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  Stage three is the “refinement” stage, when the idea is tested to see whether it works in the marketplace. Designers and engineers collaborate to help design and build product prototypes. Marketers assess whether a sizable market exists for the product. Manufacturing specialists (often in China) analyze the product’s cost at different unit volumes. These tasks require stellar execution skills first and foremost. However, even at this stage, Collins and others with strong discovery skills serve a critical role in searching for innovative adaptations to the product, making it even more desirable to customers.

  Stage four is the “capture value” stage, when the product launches to the market. While this stage centers mostly on delivery in terms of manufacturing, marketing, distributing, and selling the product, discovery skills can still generate value as BIG searches for innovative ways to manufacture, market (brand), distribute, and sell (price) the product. “You can find ways to innovate at any stage of the innovation process,” says Collins. In fact, BIG is quite innovative in this final stage of the innovation funnel, using a wider variety of distribution channels for its inventor-produced pipeline of products than a typical company.

  To illustrate, BIG’s search for new product ideas when the company was founded was in the product category of toys. Once BIG had gone through the first three stages of sourcing and developing a new toy idea, it then would face the question: what is the best way to capture value from this product (e.g., manufacture, market, sell)? Some new toy products fit well with Toys “R” Us, the retailer you would normally think about as the best way to distribute new toys. In these cases, BIG might source production from China and let Toys “R” Us take it from there. However, rather than just rely on Toys “R” Us, Walmart, or Target (big-box toy retailers in the United States), BIG found that some new toy ideas were better suited for the Learning Company, Basic Fun, the National Geographic catalog, QVC, Brookstone (toys for adults), or numerous other channels. It also licensed toy ideas to Hasbro, Mattel, or other toy manufacturers that were better positioned to take a particular toy to market due to their particular resources and processes. In short, BIG was far more innovative in the final stage of the innovation funnel compared with a toy company like Mattel, which basically took all its toys to big-box retailers. The point is that, while you might need more discovery skills at the early stages of the innovation process, you should deploy (or at least sprinkle) people with strong discovery skills throughout every team in the organization—and at every stage of the innovation funnel.

  The Value of Complementary Human, Technical, and Business Expertise

  Making sure that innovative teams possess complementary discovery and delivery skills matters, but making teams multidisciplinary—comprised of individuals with deep expertise in different disciplines—also matters in company innovation. To illustrate, consider how IDEO, the hottest innovation design firm in the world (it has won twice as many Industrial Design Excellence Awards as any other firm), staffs innovation design teams. These are teams explicitly charged with creating an innovative product design or new service concept.

  In general, IDEO works to create multidisciplinary teams comprised of individuals who are T-shaped in terms of expertise: deep in one area of expertise with shallow expertise in multiple areas of knowledge (as described in chapter 2). Of course, being part of a design firm, all IDEO teams have a team member with significant design expertise. However, IDEO teams also search for individuals with expertise that falls in one of three domains: “human factors” expertise (to determine the desirability of an innovative idea), “technical factors” expertise (to assess the technical feasibility of an innovative idea), and “business factors” expertise (to evaluate the business viability and profitability of an innovative idea).

  First, IDEO includes a human-factors expert on the team, someone with a background in one of the behavioral sciences such as anthropology or cognitive psychology. This person provides insight into the desirability of a new product (or service) from the user’s perspective. The human-factors person orchestrates in-depth observations of customers to understand the job to be done and to acquire deep user empathy. For example, when designing a product or service for people in wheelchairs, the human-factors person might make sure that people on the team spend one day experiencing the world as someone in a wheelchair would. By gaining insight and empathy into the user experience, the human-factors person brings insight into the desirability of an innovative new design. This perspective is particularly important in early stages of designing a new product or service.

  A Lack of Business Innovation May Stifle Technology Innovation

  A few years ago, Clayton Christensen received a visit from a few technology executives at 3M who expressed frustration that innovations weren’t getting to market because of a lack of innovation on the business side. 3M has long been known for innovation, and Christensen knew the company well as a result of several onsite visits to grasp how innovation works there. During his visits, he found that 3M’s research and development arm applied the innovation principles described in this book. It hired people with deep and varied expertise, connected discovery-driven people with varied technology expertise, and had philosophies that encouraged innovative behavior.

  So what was the problem the 3M team brought to Christensen? They showed him a gift bag that was unlike anything he had ever seen. If you looked at the bag straight on, it was a beautiful purple color. If you looked at it at a different angle, it was pink. Inside it was bright white. By using technologies that allowed polymers to absorb or repel wavelengths, the team created a gift bag that could literally change colors. This seemed remarkable, but the team was far from elated. “The corporation doesn’t want to take it to market,” they said. “The market’s not big enough.”

  From Christensen’s view, this was an amazing gift bag. The market for these types of bags must be huge. Indeed, the world market for gift bags and boxes is in the billions, but profit margins in the gift-bag segment are only 30 percent, he was told. 3M’s typical profit margins are 55 percent, and the treasury didn’t typically fund product launches with lower margins. This led to the question, what if the team just raised the price on the bags to reach the target margin of 55 percent? The response was that if the price increased, the market would shrink so much (to a small niche) that it wouldn’t be big enough for 3M to pursue.

  The challenge was finding a way to profitably take this innovative product to market. But 3M didn’t pursue innovation on the business side as much as it did on the technology side. It had created rules about launching products and didn’t expect innovation on the business side of how it decided to fund or not fund the launch of a new product.

  We’ve observed this challenge elsewhere. Companies relegate innovation to the R&D unit, where people should innovate, but those on the business side are expected to just execute and skip the same innovation challenge. The result (in 3M and other companies) is that a lack of business innovation can easily stifle technology innovation. Not surprisingly, this can deflate folks in the R&D side of the business. Moreover, the company can miss disruptive opportunities that it wouldn’t miss if it could only innovative a bit more in how it manufactures, distributes, markets, prices, or allocates resources to a product.

  The technical-factors person brings deep expertise in various technologies that the team might employ in the design of a new product or service. This person likely comes from an engineering or science background. This expertise is important in order for the team to grasp what technologies are feasible for use in a particular new product or service design. Technical expertise is particularly critical after the team has clearly identified the user’s needs (the job to be done) and then is searching for and deciding on technologies to provide the optimal solution.

  Finally, the business-factors person brings the expertise necessary to figure out whether an innovative new product or service design will prove viable in the market. This person likely has a business background, su
ch as a master’s degree in business administration (MBA) with expertise in operations, marketing, or finance. Naturally, this expertise becomes more relevant in the later stages of the innovation process, when a team must determine the optimal way to manufacture, distribute, promote, and price the product for profitability.

  By staffing teams with complementary expertise, IDEO can better look at problems from a variety of angles and discover a new product or service that is desirable, feasible, and viable. No wonder it generates so many successful design innovations. The key point is that innovative companies select a mix of people who possess not only complementary discovery and delivery skills, but also different expertise and diversity of backgrounds to look at problems through multiple lenses.

  In summary, the most innovative companies in the world have leaders who understand innovation at a deeply personal level. They lead the innovation charge with a high discovery quotient and regularly contribute innovative ideas to the company. As one executive with a delivery-driven boss complained to us, “you can’t be all about execution and expect people to be innovative. It just doesn’t work that way.” Innovative companies find novel ways to hire discovery-driven people who have a track record of innovation and a strong desire to change the world. Having a larger number of discovery-driven people lays the foundation for strong innovation synergies as discovery- and delivery-driven folks interact well enough to learn from and support each other. Innovative teams (and companies) perform best when discoverers honestly appreciate the pivotal role of those with strong execution skills (and vice versa), especially in teams staffed with folks possessing complementary skills. Finally, innovative companies hire and staff teams with people who possess different types of expertise (preferably with a T-shaped profile) so that the team or organization can view and solve problems from very wide angles.

  9

  Putting the Innovator’s DNA into Practice

  Processes

  “We don’t care if you give us a toothbrush, a tractor, a space shuttle, a chair; we want to figure out how to innovate by applying our process.”

  —David Kelley, founder, IDEO

  OUR RESEARCH ON THE WORLD’S most innovative companies reveals that the DNA of innovative organizations mirrors the DNA of innovative individuals. Just as inventive people systematically engage in questioning, observing, networking, and experimenting to trigger new ideas, innovative organizations develop processes that encourage these same skills in employees. They also rely on systematic processes to find people with strong discovery skills who thrive in environments that embrace their use of those skills. As described in chapter 7, organizational processes reflect a response to recurring tasks that when used frequently become taken-for-granted recipes to solve particular problems. However, for processes to help organizations generate innovations (e.g., new process, product, service, or business ideas) systematically, they must be widely understood and employed throughout an organization (not just by an innovative founder or a small number of highly innovative people). In this chapter, we first discuss how innovative organizations find people who excel at discovery, and then we examine the processes that encourage—even require—employees to question, observe, network, and experiment.

  How Innovative Organizations Find Discovery-Driven People

  Leaders of highly innovative organizations understand the critical need to attract creative people if the company hopes to build a cadre of innovators at all levels. “In most things in life, the dynamic range between average quality and the best quality is, at most, two-to-one,” Steve Jobs once said. “But, in the field that I was interested in—originally hardware design—I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream. That’s what we’ve done. A small team of A+ players can run circles around a giant team of B and C players. That’s what I’ve tried to do.”1 So how do highly innovative companies find employees that rate A+ for innovation? They look specifically for people who:

  Show a track record that demonstrates strong discovery skills (for example, they have invented something).

  Possess deep expertise in at least one knowledge area and show breadth in a few others (for example, the T-shaped knowledge profile of innovators we discussed in chapter 2).

  Display a passion to change the world and make a difference.

  Clearly, if companies want innovative ideas from employees, they should screen for innovation potential in the hiring process. Most companies rarely do it, but highly innovative ones do. They explicitly screen candidates for creativity and innovation skills as part of the new-hire process. For example, at Amazon (number 3 on our first list of most innovative companies and number 5 on our most recent list) hiring managers are looking for “builders,” and in the interview process they typically ask recruits to share their ideas on how they would build on existing business units or grow or improve the various business units within Amazon. And they want specific, novel ideas. Jeff Bezos himself has commented that he likes to challenge candidates to “tell me about something you’ve invented.” By looking for people who have a track record of innovation and who can generate innovative ideas, Amazon increases the probability of having innovators at every level of the organization.

  Google (number 6 on our first list of most innovative companies and currently in the top 100) has developed a variety of innovative techniques to find job candidates both bright and curious. To illustrate, Google came up with a Google Labs Aptitude Test (GLAT), a twenty-one-question test that was a somewhat tongue-in-cheek way of screening for new employees. Some questions focused on evaluating quantitative ability (one question: “How many different ways can you color an icosahedron with one of three colors on each face?” FYI: the answer is 58,130,055). Others were designed to test for creativity and a sense of humor: “In your opinion, what is the most beautiful math equation ever derived?” Another said: “This space left intentionally blank. Please fill it with something that improves on emptiness.” People who lack the patience for such frivolity do not apply. People who both understand such questions and find them amusing and challenging are exactly the kind of people Google wants to hire. Google no longer uses the GLAT, but the test represents one of the many innovative methods that Google has used to find and screen for creative types.

  Another innovative technique for finding qualified and creative job candidates is Google Code Jam. Launched way back in 2003, Google Code Jam is a timed problem-solving contest (tournament) where all participants compete online to solve the same problems under the same time constraints. The prize for winning? Fifteen thousand dollars and a job offer from Google. In fact, in Google’s Code Jam 2006, it awarded jobs to the top twenty finalists. Of course, being a top-twenty finalist is no small feat, considering twenty-one thousand people from all over the world competed in the contest. Through use of the tournament, Google effectively screens upward of twenty thousand worldwide applicants for jobs in a matter of days with a format that is almost entirely automated. The fact that winners of Code Jam have come from Russia, Poland, and China shows that Google is attracting global talent (entrants for Code Jam 2017 came from 125 countries). While the early qualifying rounds largely test an individual’s speed in solving computer-programming problems, the final challenge phase, conducted with a hundred finalists at Google’s headquarters, asks the participants to demonstrate more-innovative thinking; each contestant attempts to crack the programming code of the other participants. This process has been very successful at helping Google find highly talented programmers who are passionate about programming and about wanting to work for Google. In 2017 Google was able to screen from over twenty-five thousand participants.

  A consistent theme within the most innovative companies was hunting for people who had invented something, held deep expertise in a particular knowledge area, and demonstrated a passion to change the world through excellent produc
ts and services. As previously mentioned, Amazon sends a powerful signal to any potential new hire that it expects and values invention by asking for their new ideas and questioning them about something they have invented. IDEO (the award-winning innovation design firm) looks for people with deep expertise, whether in psychology, anthropology, design, engineering, or whatever, in part because such expertise demonstrates that they are passionate about something. Apple looks for A+ talent by explicitly seeking people with a demonstrated track record of excellence. “We wanted entrepreneurs . . . high energy contributors who defined their previous role in terms of what they contributed and not what their titles were,” said Sharon Aby, a former recruiter at Apple. “The main quality: expectation of excellence . . . As recruiters, we didn’t settle. I fought with some managers who wanted to fill a role quickly to get a project moving, but if it took six months to find the best, they’d have to wait. We looked for people who were excited to create new things. Our motto was, ‘Surprise me.’”2