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Peter Crowther

Innovation

INNOVATION

SPOTLIGHT ON

Five “discovery skills”

separate true innovators

from the rest of us.

| by Jeffrey H. Dyer, Hal B. Gregersen,

and Clayton M. Christensen

The Innovator’s

DNA

hbr.org |^ December 2009 |^ Harvard Business Review 61

hbr.org |^ December 2009 |^ Harvard Business Review 63

Studies of identical twins separated at birth in- dicate that our ability to think creatively comes one-third from genetics; but two-thirds of the in- novation skill set comes through learning – first understanding a given skill, then practicing it, ex- perimenting, and ultimately gaining confidence in one’s capacity to create. Innovative entrepreneurs in our study acquired and honed their innovation skills precisely this way. Let’s look at the skills in detail.

Discovery Skill 1: Associating

Associating, or the ability to successfully connect seemingly unrelated questions, problems, or ideas from different fields, is central to the innovator’s DNA. Entrepreneur Frans Johansson described this phenomenon as the “Medici effect,” referring to the creative explosion in Florence when the Medici fam- ily brought together people from a wide range of disciplines – sculptors, scientists, poets, philosophers, painters, and architects. As these individuals con- nected, new ideas blossomed at the intersections of their respective fields, thereby spawning the Renais- sance, one of the most inventive eras in history. To grasp how associating works, it is important to understand how the brain operates. The brain doesn’t store information like a dictionary, where you can find the word “theater” under the letter “T.” Instead, it associates the word “theater” with any number of experiences from our lives. Some of these are logical (“West End” or “intermission”), while others may be less obvious (perhaps “anxiety,” from a botched performance in high school). The more diverse our experience and knowledge, the more connections the brain can make. Fresh inputs trigger new associations; for some, these lead to novel ideas. As Steve Jobs has frequently observed, “Creativity is connecting things.” The world’s most innovative companies prosper by capitalizing on the divergent associations of their founders, executives, and employees. For ex- ample, Pierre Omidyar launched eBay in 1996 after linking three unconnected dots: (1) a fascination with creating more-efficient markets, after having been shut out from a hot internet company’s IPO in the mid-1990s; (2) his fiancée’s desire to locate hard- to-fi nd collectible Pez dispensers; and (3) the inef- fectiveness of local classified ads in locating such items. Likewise, Steve Jobs is able to generate idea aft er idea because he has spent a lifetime exploring new and unrelated things – the art of calligraphy, meditation practices in an Indian ashram, the fine details of a Mercedes-Benz.

Associating is like a mental muscle that can grow stronger by using the other discovery skills. As in- novators engage in those behaviors, they build their ability to generate ideas that can be recombined in new ways. The more frequently people in our study attempted to understand, categorize, and store new knowledge, the more easily their brains could natu- rally and consistently make, store, and recombine associations.

Discovery Skill 2: Questioning

More than 50 years ago, Peter Drucker described the power of provocative questions. “The important and difficult job is never to find the right answers, it is to find the right question,” he wrote. Innovators constantly ask questions that challenge common wisdom or, as Tata Group chairman Ratan Tata puts it, “question the unquestionable.” Meg Whit- man, former CEO of eBay, has worked directly with a number of innovative entrepreneurs, including the founders of eBay, PayPal, and Skype. “They get a kick out of screwing up the status quo,” she told us. “They can’t bear it. So they spend a tremendous amount of time thinking about how to change the world. And as they brainstorm, they like to ask: ‘If we did this, what would happen?’” Most of the innovative entrepreneurs we in- terviewed could remember the specific questions they were asking at the time they had the inspira- tion for a new venture. Michael Dell, for instance, told us that his idea for founding Dell Computer sprang from his asking why a computer cost five times as much as the sum of its parts. “I would take computers apart…and would observe that $ worth of parts were sold for $3,000.” In chewing over the question, he hit on his revolutionary busi- ness model. To question effectively, innovative entrepreneurs do the following: Ask “Why?” and “Why not?” and “What if?” Most managers focus on understanding how to make existing processes – the status quo – work a little better (“How can we improve widget sales in Taiwan?”). Innovative entrepreneurs, on the other hand, are much more likely to challenge assump- tions (“If we cut the size or weight of the widget in half, how would that change the value proposi- tion it offers?”). Marc Benioff, the founder of the online sales software provider Salesforce.com, was full of questions after witnessing the emergence of Amazon and eBay, two companies built on services delivered via the internet. “Why are we still loading and upgrading software the way we’ve been doing

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The Innovator’s DNA

Innovation

INNOVATION

SPOTLIGHT ON

all this time when we can now do it over the inter- net?” he wondered. This fundamental question was the genesis of Salesforce.com. Imagine opposites. In his book The Opposable Mind, Roger Martin writes that innovative thinkers have “the capacity to hold two diametrically op- posing ideas in their heads.” He explains, “Without panicking or simply settling for one alternative or the other, they’re able to produce a synthesis that is superior to either opposing idea.” Innovative entrepreneurs like to play devil’s ad- vocate. “My learning process has always been about disagreeing with what I’m being told and taking the opposite position, and pushing others to really justify themselves,” Pierre Omidyar told us. “I re- member it was very frustrating for the other kids when I would do this.” Asking oneself, or others, to imagine a completely different alternative can lead to truly original insights. Embrace constraints. Most of us impose con- straints on our thinking only when forced to deal with real-world limitations, such as resource al- locations or technology restrictions. Ironically, great questions actively impose constraints on our thinking and serve as a catalyst for out-of-the-box insights. (In fact, one of Google’s nine innovation principles is “Creativity loves constraint.”) To initi- ate a creative discussion about growth opportuni- ties, one innovative executive in our study asked this question: “What if we were legally prohibited from selling to our current customers? How would we make money next year?” This led to an insight- ful exploration of ways the company could find and serve new customers. Another innovative CEO prods his managers to examine sunk-cost con- straints by asking, “What if you had not already hired this person, installed this equipment, imple- mented this process, bought this business, or pur- sued this strategy? Would you do the same thing you are doing today?”

Discovery Skill 3: Observing

Discovery-driven executives produce uncommon business ideas by scrutinizing common phenomena, particularly the behavior of potential customers. In observing others, they act like anthropologists and social scientists. Intuit founder Scott Cook hit on the idea for Quicken financial software after two key observa- tions. First he watched his wife’s frustration as she struggled to keep track of their finances. “Often the surprises that lead to new business ideas come from watching other people work and live their normal

lives,” Cook explained. “You see something and ask, ‘Why do they do that? That doesn’t make sense.’” Then a buddy got him a sneak peek at the Apple Lisa before it launched. Immediately after leaving Apple headquarters, Cook drove to the nearest res- taurant to write down everything he had noticed about the Lisa. His observations prompted insights such as building the graphical user interface to look just like its real-world counterpart (a checkbook, for example), making it easy for people to use it. So Cook set about solving his wife’s problem and grabbed 50% of the market for financial software in the first year. Innovators carefully, intentionally, and consis- tently look out for small behavioral details – in the activities of customers, suppliers, and other compa- nies – in order to gain insights about new ways of doing things. Ratan Tata got the inspiration that led to the world’s cheapest car by observing the plight of a family of four packed onto a single motorized scooter. After years of product development, Tata Group launched in 2009 the $2,500 Nano using a modular production method that may disrupt the entire automobile distribution system in India. Ob- servers try all sorts of techniques to see the world in a different light. Akio Toyoda regularly practices Toyota’s philosophy of genchi genbutsu – “going to the spot and seeing for yourself.” Frequent direct observation is baked into the Toyota culture.

Discovery Skill 4: Experimenting

When we think of experiments, we think of scien- tists in white coats or of great inventors like Thomas Edison. Like scientists, innovative entrepreneurs ac- tively try out new ideas by creating prototypes and launching pilots. (As Edison said, “I haven’t failed. I’ve simply found 10,000 ways that do not work.”) The world is their laboratory. Unlike observers, who intensely watch the world, experimenters construct interactive experiences and try to provoke unortho- dox responses to see what insights emerge. The innovative entrepreneurs we interviewed all engaged in some form of active experimentation, whether it was intellectual exploration (Michael Lazaridis mulling over the theory of relativity in high school), physical tinkering (Jeff Bezos taking apart his crib as a toddler or Steve Jobs disassem- bling a Sony Walkman), or engagement in new surroundings (Starbucks founder Howard Shultz roaming Italy visiting coffee bars). As executives of innovative enterprises, they make experimenta- tion central to everything they do. Bezos’s online bookstore didn’t stay where it was after its initial

Sample of Innovative Entrepreneurs from our Study

SAM ALLEN ScanCafe.com MARC BENIOFF Salesforce.com JEFF BEZOS Amazon.com MIKE COLLINS Big Idea Group SCOTT COOK Intuit MICHAEL DELL Dell Computer AARON GARRITY XanGo DIANE GREEN VMWare ELIOT JACOBSEN RocketFuel JOSH JAMES Omniture CHRIS JOHNSON Terra Nova JEFF JONES NxLight; Campus Pipeline HERB KELLEHER Southwest Airlines MIKE LAZARIDIS Research In Motion SPENCER MOFFAT Fast Arch of Utah DAVID NEELEMAN JetBlue; Morris Air PIERRE OMIDYAR eBay JOHN PESTANA Omniture PETER THIEL PayPal MARK WATTLES Hollywood Video COREY WRIDE Movie Mouth NIKLAS ZENNSTRÖM Skype

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Innovation

INNOVATION

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draw together artists, entrepreneurs, academics, politicians, adventurers, scientists, and thinkers from all over the world, who come to present their newest ideas, passions, and projects. Michael Laza- ridis, the founder of Research In Motion, notes that the inspiration for the original BlackBerry occurred at a conference in 1987. A speaker was describing a wireless data system that had been designed for Coke; it allowed vending machines to send a signal when they needed refilling. “That’s when it hit me,” Lazaridis recalls. “I remembered what my teacher said in high school: ‘Don’t get too caught up with computers because the person that puts wireless technology and computers together is going to make a big difference.’” David Neeleman came up with key ideas for JetBlue – such as satellite TV at every seat and at-home reservationists – through networking at conferences and elsewhere. Kent Bowen, the founding scientist of CPS tech- nologies (maker of an innovative ceramic compos- ite), hung the following credo in every office of his start-up: “The insights required to solve many of our most challenging problems come from outside our industry and scientific field. We must aggres- sively and proudly incorporate into our work find- ings and advances which were not invented here.” Scientists from CPS have solved numerous complex

problems by talking with people in other fields. One expert from Polaroid with in-depth knowledge of film technology knew how to make the ceramic composite stronger. Experts in sperm-freezing tech- nology knew how to prevent ice crystal growth on cells during freezing, a technique that CPS applied to its manufacturing process with stunning success.

Practice, Practice, Practice

As innovators actively engage in the discovery skills, they become defined by them. They grow increas- ingly confident of their creative abilities. For A.G. Lafl ey, innovation is the central job of every leader, regardless of the place he or she occupies on the organizational chart. But what if you – like most ex- ecutives – don’t see yourself or those on your team as particularly innovative? Though innovative thinking may be innate to some, it can also be developed and strengthened through practice. We cannot emphasize enough the importance of rehearsing over and over the behaviors described above, to the point that they become automatic. This requires putting aside time for you and your team to actively cultivate more creative ideas. The most important skill to practice is question- ing. Asking “Why” and “Why not” can help turbo- charge the other discovery skills. Ask questions that both impose and eliminate constraints; this will help you see a problem or opportunity from a different angle. Try spending 15 to 30 minutes each day writing down 10 new ques- tions that challenge the status quo in your com- pany or industry. “If I had a favorite question to ask, everyone would anticipate it,” Michael Dell told us. “Instead I like to ask things people don’t think I’m going to ask. This is a little cruel, but I kind of delight in coming up with questions that nobody has the answer to quite yet.” To sharpen your own observational skills, watch how certain customers experience a product or service in their natural environ- ment. Spend an entire day carefully observing the “jobs” that customers are trying to get done. Try not to make judgments about what you see: Simply pretend you’re a fly on the wall, and observe as neutrally as possible. Scott Cook ad- vises Intuit’s observers to ask, “What’s different than you expected?” Follow Richard Branson’s example and get in the habit of note taking wherever you go. Or follow Jeff Bezos’s: “I take pictures of really bad innovations,” he told us, “of which there are a number.”

WHY DO INNOVATORS question, observe, experiment, and network more than typical executives? As we examined what motivates them, we discovered two common themes: (1) They actively desire to change the status quo, and (2) they regularly take risks to make that change happen. Throughout our research, we were struck by the con- sistency of language that innovators use to describe their motives. Jeff Bezos wants to “make history,” Steve Jobs to “put a ding in the universe,” Skype cofounder Niklas Zennström to “be disruptive, but in the cause of making the world a better place.” These innovators steer entirely clear of a common cognitive bias called the status quo bias – the tendency to

prefer an existing state of affairs to alternative ones. Embracing a mission for change makes it much easier to take risks and make mistakes. For most of the innovative entrepreneurs we studied, mistakes are nothing to be ashamed of; in fact, they are expected as a cost of doing business. “If the people run- ning Amazon.com don’t make some significant mistakes,” explained Be- zos, “then we won’t be doing a good job for our shareholders because we won’t be swinging for the fences.” In short, innovators rely on their “courage to innovate” – an active bias against the status quo and an unflinching willingness to take risks – to transform ideas into power- ful impact.

Put a Ding in the Universe

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To strengthen experimentation, at both the individual and organizational levels, consciously approach work and life with a hypothesis-testing mind-set. Attend seminars or executive education courses on topics outside your area of expertise; take apart a product or process that interests you; read books that purport to identify emerging trends. When you travel, don’t squander the opportunity to learn about different lifestyles and local behav- ior. Develop new hypotheses from the knowledge you’ve acquired and test them in the search for new products or processes. Find ways to institutional- ize frequent, small experiments at all levels of the organization. Openly acknowledging that learning through failure is valuable goes a long way toward building an innovative culture. To improve your networking skills, contact the five most creative people you know and ask them to share what they do to stimulate creative thinking. You might also ask if they’d be willing to act as your creative mentors. We suggest holding regular idea lunches at which you meet a few new people from diverse functions, companies, industries, or coun-

tries. Get them to tell you about their innovative ideas and ask for feedback on yours.

• • • Innovative entrepreneurship is not a genetic pre- disposition, it is an active endeavor. Apple’s slogan “Think Different” is inspiring but incomplete. We found that innovators must consistently act differ- ent to think different. By understanding, reinforcing, and modeling the innovator’s DNA, companies can find ways to more successfully develop the creative spark in everyone.

Jeffrey H. Dyer (jdyer@byu.edu) is a professor of strategy at Brigham Young University in Provo, Utah, and an adjunct professor at the University of Penn- sylvania’s Wharton School. Hal B. Gregersen (hal. gregersen@insead.edu) is a professor of leadership at Insead in Abu Dhabi, UAE, and Fontainebleau, France. Clayton M. Christensen (cchristensen@ hbs.edu) is a professor of business administration at Harvard Business School in Boston. Reprint R0912E To order, see page 131.

Try spending 15 to 30 minutes each day

writing down questions that challenge the

status quo in your company.

Roy Delgado “The numbers aren’t working.”