Uncomfortable Innovation

In order to change something, an innovator has to be comfortable with new ideas and at the same time be uncomfortable with the status quo. They have to be uncomfortable enough to want to change it – and willing to use untried approaches, unfamiliar skills, and even the wrong tools to make something better.

Tony Reynes, a principal of Tesar Reynes made this very clear to me recently when he said, “Instability and comfort with being off-balance certainly is a big part of why I’m an innovator.” Being comfortable with discomfort may be a crucial character trait for innovators.

Patrick Lamb of Valorum Law Group helped clarify the importance of discomfort by describing his new exercise regimen. His physical trainer requires Patrick to stand on an unstable platform whenever he performed an exercise. According to the trainer, the instability of the platform helps to build core muscles that are constantly compensating and trying to maintain some kind of internal balance. Translated to business and innovation, that same ideal holds, “if we are able to operate in an unstable way, we become stronger and better able to emphasize the positive sides of change.”

If people are unable to accept discomfort, they may not be able to innovate. Kevin Conlon of Conlon Public Strategies pointed out that traditional printers in the seventies and eighties, when negotiating new contracts with newspapers passed up the opportunity to take control of emerging electronic printing and remote printing technologies. Those printers, however, were very comfortable in their skills as traditional trainers. “They were given the opportunity to embrace new and unfamiliar technology – and instead opted for contracts that allowed them to be traditional printers forever with no burden to evolve professionally. There are now virtually no traditional printers at any of the major newspapers.”

It should come as no surprise then, that innovators often seem to straddle multiple worlds, multiple cultures, and quite often don’t completely fit in. They often don’t have the standard credentials or formulas for a problem – and therefore by default look at things in a fresh or unique way. And even when they know the formulas well, they are willing to put them aside.

People who are comfortable with how things are done right now, have little reason to change. The rational course of action for someone in that position is to avoid changing what they are doing, even if there's a chance that things could become very uncomfortable in the future.

Jonathon Rutman of CB Richard Ellis has pointed out, “Those people who are the most successful in an old system are the last to see the reason to change – or to make any kind of change. Why give up what you have?”

Innovators are better able to find new solutions to old problems, not because they choose to – but because they have to. They are too uncomfortable to continue as they are.

Innovation needs to be uncomfortable.

(This blog post is an excerpt from a Branson Powers, Inc. B2B Executive Innovation Roundtable that was held on June 19th, 2009. If you are interested in reading the full report, you can view the pdf file)

Commercial Real Estate Innovation

Many of my friends, colleagues and clients work in the commercial real estate industry. Even after the credit markets come back, commercial real estate will be engaged in some exciting and fundamental transformation. A comment left on my real estate blog at The Real Corner elicited two interesting questions from Mark Waligora of Pinetree Commercial. He asked,

"What are the trends that we can anticipate and take advantage of as stakeholders (principals, brokers, lenders, tenants) during this transformative cycle? Where are the hackers in our industry?"

As I attempted to answer the questions, I decided to focus on two key trends that help me to understand what is happening and what may happen in the future. There are, of course, many macro trends affecting this sector; demographic trends, changes in technology, economic growth, debt and equity, legal structures and a new regulatory environment are all very important. But I believe that these two sometimes overlooked trends have a tremendous amount of potential to transform commercial real estate. They are:

1. Office and Retail need less space per person.
2. Sustainability and Energy Use issues will not go away.

To start with, it is time to acknowledge that that square feet use per person is on a downward trend - both in office space and in retail - and is unlikely to jump back up once the recession is over. The second baby boom will help offset the loss of square footage demand as new workers enter the workforce, but as the use of the Internet, mobile networking, flexible office space and on-line retailing only increases, population growth cannot keep up with the fundamental shift in how our society uses real estate.

When it comes to office space, why do businesses need to have large private offices when the average desk chair is only occupied 30% of the time from 9 to 5 Monday through Friday? They don't - and more and more businesses large and small are reducing their square footage per person. It's no longer a flaky idea to have flex office space and telecommuting. With everyone using a laptop computer and a cell phone, offices no longer house all the tools for people to work. The remaining purpose of office space may ultimately be to conduct meetings and brainstorming, not sitting at a computer and taking calls, that can be done in any number of places. Commercial real estate service companies have been advising corporate clients for quite some time on how to better use - and ultimately decrease the total amount of space they use for offices. Owners of office buildings that understand that will have far more luck keeping their buildings occupied.

In retail real estate, some of the most imaginative, innovative and frankly brilliant real estate pros work in retail. However more and more people now use the Internet for entire categories of purchases - such as books, electronics, groceries, and clothing. Even though there will always be a need for some form of in-person retailing - it will require a lot less space. Retail real estate must come up with another use for all those empty shopping centers - otherwise yesterday's community big box center will become tomorrow's community problem. For more on retail vacancy read this interesting overview in a blog regarding "ghost boxes" here.)

Secondly, energy and sustainability issues will not go away - they will only become more important. A third of the energy used in this world and almost half of the release of carbon in the atmosphere is related to buildings. That means that real estate is equally as important as manufacturing and transportation when it comes to solving the issues of global warming and energy use. This is about more than getting a LEED certification on the corporate headquarters building. Every real estate investment and every lease needs to be looked at with energy use and carbon in mind - not because it's the right thing to do - but because it will have more and more of a financial impact on the profitability of that asset every year. Do not be fooled by temporary lower energy prices and a slow government's reluctance to initiate a carbon tax. This stuff is coming, and those real estate players - whether they are investors, developers, owners, brokers, managers or corporate users will get burned if they don't pay close attention.

At some point very soon, the environmental impact of a building may have as much importance as its location. The players that figure that out first will have the advantage.

Who are the hackers?

You can find them everywhere - they are the people who are trying to redefine their jobs and their companies - the tenant reps that are positioning themselves as portfolio consultants, the investment sales reps that are figuring out where the new sources of capital are coming from, and the owners, brokers, tenants and managers who are figuring out how to make the energy and environmental crisis work for them.

Why are they hacking?

Recently an industrial real estate guru and friend, Sam Foster, sent me his insight on innovation that is particularly relevant to that question,

"No one innovates until survival requires it. Yes, there are the neurotic few that can't help themselves, but for most of us, not so. Getting laid off and not being able to find another job requires one to innovate."

Real estate professionals, even if they still have a job, are seeing their old sources of income shrink or even dry up. When buildings aren't flipping every couple of years or companies doubling in size every couple of years, real estate, by necessity, has to figure out how to make a living again. Commercial real estate is a transaction business at its heart, and when the transactions slow down, the best people in the industry will work towards finding the next great opportunity.

It is not an easy time to work in commercial real estate, but it may be one of the most important times. If real estate professionals can solve for the two trends of diminished per person space and sustainability, they will go a long way towards building a brighter future.

What's Your Trojan Horse?

According to the Kauffman Foundation, 78% of Americans believe innovation is important to our economic health. Western governments are trying to figure out how to stimulate innovation. CEO's speak eloquently about innovation as they strategic advantage.

And yet...

Most companies seem to be doing anything but change. Instead, they go the standard and sometimes necessary playbook that calls for laying off workers, closing lines of business, selling assets, and praying that the economy will change before they run out of money. Changing a business model or process, creating a new product or new market is often overlooked as too expensive or risky ventures.

And yet...

According to Dane Strangler of the Kauffman Foundation, (“The Economic Future Just Happened” 6/9/09), over half of the current Fortune 500 companies began during a recession, bear market or both. If historical patterns continue, this isn’t a time to wait. New companies, new technologies, new processes and new markets are always found in times of challenge.

And yet...

According to an executive I interviewed recently, “Middle managers think Innovation is such a big word. Innovation is too scary.” Employees have their fill of change, Innovation now seems like yet another demand for change.

More than lack of capital, lack of good ideas, or lack of economic imperative; fear of change can often be the most stubborn impediment to innovation. This suggests that it would be a strategic mistake for an innovator to tell everyone that they are innovating.

A key strategic tool for innovation is to position the work in such a way that it does not seem to overtly threaten the status quo. Eventually, innovation always changes things – but it’s important that those affected by that change are not unduly concerned or frightened.

Consider using a Trojan Horse.

In Virgil's The Aeneid, the Greek armies, after 10 years of trying to defeat the city of Troy, built a huge statue of a horse out of wood. The Trojans took the seemingly harmless but massive statue into their city. At night, soldiers from the Greek army snuck out of their hiding places inside the statue in order to take over the city.

The Trojan Horse approach, then, is to present something new as if it were merely a slightly modified version of something old. The iPod is really just a digital version of a Walkman. A personal computer is really just a typewriter with a screen. A car is really just a horseless carriage. A television is really just a radio with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. It can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. No one buying a computer in 1990 was buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had ever shared before, would they have started creating Internet sites?

According to one executive I spoke with recently, “anytime you are saying that you are innovating, you will get an initial buzz. But – as soon as everyone sees it as changing what they do, they become very opposed to it. So, when there is the slightest problem with developing a new innovation, everyone jumps to, “Aha, I told you this was never going to work! And the project gets killed.” Instead, try “…unveiling bits and pieces of it at a time. Emphasize how a certain function is made simpler, but avoid talking about any larger plans or potential for industry change.”

If you are going to innovate – and therefore subvert the existing state of things – be ready to ride inside the belly of a wooden horse.

Customer Hacking

From the moment you start selling a product or service, it is becoming obsolescent. Initially, you may solve a problem for a customer - you help them do something they couldn't do before - you do a better job at something than anyone else, but then things begin to change.

Customer expectations change - as your solution becomes the new floor for what is expected in the future.

Customer needs change - as their businesses change, as their objectives change, as they themselves change.

Markets change - as competitors figure out new ways to take business away from you.

How fast your product or service becomes obsolescent depends on a lot of factors - but it's as reliable as entropy, death and taxes that your product or service has an expiration date on the lid.

That's why everyone must innovate - not just if they want to succeed, but ultimately if they want to survive.

Thankfully, people are, by nature, adaptable...and so are your customers. More often than anyone wants to realize, customers are very good at adapting your product or service so that it solves their problem.  In a process not unlike jamming a square peg into a round hole, customers will take what you give them, then adjust, support or work around it to get what they want.

For example, in the days of vinyl records, music lovers wanted to hear music, so they were willing to buy large and akward plastic discs that scratched and degraded easily, just so they could hear a song. Music lovers bought huge stereo systems to play the records, took over entire closets to store the records, they learned how to clean the record with special brushes, to gently handle the record by the edges and to delicately place the needle in the right groove. They even learned to bump the record player when the needle got stuck.

And record companies learned to help music lovers by giving them the same thing they already had, only a little better. They reduced prices by manufacturing poorer quality vinyl. They made the large discs more interesting by packaging them with "album cover art".  

For decades, to love music meant to love vinyl records.  The symbol or "brand" associated with music was often that of a record.

Customers were willing to use a technology decades past it's expiration date, not because it consistently and easily delivered good music - but because there wasn't anything else available - and they adapted to the existing technology.

And when they were presented with something better, such as CD's - it took less than five years for everyone to switch. When they were presented with something even better at delivering music on demand, the mp3 player, they switched even faster.

It is extremely dangerous to rely on customers' willingness to adapt. The moment someone has a better answer - the adaptation will end and they will abandon you.

But if you discover the adaptation first, your customers can guide you to innovation.

Asking customers what they want is pointless at best, and destructive at worst. When asked what customers want in the future, most likely they will describe a version of what they can get now - only with a little better quality, some slight changes in design, and at a much lower price. Surveying customers with direct questions around innovation can even help you persuade yourself not to innovate.

"Research shows that customers love album cover art, they even hang it on their walls; they'll never buy a small disc or a digital file."

So instead of asking customers what they want, perhaps you should observe how they are adapting your square pegs to their round holes.

The best customers to watch are the "hackers". By "hacking", I mean a certain kind of creative development practiced by computer giants such as Steve Wozniak or Linus Torvalds and all the behaviors, methodology and thought processes that allow them to develop new approaches to problems. Not to be confused with the criminal exploits of those trying to obtain credit card numbers or infecting computers with viruses, true hackers adapt whatever is at hand in order to create very useful products, services, and systems.

Jon Erickson introduces his book, Hacking: The Art of Exploitation, with the following:

"The essence of hacking is finding unintended or overlooked uses for the laws and properties of a given situation and then applying them in new and inventive ways to solve a problem - whatever it may be."

Substitute the word "innovation" for "hacking" and suddenly Mr Ericson's quote becomes a useful definition for innovation. At the same time, it's a useful model for the kinds of customer behavior you might be need to observe.

For example, when Harley-Davidson's business was pummelled in the 1970's by Japanese competitors able to deliver a better quality motorcycle for less money, customer "hacks" allowed them to find a new definition for their company, their products and their customers.  Even as new bike sales continued to drop, their accountants were able to see that their after-market parts business remained strong.  It became clear to the company that their best customers were customizing their bikes - "hacking" them to make them more personal.

The accounting insight led to a realization that they could innovate the motorcycle business. Instead of selling the best quality or the highest performance motorcycles, instead of rejecting the dark images of motorcycle gangs, they could embrace their hackers and become a premium lifestyle company.  They could sell customization, club membership and the romance of an old-fashioned, rebellious, and incredibly loud experience.  Motorcycle sales jumped upwards, along with branded clothing, accessories, tatoos, and of course, after market parts.

Despite some difficulties in recent years, the turnaround of Harley-Davidson remains one of the more innovative re-inventions of a company.  All because they noticed how their customers were hacking their product.

Are there customers hacking your services or products?  Are they using them in a different way than you think they are?  

Find out, and you may be able to find meaningful - and profitable - innovation.

Sales Innovation - Go Beyond Benefit

I love the truth. 

The more I understand the truth of a subject, the better I can understand it. The more transparent a process, the more likely it can be made to work. The more honest a person is, the better I can trust them. Honesty and truthfulness are foundations for how society works and for how we all become better people living in a better world.

Very few would disagree with the statements above...and yet we all live and work in a pragmatic world, where shadings of truths, omissions, contextualization and emphasis can make things less than transparent, slightly misleading, a bit less true - especially when it comes time to sell something.

I'm not suggesting that selling is dishonest- but when one sells or tries to persuade, the accepted practice is to show, describe or even demonstrate benefits. Few people sell by telling a potential customer what's wrong with their product, service or idea. That's why a "pitch" for something describes the positive, downplays or omits the negative, and paints a splendid picture of how our lives, businesses and communities will be improved by those benefits.  

It's not a lie, it's a pitch.

No one believes a lie...but no one really believes a pitch either.

That's one of the main reasons why advertising is steadily losing its power to sell...not because the ads are bad, quite the contrary, some of our best design, writing, photography, and acting are applied towards pitching products and services. It's hard to imagine better produced or better distributed advertising than what is seen today. But here's the problem: no matter how well produced, how entertaining and how well placed an advertisement, no matter how compelling the benefits described- customers know immediately that they are getting "pitched".  

"Pitching" makes people more skeptical and it becomes more difficult to persuade them. Quite often, no matter how well produced, people will buy something despite the pitch, not because of it.

If someone tells you how wonderful they are -  can they be believed? 

Could it be that describing benefits isn't the best way to sell?

Here's a little thought experiment. Imagine a single woman meeting a single man for the first time. This hypothetical man is very handsome, has an Ivy League education, possesses a considerable financial portfolio and runs a successful company that builds schools for lower income children. If this hypothetical man, let's call him "Mr. Right", is interested in striking up a friendship with our hypothetical woman, ("Ms. Right"), perhaps leading to a romance and a long-term relationship how successful would the following sales strategies be?

1. Features:  Mr. Right describes his background in colorful detail, with stories and accomplishments that prove how he is a valuable, charming, and interesting guy.
   
   
2. Benefits:  Mr. Right describes the benefits of dating him.  He could describe his passion for long walks in beautiful park land, meals in Parisian cafes, sweet nights watching old movies with someone special.  He could talk about how he is so good with kids, how he can provide a stable economic future for his family, how he is a good shoulder to cry on, how he can make a long-term, loving relationship a reality.
   
   
3. Conspiracy:  Mr. Right asks Ms. Right questions.  He listens to her answers.  He asks more detailed questions until he finds something about her life that he shares with her.  He would then find out what Ms. Right wants to do tomorrow, next week, next month and perhaps for the rest of her life - and what might be standing in her way.
   
   For example, Ms. Right might mention that she loves music from the 1940's but never learned to swing dance.  Mr. Right realizes that there is something they have in common.
   
   He says - "You know, I've always wanted to go to one of those retro dance places with a big band, but I'm a complete klutz - how does someone learn to dance like that, anyway?"
   
   She says - "There are classes you could take."
   
   Ever so delicately, our hypothetical couple will start to learn together the different ways they might learn how to dance a Fox Trot...and there's even a chance that they might go take a lesson together...and eventually dance together.

Which of the three strategies is more likely to bring Mr. and Ms. Right together?

The Conspiracy Strategy I described is all about getting on the same side as a prospect and figuring out how to collaborate together for mutual gain. As a colleague of mine, Buckley Brinkman described it recently, instead of defining a pain point for a prospect, then describing the benefit of your solution"...it should be about conspiring with them to solve a problem."

But conspiring with someone requires a kind of direct - at times even brutal - honesty about your self, your capabilities, and the potential obstacles. People only conspire with people they trust...and people don't trust you if you talk about how great you are.

This form of conspiring, of creating alliances with customers has long worked for individual sales people.  "Rain Makers" or master sales people, whether consciously or not, have used this technique as long as there have been products and services to sell.  But can it be scaled beyond an individual sales person with an individual customer?

Yes it can.  The transformation of electoral politics in 2008 demonstrated that quite well. When President Barack Obama's campaign "advertised" through media, the Internet, and in person, the emphasis was not on the benefits, but rather on an invitation to join together or "conspire" to create a different government. In the process - constituents (or customers, if you will) began to join in the marketing of Obama - there was far more independent marketing than there was campaign marketing.

It's time for marketing and sales to innovate away from the dogma of benefits - and to move towards conspiracy and truth.

What is innovation...really?

Innovation is far more difficult, yet far less mysterious than we have been led to believe.

In a time of global warming, energy shortages, recession, conflict and war, many now believe that innovation is perhaps the only way to solve today's challenges. According to a 2009 Kauffman Foundation study, 78% of Americans believe innovation is important to our economic health. 

Innovation will allow us to build more sustainable communities. Innovation will help our countries back down from wars. Innovation will help struggling businesses thrive once again. Innovation will bring food to the hungry, opportunity and freedom, warmth and comfort to those in need.

If only we can find the best ideas, then we can solve problems, win customers and improve our world...

I don't disagree with the idea that innovation can solve our problems, but how did innovation start to be described in almost religious terms? 

Too often, innovation is described as something done only by magical geniuses. Stories dwell mostly on the flash of insight, or "Eureka" moment. How many profiles of innovative companies describe the beginning with a brilliant ideas that led to great success? Scott Berkun, in his marvelous book, The Myths of Innovation, describes this as "They myth of epiphany"

"Even if there existed an epiphany genie, granting big ideas to worthy innovators, they would still have piles of rather ordinary work to do to actualize those ideas.  It is an achievement to find a great idea, but it is a greater one to successfully use it to improve the world."

I worry that too many people are waiting for the "great idea" to solve their problems.  For every Fortune 100 company that started from a brilliant invention in a garage - there are millions of people with great ideas that never went anywhere. And yet, entire industries have been built up to serve the faith of ideas.  Consultants, executives and businesses spend money and time to brainstorm, to elicit and evaluate new ideas.  Investors often make decisions based on a valuation of an idea or business model.  Politicians are evaluated by voters based on the perceived value of their ideas. 

And yet, the success of the company or the government is only partly determined by the quality of the ideas.  Ultimately, inventors are only successful if someone is willing to pay for their invention.  Businesses become profitable not because they have a great business model, but because they persuade enough customers to pay more for something than it costs. Politicians become good leaders through competent management, sound decision making, and quite a bit of slogging back and forth in order to persuade people to work together...the ideas they sold during the election are often left behind or reworked once they enter office.

Sit inside a coffee shop and you can hear any number of brilliant ideas. But unless those ideas are turned into something real, the ideas are worth less than the coffee.

The best ideas don't win. Good ideas that are used for actions, products and new behaviors can win...sometimes.

Think about the most successful companies, the most successful leaders, the most successful countries.  Did they have the best ideas?  Or did they have good ideas that they translated into good products, services, markets, companies, laws, governments, and treaties.  If you look close enough, you can find any number of really bad ideas that those successful entities have used to succeed despite themselves.

So why do we think that ideas are so valuable? Why do otherwise rational people believe that the best ideas will save their company, their country, their family?  

Perhaps it's because ideas, brainstorming, planning are much more fun than the reality of innovation. The reality of innovation is much like the reality of scientific discovery - as exciting as it is to imagine how something works, that imagining is only part of the process.

In very broad terms, the process known as "the scientific method" can be broken down into the following steps: Observation, Hypothesis, Testing/Experiment and Evaluation. Innovation follows the same process:

First, in order to innovate, it is necessary to Observe reality as closely as you can to discover what is currently happening.  

Second, the innovator gets to have fun with ideas - (s)he forms a Hypothesis of what might work better.

Third, that hypothesis needs to be tested in an Experiment prototype or pilot, where a small form of reality is compared to the hypothesis.

Fourth, measurements from the experiment are used to Evaluate the original hypothesis - did it do what was expected?  Can that hypothesis be changed in order to affect the desired change?

Mysterious?  not really.  Both scientists and innovators follow a process, evaluate data and find new answers to old problems.  Science and innovation isn't magic, it's just a way to find the truth - about physics, about business, about politics or about how we live - and then act on that truth in a better way than before.

Easy to understand, but quite often hard to do.  And yet, innovation can become a little easier when faith in "the great idea" is put aside - and "good enough" ideas are put to the test of a scientific or innovative method.

It's time to ask better questions.

An inherent obstacle to innovation is the context, culture, history and assumptions of a current process or business. Sometimes the harder someone works on a problem, the more elusive the solution becomes. Every once in a while, the person who has the most experience can solve a problem, but only if they don't respect their own experience. Some are able to question their own past success, but they are very rare people.

Quite often, there is a need for someone with less experience to look at a problem - someone who can see it for the first time, has little knowledge of the existing orthodoxies and can blithely question the most fundamental assumptions of success. Someone needs to bump the record player when the needle is stuck, but who can do that?

1. It can be helped by an external innovation expert - usually a consultant or coach who can look at the problem from the outside, bring in new insights from customers, or help guide internal teams through a process to see a problem and solution for the first time. They can ask questions for you.
   
2. Your competitors can do it for you. Usually, innovations are developed by new and unexpected competitors that have no respect for the past - they are able to ask, "Why are things done the way they are? Can't we do it differently and make it better?"
   
3. Your own employees can come up with innovations. But they usually need good questions to answer.

In order to understand better how organizations can improve innovation, let's look at each of these three methods.

1. Innovation Consultants

There are a great number of good consultants that can help organizations innovate - each with their own areas of focus and processes for stimulating innovation and commercialization of new ideas. It would be impossible to characterize them all at this point - but there is an interesting commonality: they all ask questions.

Whether consultants are questioning employees, competitors or customers, they are working to discover key aspects of the value chain, products, services and processes that can be fixed or changed in some way. Once the opportunity is identified, they are able to recommend solutions, test and refine them with customers, then commercialize.

The innovations themselves do not occur in a vacuum. Innovation consultants don't just come up with a good idea - they come up with questions that they either answer themselves or have answered by customers and employees.

How often does a public speaker give an average or sub-par presentation followed by a question and answer session where they become interesting or even dynamic?


It is an interesting phenomenon. No matter how little creativity or originality someone possesses or however ill-prepared they may be, when they are asked a good question, they can provide a good answer. This may be the result of an educational system that emphasizes answering questions, or it may be a more fundamental survival mechanism where human beings are hard-wired to solve immediate problems such as if there is no food, figure out how to get food.


However, if a problem is unclear, ill-defined, or not immediate - it becomes much more difficult to solve. That's why experienced speakers tend to prepare by developing un-spoken questions that they can then answer in their prepared remarks. They make the problem of: "give a good speech" more clear, defined and immediate by changing the problem to, "answer this question".


The same dynamic occurs when trying to prompt innovation. In a way, consultants are the motivational speakers of innovation. Isn't it curious that most innovation consultants are also persuasive presenters?


2. Competition


The very act of competing can force one to question the status quo, especially when the competitor is far from being the dominant player. The small competitor, in order to survive, must challenge reigning orthodoxies - otherwise they will be crushed by dominant players' resources.


No one could reasonably compete with Xerox's domination of big business copying - until Canon questioned the format, the price model, the sales channel - even the customer target and transformed the entire industry (becoming the number 1 seller of copiers in the process).


United and American Airlines defined what a commercial airline was - how to make money, how to operate their business, how to talk with their customers...until start-up Southwest Airlines questioned everything from ticketing procedures to boarding to meal service. Instead of asking themselves how to become the number 1 airline, they asked how they could get another round trip out of every airplane per day, how to better incent their employees for customer service, how to appeal to customers who rarely fly...and in the process they became the most profitable airline in the history of aviation.


The innovation advantage may very well go to the new entrant. It almost seems easier to challenge what one doesn't have in the first place. What do they have to lose? Unfortunately, small companies can lose everything if they are wrong. But if they succeed, they can often transform their industry. That's why many larger companies like GE, IBM, Microsoft and Google tend to acquire small companies and their innovative products once they have been proven successful. In effect, they've "outsourced" their innovation to smaller start ups.


As Xerox, United Airlines, General Motors and many others have discovered, however, it is somewhat risky to leave innovation to the competition.


3. Employee Innovation

When you ask a team of people the right question, it's amazing what they can come up with. An inspiring story about how teams can innovate comes from the experiences of Apollo 13. When flight director Gene Kranz needed to help the stranded astronauts build an improvised air filter, he assembled a group of engineers, presented the problem, made clear what the stakes were, presented all the items the astronauts had on board the capsule, then told them to come up with a solution. He asked a better question. He made the challenge specific.


When GE's jet engine unit asked customers about the repair of their jet engines and showed them how they were repairing those engines faster than ever - their customers told them something to the effect of, "I don't care how fast you repair the engines, I'm still not able to fly the plane until it gets back on the plane." The team of engineers at GE realized that they could probably deliver a faster turnaround if, instead of shipping the engine to the factory they brought the factory to the plane. By getting a specific challenge from their customers, they went from simply working faster to working smarter.


There are many innovation programs and initiatives going on inside organizations to encourage this kind of employee problem solving, but too often they don't deliver real innovation. They seem to ask too broad a question - something like, "how can we make our company number 1?" or "how can we reduce costs and increase revenues?", or even worse, "how can we become more innovative?" There seems to be too much of an emphasis on open brainstorming or collection of ideas and best practices. It is still possible to innovate without specific and immediate problems to solve, but it can be difficult at best. At worst, these kinds of programs either lead to small adjustments or to innovations that don't really matter to anyone beyond a very small interest group.


There is a better model to encourage innovation. Instead of asking for best practices, companies should learn to ask their employees specific questions - then reward anyone who answers them well. This process has been proven to yield incredible results.


In 1919, Raymond Orteig offered $25,000 to the first pilot who could fly non-stop between New York and Paris. There were no restrictions of how that pilot could develop his or her plane, how they flew it, or who financed them. A great number of entrepreneurs, pilots and engineers tried to answer this question. They used any number of strategies and designs, but ultimately, the innovation that helped create the $300 billion commercial aviation industry didn't come from a known organization or blue chip company. None of the airplane manufactures drove the innovation. Instead an unknown airmail pilot named Charles Lindbergh, experimenting with a simple plane design and powerful single engine, made the trip alone in 1927.


Recently, the X-Prize Foundation offered $10 million to whomever develops a production ready, reasonably priced car that gets the equivalent of 100 miles to the gallon and that can win a multi-day staged race across the country in the summer of 2010. A very specific, immediate question that will likely lead to the next blockbuster efficient car in the US. The industry has spent far more than $10 million trying to deliver this kind of innovation, but I won't be surprised if this investment will lead to a far greater breakthrough than GM or Chrysler could ever manage.

Beyond the X-Prize, there are a good number of organizations such as NASA, Google, Netflix and the Department of Defense who are asking questions and offering prizes to anyone who can answer them. They have found that asking a simple, direct and immediate question along with a financial incentive for whomever is willing and able to answer it, yields surprising innovation, productivity and speed to market all at a fraction of the cost of traditional R&D.

The impossible can become commonplace because someone asks the right question.

Therefore, a more effective innovation program inside companies would not ask for best practices or innovation ideas, it would ask simple questions and incent anyone and everyone to answer them.