Ten Tips for Better Innovation

With a name like Moses, it’s hard to resist the temptation to come up with Ten Commandments for stuff. However, innovation is so complex and multi-faceted, the best I can do are Ten Tips for Better Innovation. We’ll need four articles to cover all ten suggestions in sufficient detail, so come on back to check for additional tips over the next few weeks.

Here are the first three tips…

#1 – Innovation is Essential

In 1999, Arthur D. Little conducted a comprehensive study of 338 Fortune 500 firms and found that firms that were rated as “highly innovative” produced returns to shareholders that were nearly four times those produced by the least innovative firms over the period from 1987 to 1996. That bears repeating: highly innovative Fortune 500 companies return 4x value to their shareholders.

In fact, innovation is so important, that the management guru Peter Drucker once said, “Every organization needs one core competence – innovation.”

So the number one tip for innovation is that it pays to be virtually obsessed about it, because the development and refinement of twin innovation competencies – to create more innovative products and to design more innovative marketing – are the most important strategic priorities for any organization. When you are handed an excuse, like “maybe we should get back to innovation after the recession” or “let me be the devil’s advocate here”… you should have a clever retort prepared ahead of time. Something like “say, is Apple slowing down their iPhone product cycle… or are they redoubling their efforts even during a recession?” Cutting costs and increasing innovation are not necessarily mutually exclusive conditions.

And don’t worry about rocking the boat, because innovators are inevitably controversial.

#2 – The 31 Flavors of Innovation

Most companies commonly recite that there are four forms of innovation: incremental for process improvement, radical innovation to develop breakthrough products & technologies, development of new business models, and the formation of new ventures and spinoffs.

In reality, there are many more flavors and facets of innovation, which include creating radically new sales & marketing techniques, exploring new forms of compensation, inventing clever ways to manage risk in your supply chain, adapting to new methods for shareholder communications, and even using collaborative techniques for generating innovative cost reduction strategies. All forms of innovation are valuable. In fact, an optimal innovation initiative should reflect a diversified portfolio of ideas, pilots and ventures, which match your organization’s needs and goals. Every function of the organization needs to be continuously re-evaluated and tuned with a balance of continuous and radical innovation efforts.

The real goal is to create your own flavor of innovation that’s brandable.

#3 – Innovation is a Team Sport

Despite the enduring myth of the lone genius, truly productive invention requires a team effort. Ed Catmull, president of Pixar and Disney Animation Studios, describes what he calls “collective creativity” in a recent issue of Harvard Business Review. He writes, “Creativity involves a large number of people from different disciplines working together to solve a great many problem. Creativity needs to be present at every level of every artistic and technical part of the organization.”

But, like all team sports, some teams are simply better at playing the game than others. This is because human skill – like learning to play professional sports or play the piano – requires 5000 hours for the brain to master. Ideation – the skill of creating ideas that solve a central problem – is no different. Honestly, how many hours have your employees dedicated to perfecting their ideation skills? Or in practicing together, like a winning basketball team or a world class orchestra?

The key to forming effective innovation teams is simply to cover all the skill bases, just as you would do when building a professional basketball team. That is, by matching up the equivalent to forwards, guards and centers. In the game of innovation you are matching up empaths – people who see and listen more deeply than others, creatives –those who can build really neat stuff quickly, and conductors – like you, who can organize and coordinate those teams to deliver the best work of their lives.

And at the same time, you have to train fundamentals – just like passing, dribbling and shooting in basketball. The fundamentals of innovation and ideation are enhancing and expanding the core skills of listening, seeing, constructing, painting, storytelling and imagining. For an innovator, listening and seeing deeper opens into the skill of observing people interacting emotionally with your products and services. In a way that lets you to uncover tacit and unarticulated needs and requirements. Likewise, constructing and painting has to do with the skill of rapidly and skillfully creating visualizations and prototypes for your subjects to play with and imagine with. These are the skills of artists, except instead of painters using egg tempera or filmmakers using silver nitrate, these are the sculptors of ideas and architects of experience.

There is one other key skill, that is usually held by the conductor… this is the ability to ability to leverage and convince the organization to back a project that it is unable to see as valuable, but ultimately turns out saving the company. Think of him as your center.

And that’s what it takes to create and train a winning innovation team.

Again, these are the first three tips… send me an email if you’d like to read the other seven!

Extreme Innovation

When you delve into snowboarding or base-jumping, or any other extreme sport, you’ll find many parallels to the art of innovation. In essence, innovation and extreme sports are pursuits that require energy, skill and courage (in spades), along with a healthy dose of skeptical belief .

When you compare extreme sports to the strategies and execution philosophies of successful companies, you find that success in either domain requires knowing the environment, the strength and limitations of your equipment, your level of skill, your risk appetite, your guide’s knowledge and management skills,  the team’s ability to function as one, what you can and can’t control, and finally,  listening  to your gut instinct. In that final analysis, you’ll find that both activities rely heavily on  feel and expecting the unexpected.

I caught up recently with Steve Ellis, EVP of Wholesale Internet Services at Wells Fargo & Co, who manages the bank’s wholesale  banking technology and just happens to be… and an avid heli-boarder! I wanted to discuss these parallels, and learn a bit about what it takes to make innovation occur on a regular basis  at a behemoth financial services company.  Steve and his team have a proven track record of being first-to-market with new financial service products.

Steve Ellis, EVP at Wells Fargo & Co

Steve is one of the most energetic guys I’ve ever met –  the kind of guy who  wants to live fully in the moment of every minute of every day, 365 days a year. When I asked him for the formula for Wells Fargo’s secret sauce for extreme innovation, he laughed and explained lucidly, “There’s no secret sauce… but there are three basic tenets that we operate from, when it comes to  developing new products and services. First, innovation takes belief, that there is ‘something’ in the idea that will add value for customers, even when a traditional ROI model would tell you  to  not pursue the idea. Second, innovation is more about hard work than thinking up an idea, it’s more about execution than inspiration.  And third, it is important to get active and rapid feedback during the process.

“So you’re right, innovating and snowboarding down a mountain of virgin powder deliver similar kinds of highs ; it’s  the thrill of the  being somewhere ‘new’. It’s about strategy and execution, and tapping into continual feedback loops. Once you hit the zone, once you feel you have ‘something’ – whether you’re snowboarding or innovating –  it is an incredible rush, to ride the breathtaking flow of peak performance and what I’d call instinctual execution.”

Steve’s team developed the Wells Fargo Commercial Electronic Office (aka the CEO)  in 2000 , which has won just about every award that a  commercial  banking site could win.  The initial small group was able to build from scratch a single sign on portal to a half dozen financial services in 6 months, that was immediately well-received by customers. Since that time in 2000, the group has delivered 34 new releases of the portal, continually feeding new ideas and customer feedback into the CEO experience.  The team has  also taken these learnings  to other endeavors, like an internal unified desktop for its employees, a holistic customer view  connecting 50+ systems of record,   and  re-engineering its “sneaker-ware” credit processes into a modernized electronic workflow.

Steve continues, “On the other hand, you have to pace yourself as you’re learning. It takes a while for people to get comfortable with new ways of doing things and it’s best to learn in incremental steps. Start with simple things, master them, and then build more complex structures off the original base leveraging user and other feedback as an integral part of the process. But always keep in mind, that like snowboarding, innovation is sometimes actually safer when you do it just a little faster than your comfort zone. You won’t fall off as much and you will learn something new.”

Steve does a jump

Steve continues, “When you snowboard down a mountain of virgin powder… this is the perfect opportunity to learn how to listen harder. On the snow, it’s about  the feel of the mountain and reacting to the texture of the snow. In business, it’s about listening  closely to the customer.  For example, at Wells Fargo, we perform ethnography studies at client sites. We send  a small group of  people to literally camp out at a customer site for several days to observe how employees do their jobs.  We look for ways to re-shape our services .”

“Real innovation is about getting past the hype of a new idea, to learn how to see how things really work. These principles for innovation are in fact are quite simple to follow.  Most are either innate, part of our natural make-up, or learned more at a subconscious level and are not acquired by going to business school or anything.  Once you have these basic principles down, they can become the prime bedrock for creating successful and lasting businesses.”

How “Open” Should Innovation Be?

The latest entry for corporate buzzword bingo is the term “open innovation”. So let’s ask the question… what the heck is open innovation, anyway? Also, is open innovation really an obviously good thing, like having an open heart, or maybe a more complicated thing, like asking your spouse for an open marriage?

Open innovation is a powerful term. Apparently, combining two buzzwords, sort of like cold fusion, produces more buzz than if you just used the terms separately. Its opposite – closed innovation – evokes images of silos, cowardly decision making, and not leveraging the power of open networks. How could anyone question the wisdom of opening up innovation?

But you have to admit, the intellectual property system has been pretty useful to companies for the last couple of hundred years… is it really time to retire the patent process and live the open source dream? Let’s start by looking at a couple of examples…

One early example of open innovation is Procter & Gamble’s innovation platform C+D (ie, Connect and Develop), which allows customers and partners to co-create products at P&G. Their position is that not all the smart people work for P&G, so the quickest way to grow was to leverage outside talent and move from knowledge generation to knowledge brokering. Currently, they’ve increased their share of external innovation from 10% in 2000 to 35% today.

Another example is DVD rental powerhouse, Netflix, which recently invited outsiders to help them improve an important algorithm for their movie recommendation system. The kicker was offering a $1 million prize to whoever improves the accuracy of their current film recommendation system at least 10%, in a publicity move reminiscent of the Clay Institute’s million dollar prize for solving unsolved math problems like the Poincaré Conjecture and the Riemann Hypothesis.

But do these models really work, or are they possibly aiding and abetting your competitors to beat you to your own best ideas? The key to understanding open innovation is to dig beneath the buzzwords to truly understand the meaning of openness and to deconstruct the structure of the collaborative process.

A terrific example of understanding openness can come by studying the goal of digitizing medical records, which is part of the Obama economic stimulus package.  At first, something like digitizing musty old boxes of yellowing health records doesn’t sound like a particularly exciting or innovative idea. But it’s exactly what’s needed to build out the “last mile” of an information highway for medicine.

Therefore, open health isn’t at all about making private health records more open, and hence less private. It’s about creating standards that allow medical systems used by doctors, hospitals, patients, and others to easily “talk” with one another. It’s about enabling the system to proactively search for drug interactions that cause hard to detect complications. It’s about eliminating the bureaucratic paperwork via automated claim submission. Finally, it’s about creating a more intelligent and secure system for health records.

Interconnected for innovation

Therefore, openness in innovation isn’t about opening the kimono to potential competitors or about irrevocably committing to the open source model… it’s really about three enabling factors that can transform the collaborative process at your company, especially around innovation. First, it’s about increasing the diffusion of innovation by making both internal and external corporate boundaries more porous. Second, it’s about developing more refined non-binary trust models that let you digitize the paperwork of innovation. And third, it’s about creating open standards for automating the innovation process just like Obama hopes to do with health records.

The diffusivity of innovation isn’t measured only in terms of letting external innovation in, but also in allowing innovation to move from the top down, from peer to peer, from the bottom up, and from the inside out. We call this 360˚ innovation, and if ideas aren’t flowing smoothly in any of these directions, your collaboration systems need an oil change.  Finally, the flow of IP from within the organization to outside should always be subject to great vigilance and strategic forethought.

Non-binary trust models really have to do with simplifying the management of intellectual property, in order to build a win-win culture where everyone benefits in equal measure – management, employees, partners, customers and shareholders. The key to digitizing innovation, is actually to design an electronic IP policy server and the key to enabling openness, is to deploy an enterprise social extranet. This is actually the most compelling part of the open innovation promise – to fundamentally change the nature of social networks to allow you to more reliably locate partners you can trust and who won’t let you down.

Open standards for automating the innovation process don’t mean anything unless you actually have one. A formal and automated process, that is. For example, has your company bought one of those fancy idea catching applications? If so, can you get your data back out of it? Was it off the shelf or custom fitted to your culture? Here’s a tough one – can it enable an enterprise social extranet that hot deploys new innovation applications via a Web 2.0 infrastructure? And are these capabilities even on your roadmap?

Open innovation holds great promise for re-invigorating the enterprise, but it requires great vision in its design, deployment and management. This is one of the areas I think about a lot these days, so please feel free to contact me if you’d like to create a dialogue around this fascinating arena!

Big and Bold Enough to Meet the Challenge

Not afraid of a little rain

President Barack Obama, in selling his historic $787 billion economic stimulus bill, said that the budget had to be big enough and bold enough to meet the size of the economic challenge we face. It is among the most significant legislative accomplishments since FDR overhauled the U.S. government in his first 100 days, and spent an equivalent of $2 trillion in today’s dollars*, to stimulate the U.S. economy out of this new Great Depression.

In the middle of a recession, tax cuts alone will not create jobs, because business owners are simply going to save that cash for a rainy day. The only way to profoundly impact and maybe reverse this situation – according to Keynesian economy theory – is to do something big and bold enough to change the rules of the game and dramatically create millions of jobs. The only way to stop the cascade of layoffs is to shift businesses from fear into hope, and begin hiring again because there are an increasing number of newly employed people willing to buy their stuff. Economic stimulation worked for Bill Clinton, who was able to create 23 million jobs over his eight year term. By the way, no House Republicans voted for Bill Clinton’s 1993 economic stimulus bill either.

John Nash, whose theories are illustrated in the film "A Beautiful Mind"

The reason bold action is required is because the economy is stuck what Nobel economist John Nash called a “non-cooperative equilibrium”, a term used in game theory. Basically, if the economy is healthy, everyone spends to keep up with the competition. But if the economy contracts, everyone battens down the hatches – and starts doing layoffs to prepare for the loss of revenues caused by everyone else doing layoffs. It’s like the prisoner’s dilemma game, in which anyone who acts altruistically gets shafted by everyone else who acts selfishly, in their own best interest.

Similarly for companies seeking a turnaround or turning around recession-think, management has to be courageous enough to do something big enough and bold enough to meet the size of the challenge they’re facing. The bigger the challenge, the bigger the action required. And like the larger economy, companies face an attitudinal shift once things go into a tailspin. Employees generally start becoming less loyal, or go into a period of non-productive shock after a wave of layoffs.

In game theory, it’s all about “executing a non-linear transition to a Pareto optimal state”. For the economy, it’s passing a stimulus package big and bold enough to create millions of jobs and possibly make naysaying House Republicans apoplectic. And for your company, it’s executing an innovation stimulus program big and bold enough to raise eyebrows as well as hopes.

What does an innovation stimulus package need to include to be effective? How big and bold does it need to be, to bring hope back to the equation? How much money do you need to spend to get your employees to start thinking “Yes, we can!” again?

Fortunately, it doesn’t have to cost a lot of money to make innovation happen in a storm. This is because it really doesn’t take that much to shift your employee’s survival instinct from flight to fight. What it takes is  showing them that you’re serious about controlling the direction and destiny of your company, instead of letting the storm decide for you. What it takes is finding “good men in a storm” and giving them what they need to move into action. What it takes is demonstrating courage and encouraging hope. What it takes is leadership!

What you need to do is implement the 8 C’s of Change, that enumerate the individual shifts that need to happen throughout the organization. Just doing lip service about innovation isn’t enough. You need to commit to a program of comprehensive change that span the entire enterprise, and reaches deep into the psychology and culture of the organization. Management needs to rise to the challenge of leadership.

For a company to fully rebound from a downturn, the following C’s are required…

You have to send out the message – with evocative executive Communications that express true vision and leadership – and hammers home the message that Change is Coming and that anything is possible if we only work together to make it happen.
You have to take the time to develop deeper Customer insight – helping you find unarticulated needs and desires to build more compelling products and services.
During a slowdown, it’s time to train and re-train for business Creativity, Collaboration and Continuous learning – to help your employees turn themselves into a 21st century labor force.
Also, you need to think about acquiring or building some Cool innovation tools, aka “revolutionary software applications for innovation management”.  It’s the latest Web 2.0 thing, and based on open source, it’s much cheaper than you’d imagine. [Note: full disclosure, my company develops and sells this kind of stuff.]

Another most important C is to re-invent Compensation for creativity. It’s not just about having the CEO work for a buck a year… it’s really about coming up with a way to truly reward deep creativity throughout the organization, by sharing the upside rewards of successful deployments, improvements and spinoffs. If you don’t have the cash, think about  profit-sharing bonuses based on the implementations of your  employee’s radical innovations.

The final C that wraps it all up is Constructive leadership. Just like we needed FDR to lead us out of the Great Depression, and Barack Obama to get us out of our current pickle… your company needs you to rise to the challenge, to spread the call to action, to encourage your employees to hold fast, to be brave, and to work harder. It doesn’t really help to hire lots of consultants and buy lots of tools… it’s really up to you to bring hope to your employees, and to show them that the only thing we have to fear… is fear itself.

Go ahead and give it a try… Yes we can! YES we can! YES WE CAN!

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Note:

Franklin Delano Roosevelt at a Fireside Chat

* It might be useful to see how I developed this $2 trillion figure for what FDR proposed as a stimulus. The US Public Works Administration, part of the National Industrial Recovery Act, was a $3.3 billion program that employed 2 million people. Now, most Republican economists will simply use the inflation multiplier from 1933 – eg, in the 1930’s, a dozen eggs cost around a quarter. However, I believe that you have to include a GDP deflator, as well as compensating for the increase in population, in order to measure the psychological impact of the FDR stimulus package. In 1933, the US population was 125.6 million, and it’s now over 300 million. Thus, we need to multiply the CPI index against a GDP deflator, and increase that by 2.4x to reflect the growth of the population, in terms of the impact of a stimulus. This works out to about $2.2 trillion, in today’s dollars. This is why some of Obama’s economists argue that even $800 billion is not big or bold enough, to counteract the $2 trillion that we’ll be losing in economic contraction over the next few years.

Theory vs Reality in Innovation

There’s the theory of innovation, the art of innovation… and the reality of innovation. And the truth is that innovation is very hard to achieve and maintain, as companies mature and processes become ritualized. Innovativeness and agility for companies is like being athletic and fit for people – that’s a goal everyone shares, but it’s the rare guy who is as fit in his 50s as he was in his 20s. Similarly for companies, growing older is not for sissies.

The most deeply innovative company I’ve worked with was Nokia. This is because the company HAD to be innovative to survive, like an elk in the icy winter or a Finnish resistance fighter. The company has reinvented itself four times, first as a manufacturer of boots, then televisions, then computers, and finally mobile phones. As a result of this, the company is very serious about innovation, simply because they realize that their survival depends upon that fifth killer product line. As a result of this, innovativeness has been written into the DNA of the organization.

So the most important question to ask is… how innovative does the organization really and truly want to be? Does the organization have “the fat gene” or does it have the willpower and stamina to stay lean and mean into maturity?

An incubator is like a speedboat, that serves the battleship. If that battleship doesn’t have what it takes to transform itself and go faster, all the incubator can do is get used to the idea of coming up with great products and sacrificing them on the altar of corporate mis-management. However, if the “mother ship” does truly desire to become more innovative, the key requirement is to get serious about innovation and start taking what might seem like drastic measures.

For a 50 year old man, getting serious about your health happens when the doctor says, “you need to work out more and lose weight, or you’re going to die of a heart attack.” For a corporation, it’s when a younger and more agile company starts to eat their lunch, or the economy turns on a dime, and they start raking in billion dollar losses and shrinking market share because they’re too fat, too slow and too greedy to survive.

If the CEO and Board have both received the wake-up call and there is a sense of urgency, then there is a honest chance that the organization can achieve true change and rewrite its fundamental DNA to become more innovative.

But if that wake-up call hasn’t come in yet, all you can expect is a lot of lip service about innovation, but no real change. Evolution only happens nature is cruel. Revolution only happens when drastic measures are needed. Layoffs are like liposuction – they do not enable lasting transformation or fitness.

This is the reality of innovation.

So what does it mean for a company to get serious? It means that the company, from top to bottom, is ready willing and funded to achieve comprehensive change that impacts every part of the company. I came up with this memory device, which I call the 8 C’s of change, that lists the individual shifts that need to happen. Just throwing some innovation management tool at the troops isn’t enough. For a company to truly change…

• Constructive leadership that spreads the wake-up call
• Evocative executive Communications that express true vision and leadership… and hammer home the message that change is coming
• Most importantly, it needs to change how it Compensates business creativity
• The company needs to learn how to deepen its Customer insight in order to find unarticulated needs
• To learn how to truly Collaborate
• To train Creativity throughout the organization via Continuous learning programs
• and finally, it needs some Cool tools for innovation. Like the stuff we sell.

In other words, becoming truly innovative requires that the organization get serious about innovation – just like an out of shape and overweight 50 year old guy has to start working out seriously to change his body and state of fitness. Is your company ready to get serious? If it is, it’s time to start working out again and retraining your corporate body to be lean, mean and agile again.

Cargo Cult Innovation

The common view by business analysts is that the overall failure rate for innovation initiatives within corporations is 80%. And the failure rate of individual investments by Silicon Valley venture capitalists is around 90%. That’s almost as bad as starting a restaurant!

There are many reasons for such a high failure rate – being technology driven instead of customer driven, selling when you need to learn, focusing on requirements rather than experiences, giving all the power to gatekeepers, naysayers and the fearful.

Now, the typical advice that innovation consultants usually provide when facing such a high failure rate, is that you should fail faster. They usually quote Thomas Watson, the founder of IBM, who said, “The way to succeed is to double your failure rate.”

I disagree with that position. It’s really like a running a record business… you want a machine that reliably generates hits, not lots and lots of experiments and flops. Artistic creativity requires the willingness to take chances, but at the end of the day, you’re judged on your hit rate, on how many of your albums succeed vs how many end up in the bargain bin.

I believe that it is possible to continuously improve your success rate, by making three fundamental shifts at your company, in terms of instilling an innovative culture of success.

The three shifts are: First, you need to shift your methodologies for product design, which most likely requires that you “gather requirements” by only asking customers what they want, and not by digging deeper to understand their tacit and unarticulated needs. Second, you need to make innovation measurable and manageable at your company, because you can’t fix what you can’t measure and this is the key to continuously increasing your success rate. And finally, you need to stop doing “cargo cult” innovation. Let’s address these one at a time, starting with shifting your  methodologies for product design.

Ethnography means seeing from true perspective

The first shift has to do with learning a new way to see. The top product development companies, like Apple, Sony & Nokia use a secret weapon called design ethnography. It’s about using techniques from anthropological expeditions, to detect disruptive product opportunities. It’s all about shifting the way you observe the customer, interview them, and more importantly to detect discrepancies between what your customers say and what they do, when you’re observing them.

I helped train and build one of the world’s first “enterprise services ethnography” departments at a major bank, which grew into one of that bank’s greatest success stories for generating customer insight.

Formulaic approaches to ideation, like TRIZ or other techniques, are useful but generally won’t work 100% of the time when it comes to uncovering disruptive opportunities – because innovation is actually an art, not a management technique.

Any art based on human skill, like learning how to paint with egg tempera, or learning how to play the piano, requires 5000 hours for the human brain to learn that skill. Ideation, the skill of creating ideas, is no different. Now, to be really good at painting or piano, you need to combine that skill with talent and inspiration… and even more hard work. There are no shortcuts to becoming a master of any art or skill.

One clue as to how to develop ideation skills is to look at how art schools teach students how to become artists. The first step is always teaching a new way to see. It may be through seeing negative space, or broadening the eye’s receptivity to color resolution, or seeing how any shape can be reduced into three color tones.

One of the great moments for a first time ethnographer is when s/he realizes that “innovation is suddenly seeing that something you thought was working, was actually broken, but you just couldn’t see it.” It’s like discovering a pocket of space-time hidden in the middle of your universe. This is only possible by becoming a trained ethnographer.

A dashboard from our Revolution innovation management system

The second shift has to do with learning how to manage innovation, so it’s really about learning how to see progress. The reality is that innovation and ideation are very difficult to measure directly. However, it is possible to develop metrics and waypoints that insure you’re on the right path. One is to simply capture and count ideas as they are being generated.

Once you understand the  pipeline for innovation within your organization, you can create waypoints along that pipeline. For example, the number of ideas that  are promoted to pilot. And then the number of pilots that are successful. And then the number of ideas that eventually made it all the way, and what kind of return they generated for the organization.

If you think about it, how could a project manager within your company be successful without certain tools that measure the progress of a project? How could accounting be successful without cost controls and reporting? In the same way, innovation management requires tools, metrics, controls and reporting. However, it has to be done in a way that does not stifle the underlying fluidity of the process.

There is so much more to talk about when it comes to an innovation resource management system. If you’d like to read more about our Revolution system, click here to download the brochure.

Finally, do you know what the cargo cult is? The classic period of cargo cult activity was during and after World War II in Polynesia. During the Pacific campaign, vast amounts of war supplies were air-dropped into these islands during the Pacific campaign. But at the end of the war, the airbases were simply abandoned.

During this time, the native islanders had become accustomed to these supplies, and really wanted the planes to return. So they went about constructing mock airstrips, and made radios out of coconuts and straw. They staged drills and marches, using twigs for rifles and painting “USA” on their bodies to make them look like soldiers. But no matter what they did, no planes ever came back.

I first heard about cargo cults during a talk given by Richard Feynman, about “Cargo Cult Science”. After studying a number of companies attempting to be innovative, I realized that many companies actually practice Cargo Cult Innovation.

A cargo cult in Micronesia

Like the islanders, Cargo Cult innovators use all the same buzzwords and expressions as true innovation… but when the chips are down, they’re usually the ones who put the NO in innovation. The harsh reality is that many companies fail when management entrusts innovation into the hands of people who have learned how to survive by the expert application of politics, the  rewarding of ego and empire-building, and the requirement of top-down control.

The position of Innovation Czar is a very sexy and desirable job for any executive, so it’s going to attract both the truly innovative as well as the cargo cult innovators. Usually, after the cargo cult innovation process fails to produce results, the organization can simply say, “hey, we tried and it didn’t work, so can we kill this innovation thing now and get back to work?”

In other words, the third shift is learning how to see reality when it comes to your own managers. Putting anyone politically motivated in charge of innovation will be the kiss of death to your initiative. The essence of true innovation is that it comes from the heart, so you need someone who has a lot of heart and empathy. You need to entrust innovation to someone within your firm who is willing to swing for the fences, who is willing to take chances.

Therefore, look for someone who is brilliant, but at the same time, humble. Look for someone who naturally uses the word “yes” more than “no”. Look for someone who believes in the potential of the human spirit, and instills confidence in his reports. Look for someone with true courage, who would be a good man in a storm. Look for someone who actually listens carefully, when anyone speaks… not just the boss. You know, someone like Barack Obama.

For innovation to be successful at your company, these are the first three steps to take. Specifically – (1) establish an ethnography training for your product developers, (2) install and pilot an innovation management framework, and finally, (3) pick the right manager to lead the innovation initiative.

There’s a lot more you have to do, but this would make for a terrific start!

So what does firewalking have to do with innovation?

Firewalking and innovation? What the heck?

Before I answer that, let me start with a question for you… what is the core of innovation? The most important factor or ingredient? Some would say it’s inspiration or pure brains. Others would say it’s perspiration or hard work. However, I believe that the true essence of innovation is courage… and in business, this translates into the rare ability to persevere when everyone around you is giving up. It’s about enjoying a persistence of vision so strong that virtually no hardship can deter you. Therefore, I believe that fearlessness is the true essence of the innovative spirit. The difference between a common and an exceptional life is the combination of courage and vision, and that is the difference between a common and an exceptional company as well.

There’s a reason that motivational experts like Tony Robbins uses the firewalk, and in fact, has led over 200,000 people through the process. Because it works. For example, motivational coach David Fabricius reported that after leading the employees of a major bank through the firewalk process, one division at a time – every division reported a spike in revenues in the quarter directly following their firewalk event. An average of 130% greater revenues! Peggy Dylan, the founder of the Sundoor firewalking school, reports a similar jump in revenues after leading a national real estate chain had every brokerage office – one at a time – go through the firewalk process.

Therefore, the first reason for considering a firewalk exercise within the context of innovation training is because the firewalk is a remarkably effective tool for transforming the fear that limits the human mind. If every human being believed fervently that flight is impossible, then the possibility of flight could never exist. Add a little personal fear to the equation and it becomes a major paradigm that needs shifting. You need powerful tools to break through such rigid belief.

An innovator fundamentally needs to believe that the impossible is possible, which drives the need to push beyond his limits to prove he’s right. On the flip side, the greatest inhibitor to innovation is the inability to see that the thing that stops us from innovating is actually within ourselves. As long as we blame others for why we can’t innovate, we’ll never break through to true innovation. But that moment you successfully cross a bed of hot coals with your bare feet… you stand there knowing in your bones, that anything is possible.

It would probably be good to take a second and address the question you probably have on your  mind… “is this firewalking stuff for real?” The answer is yes. Firewalking is real, and it isn’t a trick. People do get burned at firewalks, but it isn’t anywhere near as dangerous as something like skydiving. The most colorful story about getting burned at a firewalk was when a TV physicist, Jearl Walker, set out to prove it’s a hoax… and ended up with second degree burns. With a certified firewalk instructor running the show, burns are actually quite rare.

The second question is probably, “how does it work?” The answer isn’t clear. As a former physicist, I’d say that there are many factors at work. For a shorter “training fire”, less than 10 feet long and with relatively cool coals, the Leidenfrost effect (steam formation separating your skin from the coal) and low heat conductivity through ash are in effect. But when you talk about walking over 40 feet of coals, or even over hot lava, like Huna shamans do in Hawaii, there’s clearly more at work. There’s definitely a bit of mind over matter happening, which needs to be experienced first hand to validate.

Third question, “who was crazy enough to think it up in the first place?” Actually, firewalking has been around for over four thousand years, practiced by Eastern Orthodox Christians in parts of Greece and Bulgaria during some religious feasts, to fakirs in India who live by begging and performance of such feats, to the Kung bushmen in the African Kalahari desert who use fire in their healing ceremonies, to young girls in Bali in a ceremony called Sanghyang Dedari – in which the girls are said to be possessed by beneficent spirits, to the Yamabushi sect in Japan – practitioners of Shugendo – an interesting mix of shamanism, Taoism and Buddhism, to Vikings who used to walk over red hot chains, to Hawaiian shamans who walk over molten lava. It’s one of the most prevalent ritual phenomena throughout the world… and now it’s arrived in America and taught by motivational speakers!

The more important question is why it was used as a ritual all over the world for thousands of years? Clearly, people used as fire ritual to unlock the mind’s healing power or as inspiration to find better luck for hunting and farming. But at a deeper level, I believe that people needed something physical to transcend their fears, to release that energy into movement and change, to validate personally their courage in the face of despair.

As a way of bringing this conversation back to innovation, let me talk about what I think was humanity’s finest example of courage in the face of despair – the Battle of Thermopylae. Maybe you’ve seen the movie 300? You know, it’s the one about the 300 Spartan warriors who held off the army of King Xerxes of Persian in 480 BC at the narrow pass by the sea. The army of Xerxes was so large – estimated by some scholars to be as large as a million soldiers – his soldiers would drink rivers dry. When his archers let fly, the arrows would block out the sun. To this, a Spartan warrior named Dieneces retorted, “Excellent, then we will be able to fight in the  shade.” This small band of 300 warriors held off the army of Xerxes long enough to allow Greece the time it needed to marshal the forces necessary to win the larger war.

My favorite quote from the history of the Spartans – when Xerxes tried to bribe the Spartan king, offering him all of Greece to rule, King Leonidas replied, “Tell Xerxes this. If he understood what is honorable in life, then he would no longer try taking things that belong to others. For me to die for my people is a far greater honor than he can ever offer.”

Now, imagine your company under the pressure of the worst recession in decades. Sales projections look pretty ugly. Your customers are going under. Another wave of layoffs is imminent. What does the rank and file do? Get scared and demotivated? Start sending out resumes just in case? Start drinking more heavily?

Now imagine what if – what if your 300 most courageous employees rose up, and formed a cadre of engineers and product marketers, to say, “we know there’s a salary and hiring freeze, but we want to help, we want to work harder, we want to increase innovation, we want to find ways to increase sales… please let us bring the battle to them!” What if your 300 best and brightest said to you, “when the economy hits us this hard, all we want to do is hit back harder!”

Now, wouldn’t that moment choke you up, just a little bit?

This is why we say that the core of innovation is courage. This is why we added exercises like the firewalk, walking over broken glass and breaking boards to our Breakthrough Innovation workshop. Sure, we also use a rational approach to managing innovation, complete with collaboration software solutions and more academic training. But because it’s because our goal is to help your employees and management break through fear, to the next level of energy and achievement, we have innovated by adding exercises that unlock the power of the human mind.

Moses walking over broken glass

Companies are like people. When they’re young, they are much more willing to take risks… whether it’s snowboarding or signing up for the SEALS, risk is for the young and macho. When people get older, they begin making excuses for resisting change and risk, for getting out of shape, for failing to learn new skills, for giving up.

Likewise, companies make excuses as well, which become part of a culture of reasonableness and maintaining a mission of only being “good enough”.  Innovation is actually about teaching older companies how to become young again. To be fearless again. To strive for its dreams again.

Note: Please do not attempt to perform these acts on your own. Moses is a certified firewalk instructor, having completed an intensive training from the leading firewalk school in the world, and has walked over fire close to 100 times.

The Value of Innovation during Recessions

There’s a saying that “entrepreneurs are like teabags – you never know how strong they are until you put them in hot water.” Well, we’re all in hot water now. The next year or two should provide us with a remarkable opportunity to test our mettle.

The funny thing is, despite all the grumbling that accompanies a capital crunch, lean years are actually good for new companies. Many major brands like 3M, General Motors, IBM, General Electric, Microsoft, and Sun Microsystems all got their starts during the lean times of recession. The worst recession since World War II was from 1973 to 1975, when the country’s gross domestic product dropped 3.10 percent. This is when both Microsoft and Apple were founded.

I believe that one of the reasons why better companies come out of recessions can be explained by the structure of the human brain. What I mean is that a group of people – working together – will sometimes mimic the underlying functionality of the human brain. There’s a term in neurophysiology called plasticity. Neuroplasticity refers to the brain’s capacity to modify its organization, pertaining to the acquisition of new skills and learning.

Several decades ago, the consensus was that the neocortical areas were immutable after a certain stage of development. However, recent studies have determined that environmental changes could alter behavior and cognition by modifying neuron connections in adults. Therefore, the adult brain is not static, but rather, can be reshaped by experience.

In this research, it was determined that stress is the key factor in altering plasticity in the nervous system. The research indicates that the application of mild to moderate levels of stress actually facilitates neuroplasticity, but on the other hand, severe and/or prolonged stress will impair “hippocampal- dependent” plasticity.

In other words, when the going gets tough, the tough start adapting and making new connections.  The brain says to itself, oh, my survival is at risk, so I’d better start adapting and learning really hard right now. It’s only when you have skin in the game, that you’ll really focus and learn.

Similarly, groups of brains will react in the same fashion. Under the stress of a recession, those groups of brains called companies sometimes react with an immediate urge to retract and contract, attempting to avoid becoming victims of natural selection.

But those groups of brains that respond by expanding their innovative capacity will probably not only survive, but will strengthen their skills of adaptivity through the experience, likely to reap extraordinary returns during extraordinary times.

So the normal corporate kneejerk reaction to immediately lay off staff, cut marketing costs, and postpone innovation initiatives – in other words, to batten down the hatches – may not be a surefire strategy for survival or success. Actually, there’s a pretty good reason for courageously increasing your innovation and strategic marketing efforts during a recession.

The reason is similar to the rule that Lance Armstrong uses to win Tour de France competitions – you always make your move on a hill.

In competitive biking, all riders begin together as part of the peloton – i.e., the bunching of riders formed during a cycling road race. Because riders remain tightly grouped in the peloton, only the few who are in the front at any one time face the full effects of wind resistance. Those drafting behind, like a school of fish or V formation of birds, can more easily maintain the peloton’s pace.

Usually, it is very difficult for those lead riders to escape the peloton, except when encountering a steep hill. This is because as the riders slow, the effect of drafting is lessened, giving a chance for the strongest riders to break away and outdistance the peloton.

The same goes for business, you often need a hill – in this case a recession – to breakaway from the herd and strengthen your brand. And there’s evidence to support this strategy. There was a study by McGraw Hill that found that advertising during a recession yields an amplification of sales growth for those gutsy enough to make their move, compared to competitors who cut back. The gain, or lift as they call it in the ad world, was found to be between 135% to 275% better if you stepped up advertising, than if you cut back. This means that advertising packs twice the wallop during a recession.

The most famous example of contrarian thinking comes from Adolph Ochs, the publisher of The New York Times during the early 1900s. Following the stock market crash in 1929, he issued a memo to his staff: “We must set an example of optimism. Please urge every department to go ahead as if we thought the best year in the world is ahead of us.” Sending out a memo like this today would like cause the Board to have the CEO committed.

It wasn’t easy for Ochs. Although major advertisers cancelled their contracts, Ochs mitigated employee layoffs opting to use a vital $12 million surplus he had built during the roaring 1920s to pay salaries. More importantly, he attempted to improve the editorial quality of the paper, even though advertising had fallen off. Amusingly, the paper also became a “better product” because it contained fewer advertisements!

Finally, he focused on positive stories rather than  spinning the financial horror story of the day. For example, he declared the most important story of 1929 to be Admiral Richard Byrd’s successful exploration of Antarctica. What an optimist, huh?

When the Great Depression finally ended, the New York Times found itself enjoying more readers than any other newspaper in the country… which translated into higher advertising rates. By the way, when Ochs bought the paper, it was only the eighth largest newspaper in New York! Ochs had the courage to breakaway and go for the gold.

So, do you have what it takes to breakaway? Remember, it’s a difficult but effective tactic, and the best time to attempt it… is up a steep hill! The steeper the better. And so, a recession is actually an opportunity… an opportunity not only to outpace the competition, but to prove what you’re made of! So man up and go for it!

Break away!