UK is second on the list!
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.
Three different bodies offer their lists of the ‘most innovative companies in the world’. They use different methods and get different results. So here is a comparison:
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.
After exhaustive examination and testing I can safely declare that this is the greatest innovation this year:
Happy New Year
Here is a list of the top innovation blogs of the year. Which are you favourites and why?
Top Innovation Blogs
As a young man Walt Disney was fired by a newspaper editor because “he lacked imagination and had no good ideas.” It was an inauspicious start for a man who went on to be one of America’s most innovative leaders.
In 1921, he founded his first animation company in Kansas City. It failed. He had to dissolve his company. He could not pay the rent and it is said that he was in such desperate straits that he had to eat dog food.
When Disney offered MGM studios the opportunity to distribute Mickey Mouse films in 1927, he was told that the idea would not work because a giant mouse on the screen would terrify women and children! Mickey Mouse went on to be a huge success.
In 1933 Disney created the most successful cartoon short of all time, The Three Little Pigs. It ran continuously in many theatres across America. He asked his team what they should do next. The response was more short cartoons featuring pigs – it was a formula that worked. But Disney was more ambitious. He planned something which had never been attempted before – a full length cartoon film. When the film industry learned of Disney’s plans to produce an animated feature-length version of Snow White in Technicolor they scoffed. People were sure that the project would destroy the Disney Studio and called it “Disney’s Folly”. Both Disney’s wife and brother tried to talk Walt out of the project but he persisted. Because of Disney’s demands for high quality the film took four years to make and his company nearly ran out of money. The film became the most successful motion picture of 1938 and earned over $8 million on its initial release, a huge amount in those times. Disney won 8 Oscars for the picture.
Walt Disney continued to innovate and take risks throughout his business career. His film business was remarkably successful but that was not enough. He wanted to found a theme park in Los Angeles, Disneyland. He told one of his aides ‘I want it to look like nothing else in the world.’ It is reported that his project was rejected by 300 bankers before he raised the finance he needed. Why would a banker believe that a film maker could make a success of such a huge, untried and entirely different venture? Disneyland opened in 1955 and was a great success. It was followed by Disney World in Florida which was designed by Walt Disney and opened in 1971 some five years after Disney’s death. It is now the number one vacation resort in the world with over 50 million visitors every year.
Disney was never satisfied with repeating success. He wanted to try new, different and bigger ideas. He ignored the doubters and made huge innovations happen.
Predictions are always difficult and especially so if they are about the future! However Thomson Reuters are bold enough to make 10 innovation predictions for 2025. Some seem eminently sensible but others are a little outrageous – especially teleportation. What do you think?
Here is a great short article by Max Nisen which encapsulates the wisdom of 15 classic business books in one sentence each. Superficial? Certainly but there is a large element of truth in each concise summary – and it does save you a lot of time.
Incidentally you can save time reading most self-help and positive thinking books. My summary is that nearly all of them are based on one powerful truth – change your attitude and you can change your life.