An angry banker once told Thomas Alva Edison to get the toy out of his office -So, Edison took his invention(Phonograph) somewhere.
Digital Equipment Corporation(DEC) -In the late 1960s and the early 1970s, DEC became a dominant player in the manufacturing of minicomputers. One of the models PDP-8 was a massive commercial success. The customers perceived that DEC’s VAX series of minicomputers as the most reliable computers ever manufactured at that time. As sales multiplied, DEC opened up more manufacturing units, sales offices, warehouses, distribution centers, and other related facilities. The company hired more people to handle the workload.
As the resources grew, the pressure to keep the facilities running and to keep the people occupied began to pile up. The product sales had to grow briskly to keep the momentum and that further demanded an increase in resources. It was a vicious cycle. The company was becoming a beast & it needs a vast amount of food.
It forced the management to look for ways to create and launch new products as quickly as possible. DEC’s research team proposed concepts like personal computers, computer workstations, and client-server architecture. But the management ignored those ideas as they felt that the projected sales volume of those products would not be sufficient to keep the big company running. It cannot feed the beast.
Ken Olsen, One of the DEC founders famously told, “I can see of no reason why anybody would ever want a personal computer on their desk. The market demand would be very small.” It’s a bad idea!
However, personal computers, client-server models from competitors began appearing in the market, though the products had a weaker demand in the beginning. The DEC leadership ignored the emerging trends.
They believed that their minicomputer would continue to prevail and bring in enough profits to run the company. They blindly continued to make minicomputers that were superior to their previous models.
In the following decade, the company slowly went out of business.
Walt Disney Studios -In the late 1980s and early 1990s, most of Walt Disney Studios’ movies became massive hits. The films’ success led to Disney Studios’ expansion -They opened animation centers, marketing offices, distribution facilities, service hubs, and merchandising departments in multiple cities. The studio became a beast.
The pressure began to pile up to keep the beast fed. Disney Studios needed more film projects to keep the staff occupied and to meet the expenses. It was a classic growth challenge. To quickly create as many new movies and launch them as soon as possible became the order of the day.
In the following decade, Walt Disney Studios failed to release any great movie. They made films that appeared similar to or slightly better than their earlier releases. Many of the shows were a remake or franchise models of their old films.
THE PROFIT PARADOX
What’s the problem? Why does it happen in many larger organizations?
When you are a small company, your focus is on effective ways to solve a customer problem. In Disney’s case, the focus was on powerful means to entertain people. You look at a new idea and comprehend whether it has the potential to solve a people’s problem.
As the company grows, the goals shift as the measure of success change -Employees have to generate ideas that would leverage existing assets & supply chain system and also would meet resource expenditure in a short time. And, that too, without threatening existing net income levels. It forces them to dump many concepts. The leadership thinks many of the ideas aren’t worthwhile to continue. However, the brutal truth is — As a startup, they would have pursued many of those rejected concepts. It blocks the nature and scale of innovation.
It results only in incremental innovation, resulting in incremental profits.
It eventually becomes, “How can we do what we’re already doing, a little bit better and a little bit cheaper?”
This relentless profit pressure makes the leadership to dump good ideas and support only incremental designs.
Why do people dump good ideas?
The problem is that those good ideas, at first, might seem wrong or not practicable. Imagine the concept of asking a person to rent out a part of his home to a stranger. It was considered a horrible, senseless thought that was hard to implement and had no practical benefit to anyone. Today, Airbnb is one of the top global brands. The founders pursued their idea and let it evolve.
We have to understand that most of the newly formed ideas will be vague, poorly defined, ugly, and may not have all the details. If somebody sees the concept at this stage, they might conclude that the idea is not worth pursuing. They don’t realize that the new concepts need time to grow.
PIXAR -Ed Catmull, Pixar’s CEO, writes that all their successful films were once ugly, poorly defined ideas in the conceptualization stage. They were not beautiful, miniature versions of the final movies they grew up to be. The story had several potholes in the beginning. But Pixar nurtured those ideas. Disney Studios, on the other hand, compared their early mockups of new movie ideas to their recently released finished films and judged them. Ed Catmull never let his unit compare the latest concepts with the existing successful movies/products. That’s a fundamental lesson -Don’t compare the new idea with a current product/service that had taken some time to reach the stage where they are now.
Build a Cocoon -Ed Catmull writes that every new idea needs nurturing in the form of time and patience to grow. The latest concept might be ungainly and opposite of established or entrenched practices. That’s why you should allow time. We have to understand that for greatness to emerge -there must be phases of not-so-greatness. Think of a caterpillar morphing into a butterfly. It survives because the encased cocoon protects it.
The leadership has to create a cocoon around the idea to save it from ill-judgments.
Many companies might not have an organized culture to support bad or incremental ideas, but they might have a history of killing ideas before allowing it to evolve for some time.
So, how to avoid that and create a culture of nurturing ideas?
THE GROWTH MINDSET
At Pixar, every director, storyteller, production personnel were well aware that all great ideas were once rubbish.
A movie about talking toys? Oh! It’s crap. A film about a rat preparing food for humans? How horrible?. All those great movies were, in the beginning, appeared as a garbage idea. However, the director & his/her team believed in the story, started somewhere, collected candid feedback, iterated, reworked again & again until the flawed story found its soul — Ed Catmull.
Every employee at Pixar believes that an idea’s true potential is unknown. It’s impossible to predict how working with passion, extensive analysis, iterations, and hard work could transform a concept.
The concept reviewing team at Pixar sees every new idea as a springboard for growth and a challenge to stretch their existing abilities. Their first thought would be on how to improve the concept and not on approving or rejecting it.
Encourage a growth mindset about any new idea among the employees.
Ed Catmull talks about two types of people -Idea Killers, who would actively search for flaws and pounce to kill the concept itself. Giving negative feedback about an idea is not bravery. It would make a company risk-averse and kills innovation. A company that takes risks innovates. Innovation builds a sustainable competitive advantage.
The second type of people, called Idea Protectors, observe flaws in a concept, point out gently, and suggest alternate solutions for improving it. They will hold no authority and leave it to the person to decide the future action of the idea. They also look for positive things in the concept and highlight them.
The Idea Protectors believe that the idea needs to evolve sometime before rejecting it.
Backing an unproven idea and allowing time to grow needs the courage of the highest order. It’s a risk. Only a few souls could do it.
Populate concept review meetings with idea protectors.
Empathy is the cornerstone of any idea evaluation process inside the company. The extent to which the review team participants understand the reasons behind the idea from the creator’s perspective determines the outcome of the meeting. They need to listen patiently and observe with empathy to understand the thoughts behind the person’s idea. Only when the participant understands the thought process, he/she could sort out the strength and weaknesses of the concept.
For reviewing the new movie ideas, Ed Catmull, Pixar’s CEO, chose a team of people who could understand the difficulties of being a director. He didn’t allow non-filmmakers or non-creative people into the review team.
Ed Catmull’s idea was clear -only people who could empathize with the person can be part of the review team. A director who had struggled earlier with his dilemmas can see another director’s struggles more clearly than his own.
ENCOURAGE TO GATHER MULTIPLE PERSPECTIVES
One of the ways to ensure the success of a concept is to seek different views at the beginning. Multiple perspectives, not only add value to the idea but highlight the presence of hidden biases.
More the information, the lesser the hidden problems and better the decisions.
Ed Catmull encouraged his directors to collect feedback about their concept stories from other directors/storytellers. He also requested them not to see their suggestions as a competitive thing but something that would add value to his/her idea.
In one of the studies, researches divided the employees into two groups. One group discussed their ideas only with colleagues within their departments. The other group of employees presented their ideas to people from outside their departments. The result -The ideas that had inputs from multiple departments were the successful ones. Those ideas had undergone substantial evolution and were more detailed. It improved the rate of adoption.
The earlier the person discusses his/her idea with people of different disciplines, the higher the adoption rate.
Encourage your employees to discuss their idea informally with colleagues from other departments.
For nurturing ideas, it is essential to have an environment that is conducive to creative thinking.
Ed Catmull created an environment where nobody had to fear of saying something stupid -Nobody is going to ridicule him/her for his/her idea. He created a system where each of the participants in the meeting would focus only on the film(or problem or concept) and not on any hidden personal agenda. The review team would discuss how the new movies were panning out. They would talk about what they feel is not working well in that idea, what could be better, and what’s not authentic.
Instead of saying that he/she is wrong, talk about the wrong things in the idea.
At Pixar, the idea review participants earned no credits or rewards for their feedback on the idea. They gained no favors from their supervisors.
Though he is not a director, Ed Catmull attended many of those review meetings. His primary role was to observe and make sure that the above environment is maintained. If anything contrary happens, he would bring it to the awareness of everyone and solve it along with them.
Creativity grows when people feel safe from ridicule. Negative responses reduce motivation and commitment.
FREEDOM AND RESPONSIBILITY
In the early 1970s, Intel was nearly a monopoly in manufacturing and supplying memory chips(DRAMs).
However, in the late 1970s, the entry of Japanese memory manufacturers wrecked Intel’s market, turning DRAMs into a commodity product. Intel was losing money rapidly. Intel’s CEO Andy Grove and Chairman Gordon Moore pondered various solutions to stem the loss as well as the future course of action.
The Freedom To Experiment -As a part of internal culture, Andy Grove had encouraged his executives, shop-floor employees to experiment on their own & be creative. He empowered them to make their own decisions. Mistakes were not condemned but critiqued by way of advice and learnings.
Because of this type of encouragement, many small teams within Intel kept experimenting on new technologies. One of them was working on microprocessors from the early 1970s. They had the freedom to find a buyer and sell the product. Though the sales were low, they continued to work on tweaking the product. The leadership didn’t interfere and allowed them to do what they believed. However, Andy felt that the microprocessors had a small market. It won’t be sufficient to feed the beast. So, he ignored the idea, but he didn’t interfere in the workings of the microprocessor team. Andy suggested Intel focus on manufacturing higher-end memory chips.
In the meantime, IBM PC was using Intel’s microprocessor & their sales had exploded. Nobody else manufactured microprocessors at that time. IBM looked up to Intel to ramp up the microprocessor production. Soon IBM PC’s competitors were also behind Intel for microprocessors.
Freedom to Make Decisions -One of the best things that were happening to Intel at that time was -Andy Grove and Gordon Moore had let their executives, middle managers make all the daily decisions on their own.
The resource allocation processes at Intel were designed and perfected for memory chips manufacturing. As the demand for memory chips began to fall, little by little, the middle-level production managers embarked on allocating more and more of the resources, production facilities to manufacture microprocessors so that the unit could remain profitable and not remain idle. As part of their daily work, those middle managers slowly took away the production capacity from the money-losing memory business to profitable microprocessor business.
Andy writes that those managers didn’t have the authority to get Intel out of memories, but they had the jurisdiction to fine-tune the production allocation process by lots of little steps. They didn’t wait for approval from the top management.
By the time Andy and Gordon decided to move away from memory business to microprocessors, only one out of eight silicon fabrication plants were producing memories. Those middle managers helped Intel to transition quickly to microprocessor business without any drastic consequences.
ENCOURAGE ENTREPRENEURIAL MINDSET
To sustain an innovative culture, leadership should encourage employees to think like entrepreneurs. Allow an employee to decide on continuing the new idea if he/she believed in it, even though the leadership team was against it. Empower them to find the resources inside or outside the organization without breaking any crucial practices. Don’t punish them even if the project fails unexpectedly. Encourage passion. It is a way to nurture ideas.
Chuck House was one of the talented employees in the product development division of HP. He was working on a new display monitor and showed a prototype to Dave Packard(HP’s Co-founder). Dave studied the prototype and felt that it would not sell in the market. So, he asked Chuck to abandon the project. However, the employee was not ready to quit. He revised the product and went on to show the new prototypes to potential customers and gathered their feedback. He had freedom in his company to do that. He knew that the leadership would not reprimand him for trying his ideas. That’s the environment a company needs to create.
In his meetings with customers, Chuck was pleasantly surprised to discover that customers loved the product. Their interest prompted him to continue working on the project even though the management asked him to discontinue. He somehow convinced his manager to rush the monitor into production. The result -HP sold more than seventeen thousand display monitors within a short time.
Dave presented Chuck House with a medal for -extraordinary contempt and defiance beyond the normal call of engineering duty.
The above example shows how HP benefitted from creating a supportive environment for nurturing an idea.
DON’T PUNISH THE FAILURES
In the 1970s, in GE, one of the teams under Jack Welch(Later, he became CEO of GE) developed ‘Harlac’ light bulbs that lasted ten times longer than the typical light bulbs at a fraction of energy but expensive to buy. Unfortunately, consumers did not buy the light bulb & the project failed. GE lost more than $50 million. Jack didn’t punish those involved in ‘Harlac’ project but celebrated their great ‘efforts’ by handing out cash awards and promoted several of them to new jobs. This act fostered the thought that taking risks is encouraged & failing is a way to grow in GE -a positive step in building a fearless culture to nurture ideas.
Jack believed that fearless culture encourages creativity and independent thinking. It helps to bring out great ideas & it is essential for a company’s rapid progress.
From Henry Ford’s assembly line to Airbnb, every great innovation started with a terrible idea. George M Prince says that to have creativity take place we need to be optimistic, assume valuable implications, protect vulnerable beginnings, give early support, share the risk, deal as an equal, temporarily suspend disbelief, share the burden of proof, focus on what is going for an idea and assume it can be done(From the article written by J Allyn Bradford). Build a culture to nurture ideas in your organization
References: How to Build Effective Teams through Critical and Creative Thinking by J. Allyn Bradford, Creativity, Inc. by Ed Catmull, The Innovator’s Dilemma by Clayton Christensen M, The HP Way by David Packard, Straight from the Gut by Jack Welch, Only the Paranoid Survive by Andrew S Grove.