broad exploration.

Our ongoing struggle in Iraq is a disastrous example of the importance of framing questions correctly. We went to war with the technology to support a precision military campaign with minimal casualties. But we had the answers to the wrong problem. The military was prepared for a soldierless attack, but occupying a country requires boots on the ground. We were not prepared technologically, financially, or emotionally for the actual problem we’re faced with now.

Brainstorming for ideas – new ways to address perceived needs – is often thought of as the “magic” part of innovation. It takes the right combination of research, creativity, and enough time to think. Once a promising set of ideas has been identified, it’s time to try and test them through market research, scientific experimentation, or prototyping, at which point methodology and discipline become crucial.

Think back to your high school science classes when you learned how to design experiments. My son and I spent an afternoon firing a Nerf bow and arrow down the hallway for a high school physics assignment. After several hours of shooting arrows and calculating the propulsive force of the string, our results were inconclusive. Though we had fun, the longest section of David’s lab report dealt with margins of error, because we didn’t have the tools to accurately measure the arrows’ trajectory or the force of the string.

Lesson learned: experimental design is critical. Deciding how to test, where to get feedback, and critical analysis of data are all key to successful experimentation.

The Internet has transformed the relationship between companies and their customers, opening up direct and unfiltered channels of communication that were unimaginable in previous eras, and providing companies with instant access to feedback and ideas from their customer base. With this free flow of information also comes the burden of filtering out the relevant information from the noise.

Focus groups are useful only if you’re asking the right questions of the right people. As Henry Ford put it, if he had asked his customers what they wanted, they would have said a faster horse.

 If an idea is significantly ahead of its time, early market feedback can be misleading. You have to decide whether you believe strongly enough in the concept to risk taking the next step in spite of not getting positive feedback.

Once the testing is done and the data have been analyzed, honest self-assessment is required:

  • Does the proposed solution really answer the question at hand?
  • Is the anticipated need significant enough to justify moving forward?
  • Is it necessary to go back and test more, try another idea, or reframe the questions?

The journey from the initial idea to success may take only weeks or months for a new product feature. But the development and testing of a new drug or a paradigm-shifting product can go on for years or decades.

Reed Hastings launched Netflix in 1998 as a frustrated video renter who was tired of paying late fees. The company started with a single-rental model: users paid $4 to rent a single DVD for a week, plus a $2 shipping and handling charge. “It was just not a wow,” admits Hastings in retrospect. “It was OK, but we needed a wow to break through.” Looking harder at the business, he concluded that a monthly subscription model – with the addition of a “dynamic queue” so that customers could always have a DVD to watch and more to look forward to – might just work. Netflix relaunched in September 1999, and this time it was a wow.

It can take multiple cycles of brainstorming, testing, analyzing, and adapting to get a project right – or to sensibly call it quits. The process involved in innovation is often like riding a unicycle. To balance and keep moving ahead, you have to pedal both backward and forward.

No bigger than a jazz band

If you talk to anyone who is in a leadership position, that person will tell you that attracting and retaining the best talent are top priority. What does this mean in the context of innovation?

The best talent embodies the five core values and has the right combination of aptitude, skill, judgment, passion, and drive. Such people’s curiosity and openness to new experience are as important as their pedigree. They require deep understanding to garner respect, a sense of infectious excitement to rally the organization around them, and an almost compulsive drive to tinker.

“What we always looked for were people who were born with soldering irons in their hands,” says Jon Rubinstein. “People with a passion for products, for the creation process, and for technology itself.”

Many innovators do not have a firm idea of what obstacles they will face when they launch something new. They have a certain dose of entrepreneurism that prevents them from being daunted by the problems that inevitably lie ahead. Reid Hoffman, founder of the LinkedIn social network, has personally mentored many of the founders of startups like Facebook, Flickr, and Digg. In the late 1990s, he joined PayPal and ended up being responsible for all of PayPal’s external relationships, including coping with banking regulations.

“By not knowing about government regulations, banking, fraud, financial structure, and a whole bunch of other things,” says Hoffman, “we basically ran out into the middle of a minefield, not even knowing that there were minefields. But once we were there, the only thing we could do was to go forward-and we pulled it off, while most of the people in the banking industry were sitting on the sidelines.”

Akin to this is a sense of play, even in the midst of very demanding work. “I have a category of people in my network who really enjoy playing with technology,” says Hoffman. “They start with an artifact and say, ‘What can I make out of this?’ This is different from goal-driven behavior.”

Magic happens when small groups of the most talented people have a sense of purpose and shared values, are provided with sufficient resources, and are empowered to come up with something great. Even for complex projects that ultimately may require significant resources to implement, the initial teams should be kept small, cutting down on communication overhead and ensuring that the group can change direction quickly if necessary.

In Silicon Valley, the optimal size of these groups is often described by the “two-pizza” rule, which says that nothing amazing ever happens in a group that can’t be fed by two pizzas. Nokia researcher Henry Tirri refers to the right size of these groups as “no larger than a jazz band,” so that individuals can improvise and play off of one another without requiring a conductor to stand before them, orchestrating every move.

Every jazz aficionado knows that the best bands are made up not just of musicians who can play killer solos, but of those who know how to listen to one another and serve the collective vision of the music. Particularly now, when products and projects often call upon a broad range of expertise, finding team members who know how to collaborate with one another – and with the world at large – is crucial.

Increasingly, leaders are recognizing the value of what IDEO, a leading product design company, calls T-shaped people – those who have a depth of knowledge in a particular area, but also the breadth to communicate well with people in other disciplines.

It wasn’t just the technology of Apple’s iPhone that made it a landmark product that grew the market for smart phones generally. It was also the elegant and imaginative product design, and a marketing team that knew how to build public expectation into a frenzy.

Innovation grows out of the combination of diverse sets of expertise. Facilitating communication between the various groups, and creating the right balance of rewards for all, requires leadership that understands and appreciates the importance of the entire cast of characters.

“There are half a dozen words in the English language that are substitutes for substance. Three of them are innovation, accountability, and leadership,” says retired Intel CEO Andy Grove. “Companies that let people get away with murder talk too much about accountability. Those that don’t have the courage to leave the handrail talk incessantly about leadership. And people who are incapable of changing what they are doing, or even analyzing what’s wrong, go on and on about innovation.”

Innovation is not just another pat phrase with little meaning beyond the latest hot startup. We need real, sustainable innovation, which can come only with courage on the part of leadership and an ecosystem that is in balance.

Judy Estrin is CEO of JLABS, LLC. She co-founded seven technology companies and was chief technology officer at Cisco Systems.

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