Threadless is well known as an example of crowdsourcing new product design. This fast-growing T shirt company asks its user community to submit designs for new T shirts. Designers from around the world submit designs which are often edgy, cool and topical. The company then asks users to vote on the designs. Threadless manufacturers the most popular items and (not suprisingly) they sell well. The original designer gets some small monetary reward and his or her name on the label. Threadless now makes sweaters, hoodies and phone cases on a similar basis.
A similar but different model is operated by Gustin who make premium men’s clothing. Gustin sets out different designs on new products. Members of their user community then make pledges as to which new product they would like to buy. Each new line has a goal in terms of number of items and funding. Once these goals are met then no further pledges are accepted. The company makes a limited edition of the item and those people who pledged to buy it are sent one and their credit card account is debited. The company carries no inventory, has no waste, no distribution channel and no marketing expense. Each new product is fully funded by customers before it is made.
Threadless and Gustin are eliminating the risk in new product development. They get their customers to design, select or fund their product innovations and that pretty much guarantees success. Nice work if you can get it.
Shimpei Takahashi is a Japanese innovator and inventor of new toys. In this TedX talk he recommends disregarding data analysis when developing new products. Instead he suggests using random words to generate novel ideas and combinations. In particular he recommends using a method called Shiritori where you generate a list of words where the last letter of one word is used as the first letter in the next word.
Francesca Gino of Harvard Business School and Scott Wiltermuth of Marshal Business School published a paper which proposes that dishonesty leads to creativity. Their report states that, ‘dishonesty and creativity have something in common; they both involve breaking rules. Because of this shared feature, creativity may lead to dishonesty and dishonesty may lead to creativity.’ They tested this hypothesis with a series of five experiments. Gino and Wiltermuth found that those people who cheated in one test were subsequently more creative than non-cheaters, even when they accounted for individual differences in their creative ability. Using random assignments they found that acting dishonestly led to greater creativity in subsequent tasks. They believe that the link between dishonesty and creativity is explained by a ‘heightened feeling of being unconstrained by rules.’
These findings present us with a paradox. We do not want our employees to be dishonest but at times we do want them to be creative. So is there a way to harness the power of dishonesty to improve creativity without getting bad practice at work? Creativity guru Jeffrey Baumgartner makes a useful suggestion here. He recommends that you start a brainstorm or problem solving meeting with an ice-breaker which involves telling outrageous lies. Everyone is encouraged to introduce themselves with their real name followed by an absolutely egregious falsehood. So they might say something like:
My name is John. I climbed Everest wearing only a straw skirt. I kept warm by rubbing my skin with a wire brush.
My name is Jane. I discovered a major conspiracy – our government is comprised entirely of aliens from the planet Zog. They are gradually replacing each of us with an identical robot.
The more ridiculous and humorous the lie the better. Laughter breaks down inhibitions. You will find that the subsequent meeting starts in a much more relaxed and creative atmosphere. Because people have already broken the rules of what is acceptable they are much more likely to generate really radical ideas.
For large companies to innovate they often have to face the fact that their current products and business model need to change. Think of Kodak, Nokia and Blockbuster Video. What’s more when they try something new, very often the innovation does not work. The organisation has to learn fast and adapt. First however, the leader has to admit that they were wrong. For proud, successful senior people this is very hard.
Mark Lynas is an environmental activist who was one of the leading opponents of genetically modified foods. He argued that the selfish greed of big corporations would threaten the health of both people and the Earth. In 2013 he dramatically changed his mind. He said, ‘I apologise for having spent several years ripping up GM crops. I am also sorry that I helped to start the anti-GM movement back in the mid 1990s, and that I thereby assisted in demonising an important technological option which can be used to benefit the environment. I could not have chosen a more counter-productive path. I now regret it completely. So I guess you’ll be wondering—what happened between 1995 and now that made me not only change my mind. Well, the answer is fairly simple: I discovered science, and in the process I hope I became a better environmentalist.’
One has to admire his courage. He was ridiculed from all sides. How can anyone trust a leader who changes his mind? There is a toxin in the body politic which prevents politicians from changing their point of view. They are castigated in the media for ‘flip-flopping’ or doing a ‘U turn.’ Margaret Thatcher famously declared that ‘the lady is not for turning.’ Tony Blair declared that he had ‘no reverse gear.’ But would you buy a car that could not turn or did not have a reverse gear? We need leaders who are prepared to admit, like Mark Lynas, that sometimes they just got it wrong. A classic example concerns the National Health Service, where we desperately need more empowerment, innovation and experimentation. Yet if different approaches are tried in different places with different results then the media can joyfully deride a ‘post-code lottery.’ Experimentation by post code would be highly beneficial if we could share the results yet conformity and compliance are preferred.
In business and in politics we need leaders who are prepared to try new things and honest enough to admit when their approach proves flawed. The paranoid leader never admits they were wrong. They develop an atmosphere in which no-one admits a fault, whistle-blowers are punished and ugly truths are ignored. The courageous leader has the humility to accept that he or she has erred. They encourage everyone to admit mistakes and to learn from them. There are not enough leaders like this.
Cornell University, INSEAD and the World Intellectual Property Organization (a specialized agency of the United Nations) co-publish The Global Innovation Index. It compares five input metrics of the national economy that enable innovative activities: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. Two output metrics compare actual evidence of innovation outputs: (6) Knowledge and technology outputs and (7) Creative outputs. Each metric is divided into sub-pillars and each sub-pillar is composed of individual indicators (84 in total). The 2014 report lists the top 20 countries as:
2. United Kingdom
10. Hong Kong
18. New Zealand
China is ranked 29, Russia 49, Greece 50, India 76. Sudan comes in last place – 143.
The Entrepreneurship Summit in Mumbai is an annual conference hosted by the Indian Institute of Technology, one of India’s most prestigious technical universities. I was fortunate enough to be a guest speaker there this year giving talks on lateral thinking and on open innovation. There was a range of other distinguished speakers and two of them gave starkly contrasting advice on how to start a new business.
Archit Gupta is the founder and CEO of Cleartax, a successful software start-up company which provides an automated service to help people in India complete and file their personal tax returns. He had taken his innovative idea to a Y Combinator camp in the USA and had undergone the intensive full-time grilling which that entails. At ‘demo day’ Gupta showed his budding software project to potential investors and he was able to secure the investment needed to launch his grand scheme. His approach to start-ups is to develop a big idea and then to launch version one quickly – even if it is ‘embarrassing’. Next you should raise enough external finance to go for ambitious growth. An example of big ambition is Angry Birds, a Finnish startup that aimed to go global from day one. Gupta’s key advice was as follows:
Have a huge vision.
Make something that people want.
Get the right team.
Launch quickly and iterate.
Rejection is the norm.
Persist and succeed
If you are a first mover then seize the opportunity and grow aggressively
Jim Beach is an American serial entrepreneur who has started and sold many businesses. He takes a more prosaic ‘kitchen sink’ approach. He is a believer in starting small with something safe. His advice included:
Don’t quit your job to start your business. Start the business in your spare time.
Avoid creativity; the more innovative the idea the greater the risk.
Minimise risk by doing something you know or can copy.
Passion is for the bedroom and not for your business.
Bootstrap your business using your own resources.
Start selling products or services before you try to raise finance.
Never start a business if you do not know how to exit.
He says that he meets many entrepreneurs who are passionate about their business idea but he believes they would be more successful if they were dispassionate, level headed and business-like. He advises entrepreneurs to avoid raising early finance from external investors if possible and instead to bootstrap the business using savings, loans from family and friends etc. even if this means a slower growth trajectory. He gives two prime reasons for this. First, while the CEO and CFO are out making pitches to investors they are not running the business or making sales. Secondly the early dilution of equity means that when the company is eventually sold the founder gets a much smaller percentage (typically less than 10%) of the sale value than a founder who did not take an early external investment.
Which approach is right? It seems that that depends on the entrepreneur and the nature of their idea. If it is a high-tech product which requires considerable investment and support then the first approach is needed though it is loaded with risk. The potential rewards are high if you can get it right. The second approach is better for simpler ideas and service innovations. It is safer and would suit many a person who does not want to conquer the world but just wants to run their own business – and maybe become a regular run of the mill millionaire.
A key precept in the self-improvement manual is to learn from your mistakes. If you can do that then you can keep growing and getting better. Yet many people find this very hard. And the same story applies to organizations. If a company wants to be innovative then it must try many new things, stop the unsuccessful experiments, learn the important lessons and rapidly move on. It sounds straightforward but it is surprisingly difficult.
In his book, Adapt, Why Success always starts with Failure, Tim Harford identifies three salient reasons why individuals, corporate executives and organizations fail to learn from their mistakes.
People often refuse to take responsibility for something that went wrong. They prefer to blame others or make excuses. It is why autocratic CEOs are surrounded by ‘yes men.’ When someone brings bad news the reaction is to shoot the messenger so nobody brings bad news. Successful people with big egos can find it particularly hard to admit that they got it wrong. When DNA evidence was first introduced it showed up a number of wrongful convictions including that of Roy Criner who had been found guilty of raping and murdering a woman. When it was later proved that it was not Criner’s semen in the victim the Texas prosecutor Michael McDougal said, ‘the sperm found in her body was not his. It doesn’t mean he did not rape or kill her.’ He refused to consider that he might have convicted the wrong man.
Loss Aversion. Because we do not like to make losses we often ‘throw good money after bad’. It has been shown that the moment of greatest danger for a professional poker player is just after he has lost a big pot (perhaps unluckily). On the next hand he is more likely to cast aside his cool and make a series of rash bets in order to win back what he wrongly feels is still his money. Similarly the average investor is more likely to hold on to shares that have fallen in value in the hope of recouping losses when a better strategy would be to cut the losses by selling.
We can sometimes persuade ourselves that the mistake does not really matter or, worse still, reinterpret the mistake as some kind of success. ‘Things probably worked out for the best.’ Studies show that people often reinterpret their past decisions as better than they really were.
How can you overcome these natural tendencies? Harford recommends that you set up a ‘validation squad’, a group of supportive but critical colleagues who will challenge your thinking when needed. They are people who will give you ‘an honest opinion with no strings attached.’ This is why the top professional tennis or golf players have coaches who analyse their games, identify their weaknesses and help them to improve.
The only person who does not make mistakes is the person who never tries anything new. Making mistakes is not necessarily a big problem but failing to learn from them is. We should learn to fail but we must not fail to learn.