Open Innovation Design

Nearly 2 years ago, I used open innovation to develop the logo used on this site.

I am now using open innovation again to help redesign my Personality Poker cards.

As you know, later this year, the Personality Poker book will be published by Penguin’s Portfolio imprint.  The publisher designed the book cover (we aren’t prepared to share that with the world quite yet).  Then, based on that design, the backs of the Personality Poker cards were redesigned to match (image left).

Yesterday, I launched a design project on 99designs.com, the leader in design-based open innovation.  Last time I ran a competition, I had some interesting learnings.

One of the challenges had to do with people building on the ideas of others.  In some respects, this was great.  As a good design was developed, others could help refine and improve.  However, as my article points out, there was a downside: how to choose a winner.

But the other downside associated with a collaborative challenge is “group think.”  As soon as the first idea is thrown out, it tends to influence the thinking of the other contributors, narrowing the set of ideas generated and reducing divergent thinking.  I discuss this concept in my article on the “hand dryer vs paper towel debate.”

Therefore, for the poker card redesign, I decided to go with private submissions.  That is, no one can see what others are submitting.  I will write more about my experience with this next week.

If you are interested in reading the design brief without having to logon to 99designs, you can read it here (pdf).

Or, if you want to submit your own designs for my challenge, go to the 99designs website.

Does Stress Limit Creativity?

Friday I was stuck in New York City.  I wasn’t sure I would ever get out.

The Tri-State area was getting hammered by a snow storm.  I was scheduled to leave at 1PM, hours after the snow began.  The airports were closed. And to make matters worse, earlier in the day, two people were struck by a train on the tracks outside of NYC.

This combination of events caused a ripple of delays throughout the rail system.  In fact, every seat on every train for the next few hours were sold.

Knowing that the ride out of New York’s Penn Station can be crazy on a normal day, I decided to invest the few extra dollars for a first class ticket.  This was perfect as I could wait out the delays in the (relative) comfort of the Acela Lounge.

The board said that the train would be delayed about 90 minutes.  Not too bad considering the circumstances.  Right on time (well, an hour and a half after the scheduled time) the announcement came over the loud speaker.  “Train 2164 is now boarding on track 13 East.”  That was my train.

About a dozen of us exited the lounge and headed for track 13 east.  But the escalator was going up?  How would we go down to the tracks?  We looked around but couldn’t find anyone who knew anything.  After a few minutes, our train disappeared from the board indicating it had departed.  We discovered that it had indeed left without us.

The dilemma was not lost on me:  There were no more seats on any trains until late into the evening.

Most people were furious.  Admittedly, I was a bit amused.  Fortunately I did not need to be in Boston by any particular time, so the delay was an inconvenience, but not the end of the world.

We went back to the lounge to discover that the woman there announced the gate information long after our train arrived.  Other were screaming at the woman and the manager.  There were a lot of angry and stressed-out people trying to get home.

I watched.  I let them do the screaming.  And then I started to think through and investigate the options.

1. I could wait for the next train that day, whenever that might be.  I had plenty of work that I could do while waiting.
2. I could stay over night in a hotel.  There were many friends I did not get to see while I was in the City.  And fortunately I did not have anything pressing the next morning.  All of my business could be conducted via phone.  And I knew rooms were available somewhere in NYC.
3. I could rent a car.  Maybe that wasn’t an option given the chaos, but it was worth investigating.  A quick check via my BlackBerry showed that it might indeed be possible.
4. I could share a taxi with someone to Boston.  There were plenty of taxis available.  Although a taxi might be more expensive, it might only be $100 more than the train, if I shared it with a few other people.  Or maybe I could take a taxi to another city, for example, Stamford, CT and either catch a train from there or rent a car.
5. Hitch hiking was not high on my list, but when “brainstorming” (even with yourself) it is best to keep all options open.
6. Take one of the trains that did not require reservations, but did not guarantee a seat.  Worst case would involved sitting on my luggage for 4 hours.
7. Take a train SOUTH a few stations and then try to catch a train from there.  I do this with hotel elevators sometimes.  If I am going down to the lobby from my room during peak hours, sometimes all of the elevators that stop on my floor are full.  So I will take an elevator UP to the top and then catch it down from there.  Surprisingly, it can be faster.

Anyway, the list goes on.  Because I was relaxed, I was able to consider lots of different options.  While everyone else was stressed out, I got creative.  And it got me thinking…

Does stress kill creativity?

The answer is of course, yes.  I wrote about this in the past in articles on the “Performance Paradox” (this link brings you to the AMA website where the article was published).

Stress causes a reduction in athletic and physical performance (read my article on why Barry Bonds performed 10x worse as he got closer to his 755th home run).

Stress also causes a reduction in intellectual abilities to an even greater degree than the impact on physical abilities.  (A brief anecdote is included in the Performance Paradox article)

But stress has the most profound impact on creativity. Or, as I said in the article…

The more creative the work, the less motivation required to hit peak levels of performance. Studies reveal that creativity diminishes when individuals are rewarded (externally motivated) for doing their work. Why? The desire to achieve the goal overtakes the personal interest in the endeavor. A myopic focus on the outcome overshadows the intellectual stimulation of the process. As a result, risk taking becomes reduced and creativity vanishes.

Goal-orientation is one form of stress.  Missing your train when you have a goal of getting home is certainly another.

How did my story end?  There was a 3PM train leaving at 3:15PM.  The manager simply stamped all of our tickets, allowing us on that train.  Of course, given that the train was previously sold out, that caused other problems.  But I’ll write more about that another time.

Three Innovation Distinctions (Part 3): Diversity not Homogeneity

This is the third of my “innovation distinctions” entries. [for your convenience, all three articles have been packaged into one pdf file]

In the first part of this series, I wrote why you should focus on “Challenges, not Ideas.” Next, I addressed the distinction of “Process, not Events.”

In this final entry, I discuss why innovation requires “Diversity not Homogeneity.” Be sure to read the previous two articles before reading this one.

As mentioned in the other blog entries, I first shared these distinctions with a group of speakers and authors who were brainstorming ways to improve the learning experience for other speakers and authors who attend their conferences. Here’s the Catch 22: Having only speakers and authors speaking to other speakers and authors does not lead to much creativity. Most of the “ideas” presented are well-worn and don’t address the “real world” outside of the industry.

Therefore, my last suggestion to the group was to increase the level of diversity at these learning experiences. This would provide a wider range of ideas, suggestions, and points-of-view.

How does diversity apply to an organization?

Diversity can mean a wide variety of things:

• Diversity of race, creed, color, sex, etc
• Diversity of innovation styles
• Diversity of disciplines

I won’t address the first point as that has been a topic of discussion for decades. Let me tackle the next two.

Diversity of Innovation Styles
The second point ties directly to my Innovation Personality Poker system.

In the card-based game, I discuss the four primary innovation styles: analytical, creative, planning/action, engagement.  Most organizations favor one over another and therefore do not have a good balance of styles. There’s a reason for this.

Although homogeneous teams are often more efficient (i.e., you get things done faster), having a bunch of “yes men” working for you is not the answer for long-term growth. When people think too much alike, new ideas struggle to surface. In these homogeneous climates, innovation and growth (i.e., effectiveness) suffer.

The essence of successful companies, then, is the ability to be both efficient and effective. They are able to focus on both production and innovation, not just doing things right but also doing the right things.

There’s plenty of evidence that team diversity translates directly into corporate profits. Sigal Barsade and colleagues at the University of Pennsylvania’s Wharton business school studied top management teams at large corporations in the United States. Interestingly, the more diverse the functional roles of the members of those teams were, the greater the average, market-adjusted financial return in those companies. Diversity of the top leaders translated into bottom-line results.

In Personality Poker, there are four key concepts:

• You need people in your organization “play to their strong suit.” That is, make sure that everyone understands how they contribute to and detract from the innovation process. This includes ensuring that you have the right people with the right leadership styles in your organization.
• As an organization, “play with a full deck.” You must embrace a wide range of innovation styles. Instead of hiring on competency and chemistry, also hire for a diversity of innovation styles. Every step of the innovation process must be addressed. You need people who are great at conducting research, delivering results, developing plans and reports, building relationships, and creating new ideas, amongst other things.
• “Deal out the work.” That is, you must divide and conquer. You can’t have everyone in your organization do everything. Instead, get them to divvy up the work based on which style is most effective at a given task. You can’t have everyone generating ideas, or focusing on planning.
• Recognize that in order to treat everyone the same, you must treat everyone differently. People have different needs in terms of how they like to be managed, how they like to be praised, and how they want to contribute to the organization. In order to attract and retain a well-balanced organization you must be prepared to treat people as they want to be treated. To do this, you must overcome the inertia of your company’s personality and embrace the needs of the individual personalities.

I could write a whole book on the value of diverse teams.  Oh, wait, I did!  My Personality Poker book will be published by Penguin’s Portfolio imprint Fall 2010.  Throughout, I provide examples of, and evidence for the value of having a diversity of “styles” within your organization.

But what about the third type of diversity: The diversity of disciplines.

Diversity of Discipline
A discipline is any area of expertise like biology, chemistry, physics or mathematics. You can have an organization comprised of diverse innovation styles while sharing only one discipline.

A while back, I spoke with Al Bredenberg, Senior Researcher from ILO Institute. He subsequently wrote an excellent blog entry on the topic of diversity where he quotes me. He also mentions a Harvard Business Review article by Lee Fleming that suggests that companies with less diversity of discipline produce better overall financial results than highly diverse ones.

“The financial value of the innovations resulting from such cross-pollination is lower, on average, than the value of those that come out of more conventional, siloed approaches. In other words, as the distance between the team members’ fields or disciplines increases, the overall quality of the innovations falls…. But my research also suggests that the breakthroughs that do arise from such multidisciplinary work, though extremely rare, are frequently of unusually high value—superior to the best innovations achieved by conventional approaches…When members of a team are cut from the same cloth, you don’t see many failures, but you don’t see many extraordinary breakthroughs either.”

However, as the diversity of disciplines increases, “the average value of the team’s innovations falls while the variation in value around that average increases. You see more failures, but you also see occasional breakthroughs of unusually high value.”

Therefore, although there is value to diversity of disciplines, the challenges seem to outweigh the benefits.

What’s the solution to having a diversity of disciplines without having to deal with the inherent complexities?

Open Innovation. By working with companies like InnoCentive, you get the value of discipline diversity while having few of the downsides.  You get the take advantage of a wide range of experiences while only paying for successful solutions.

I will write more on Open Innovation in subsequent entries.

The Bottom Line
Diversity can create incredible value for an organization. It can help facilitate the innovation process. It can help increase the quantity and quality of breakthrough ideas. The key is knowing the right way of managing and engaging a diverse set of perspectives.

Why Best Practices are (not Always) Stupid

A couple of days ago I wrote an article entitled – “Why Best Practices Are Stupid.”  You can read my rationale there; I won’t bother reiterating it here.  Besides, there is a video in that post.

But there are situations when best practices are NOT stupid.

Core & Support Capabilities
In an even earlier article I talk about innovation targeting.  Again, I won’t repeat what was said there.  But in summary, best practices are not a good idea for your “differentiating” capabilities.  But they can be quite useful for optimizing your “core” and “support” capabilities.  Read the article to learn more.

Cross-Industry Best Practices
Don’t get too excited about best practices that are from within your industry.  But certainly “steal with pride” from other industries.  You can get some incredible innovations from companies who are not your competition and are from an entirely different industry.  Watch my TEDx NASA video (only 6 minutes long) or read the speech transcript for some examples.

The Innovation Process
Here’s a question for you: Should you innovate  the innovation process?  Here’s my two cents.  Although innovation is used primarily for your differentiating capabilities, the innovation process itself is, for most companies, only a core capability.  Therefore the answer is “no, you should not innovate the innovation process.”  Or in other words, innovation best practices are extremely useful (and not stupid).

For example, if you are an insurance company, you might want to apply innovation to your claims processing.  Claims processing might be a differentiator.  But innovation is a core capability.  Therefore you want to use innovation best practices rather than inventing new approaches for innovating.

The one exception to the rule however, is if you are indeed an innovation company.  For example, for companies like InnoCentive, innovation is their differentiator.  Using innovation best practices would not be enough.  They differentiate themselves in the marketplace via the thought leadership on the innovation topic.

As you can see, although it is fun to say that best practices are stupid, they do in fact serve a useful purpose if used in the right way.

Three Innovation Distinctions (part 1): Challenges not Ideas

Last week I was with a group of extremely successful entrepreneurs in Las Vegas. I was a bit of an outlier as my background is mainly with large, multi-billion dollar businesses. Everyone else in the room came from the start-up world. Also, nearly everyone in the room worked exclusively with speakers and authors. Although I too am a speaker and an author, it was clear that my perspectives were a bit different than everyone else in the room. Or as one entrepreneur said, “Steve, you have distinctions in innovation that we don’t.”

So they asked me to share my point of view. What I shared were three simple distinctions on innovation.

1. Challenges not Ideas
2. Process not Events
3. Diversity not Homogeneity

In today’s blog entry I will focus on the first point. Subsequent blog entries will address the last two points.

CHALLENGES, NOT IDEAS

Signal-to-Noise Ratio
One of the most important, yet under-considered measure in the innovation process is the signal-to-noise ratio. The signal-to-noise ratio is the ratio of a signal power to the noise power corrupting the signal. In layman’s terms, it is the ratio between what you want and what you don’t want. For example, in audio recordings, it is the ratio between the music and the background noise.

Organizations do not have a shortage of ideas. They have a shortage of good ideas that matter.

In innovation, the signal is comprised of the good ideas. The useful ideas. The ideas that can and will ultimately be implemented in such a way that they create value. The noise is made up of all of the other ideas. Useless suggestions. Solutions to problems that don’t matter. Ideas that will never come to fruition.

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

Drowning in Ideas

Suggestion boxes are cluttered with noise. The amount of time required to sift through the chaff to get to the wheat is huge. And even when you do find a good solution, the amount of effort required to rally to troops to implement the problem is huge.

The innovation team of a large retail bank implemented a major suggestion box program. They received thousands of ideas. Evaluators looked at every idea.  In the end, none were implemented. In the aftermath of their efforts, they asked me for my observations.  In hindsight, the submitted ideas could have been categorized into 3 groups:

1. Duds: A large percentage of the ideas were clearly not worth pursuing. These ideas were not new, or were unlikely to show a positive ROI.  However, even with these, there might have been a nugget of usefulness that was missed.  However the energy to nurture these nuggets was probably not worth it.
2. False Negatives: There were, from my perspective, many ideas that were indeed good. But for whatever reason, the evaluators dismissed them.  Part of it had to do with biases of the evaluators.  Sometimes it was due to a lack of knowledge on the part of the evaluators.  And often, it was because the ideas were not fleshed out enough making it difficult for them to be properly judged.
3. Good, But No Home: This was the most disconcerting category.   These were ideas that were good ideas that the evaluators liked, but sadly they had no organizational home. As a result, the ideas withered on the vine and were never implemented.  They never got the resources or funding necessary to move them to the next level.

The company’s innovation program lasted a total of 18 months.  It was shut down and deemed a huge failure.

I have seen similar results in other organizations. One large company I know has a competition each year where employees submit new product ideas. The winner gets a large check and the company implements the best idea. I asked the person responsible for this program if it was viewed as a success. The answer was, “It was a PR success but a commercial failure.” The competition generated buzz in the media, but none of the products have yet to generate a positive ROI. Contrast this with their more focused efforts on creating or improving specific product lines. In nearly every case, these were commercial successes. Their idea-based programs did not generate good bottom-line results, while their challenge-based initiatives did.

The other issue with ideas is that there is no level of accountability. Because people tend to develop ideas on their own time, there are no time tracking methods that can keep tabs on how much energy is invested in idea generation. If you encourage ideas, I suspect that you are spending a lot more money on those initiatives than you could ever imagine. You might be able to measure the ROI of a winning idea. But I doubt you can determine the ROI of your overall ideas-based program. There is no way to know how much time was spent on the thousands of duds that never see the light of day.

The Power of Challenges

Contrast this with challenges. With challenges you assign owners, resources, evaluators, evaluation criteria, and funding up front. We know that the solution to a challenge will be relevant to the needs of the organization, so if a solution is found we know it will be valuable. Also, because of the nature of challenges, we have better tools to evaluate the amount of time spent on finding solutions. We can truly measure the ROI of each challenge and the overall challenge-based program.

Some of you may see a loophole in my logic. You might think, “Ok Steve, why not just post a challenge that asks for new ideas. This would seem to be a challenge-based approach. But of course all you are getting back are ideas.” This is true. And this is why it is important to discuss the construction of challenges.

The Goldilocks Principle

Good challenges must adhere to the Goldilocks Principle. That is they can’t be too big (broad, novel, abstract – e.g., asking for new ideas) or too small (overly specific). They must be “just right.” As Dwayne Spradlin said in his InnoCentive blog entry on the topic:

For example, the big problem is not the need for a new drug for a neglected disease, it is the elimination and/or minimization of the human suffering caused by the disease. The right questions might include: How do we limit transmission? How can we cost effectively produce treatments that comprehend market based economics to ensure a sustainable model? How do we distribute treatments in the developing world? Even these questions require further decomposition until we get to well formulated challenges (e.g., Can we get 5X more vaccine into the hands of those that need it in the context of real world economic, cultural, and political constraints in Sub-Saharan Africa?).

The key is good challenges. The right challenges.

A lot more could be said on this topic. But I will close with a quote from Albert Einstein, who in 1938 said, “The mere formulation of a problem is far more often essential than its solution, which may be merely a matter of mathematical or experimental skill. To raise new questions, new possibilities, to regard old problems from a new angle requires creative imagination and marks real advances in science.”

I couldn’t have said it better myself.

[for your convenience, all three articles have been packaged into one pdf file]

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