John Hannon – Page 2

Failing for Success: The Importance of Low-Fidelity Prototypes

Posted on March 4, 2013November 30, 2015 by John Hannon

Many of the strategic issues we’ve been thinking about at Justkul Inc. revolve around the intersection between design-thinking and corporate strategy. Although we believe both can be compatible, they are often in tension with one another. One of our hopes is to bring both fields closer together.

One concept about which many design thinkers are seemingly at odds with corporate strategists has to do with failure. Business strategy often ruthlessly avoids failure. Yet, in many cases, “failure” can be good and should be strategically incorporated into business processes. I say “strategically,” because not all failures are the same, and recognizing this point can have a profound impact on innovation.

To understand the importance of this point, it is worth keeping in mind how large corporations succeed. Corporations do this primarily by developing reliable processes that can be replicated through time while avoiding failure. Some industries, such as the automotive industry and manufacturing aim at six sigma accuracy, which is typically defined as less than 3.4 mistakes per million products. When you consider that individual products can have hundreds if not billions of components (think computer chips), to even come close to achieving this level of accuracy is an amazing accomplishment, and requires not only technological innovation, but also corporate cultures that are committed to the goal of avoiding failure.

Yet, even though many mature companies aim for that level of accuracy in some processes, it can be detrimental to other processes. For instance, any firm that is developing a new innovative product should generally not aim for perfection in the beginning of the product’s development, but should rather aim for rough prototypes that test the fundamental ideas first. This is because the process of developing a revolutionary new product often requires a great deal of failure. At an opposite extreme to six sigma accuracy consider the famous 5,127 prototypes that James Dyson made before he finally hit upon his famous vacuum. If you want to look at this design process using the same scale as a six sigma process, instead of 3.4 failures per million, that would be a failure rate of about 999,800 per million, or 294,000 times an acceptable six sigma rate! No large corporation would survive if it had that kind of failure rate in one of its key replicable processes.

However, Dyson’s “failures” were of a very different sort than the failures that prevent a company from achieving six sigma accuracy. They may have been failures so far as they failed to manifest the final successful product, but successes so far as they were important steps along the way. Thomas Edison encapsulated this thought well: “If I find 10,000 ways something won’t work, I haven’t failed. I am not discouraged, because every wrong attempt discarded is another step forward.” Dyson and Edison’s “failures” reflect the very nature of the process of innovation.

Most companies have come to recognize this truth in some form, and the phrase, “fail early, fail fast, and fail often,” has become a mantra for R&D. Consequently, management is usually willing to tolerate a certain degree of “failure” from their R&D departments, and to understand that the same metrics cannot be applied there as in other parts of the corporation. However, being tolerant of failure often doesn’t go far enough. There are circumstances in which failing to produce a perfect, compelling product should not only be tolerated, but encouraged.

Aiming for Imperfection

Imperfection should not only be tolerated, but encouraged in the early stages of product development. In these circumstances, striving to produce too perfect a prototype can lead to significant failures later on.

To see this, note that any prototype of a product will succeed in some ways and fail in others. In one extreme let’s imagine the 5,126th prototype of Dyson’s vacuum cleaner. I have no idea what the product looked like, but given the late stage in the development, I imagine that it was very close to the final product. It had high fidelity in relation to the final product. When Dyson was evaluating such a product, most of the details were likely working satisfactorily, but there may have been one or two things that were off: perhaps the color or the texture of a surface material, perhaps there was a defect in the motor that needed to be fixed. But I hazard to guess that at this stage of development 99% of the product was in its final form and functioning correctly.

Again, I have no idea precisely what Dyson prototype #1 looked like, but given the nature of innovation, I would be inclined to imagine it was very different from the final product. It had low fidelity in relation to the final product. It probably did not match the final product in shape, color, size or even function. It might have even been made out of cardboard or drawn on paper.

The level of fidelity of a prototype is important because it is directly related to the type of feedback one will receive. If a potential purchaser of a Dyson vacuum cleaner were shown prototype 5,126, that person might decide to buy it on the basis of its color, regardless of what functional innovations it incorporated. The product just looked nice. In contrast, a viewer of prototype #1, whatever that looked like, would probably not be distracted by the color. In fact, it would be pointless to ask about color at that stage, because color preferences will likely change as other important factors changed.

If the goal is to receive feedback on fundamental concepts, then there is no need to produce a finished model. In fact, the finished model with all its polish and beauty can be a distraction from the intended evaluation. Hence, for a very interesting reason, one should not aim to produce perfect and beautiful prototypes early on in a design process: they can be distractions from the basic innovations that one wants to evaluate.

Not just a Concept for R & D

The same principle holds in areas far removed from product development, and this concept can be carried over into all aspects of business and life. For instance, the broad outlines of a new business strategy might be evaluated incorrectly if it is initially packaged too well. A hiring process might not be optimized if a job candidate is expected to perform too well on an initial interview. An initial brainstorming session is often less productive if there is an expectation for too refined a result. And as I will explain in a future post, one will learn things more slowly if one doesn’t provide adequate space for failure.

Everyone wants to have their ideas succeed. Corporate culture only reinforces this inclination whether you are in a six sigma operation or a less than one sigma one. The fact that beautiful prototypes can succeed more often than ugly ones, that quantitatively validated ideas can succeed more than those that are more nebulous, encourages us to adopt certain strategies. But when it comes to early stages of a product’s or an idea’s development, this in itself can be a mistake. Fail early not only because it is better to get such failures out of the way in the beginning, but also because it may be the only way to ensure products will succeed in the end.

By @jfhannon, CEO at Justkul Inc., a research firm focused on the needs of strategy and private equity. This post and the concept of fidelity were inspired by an excellent talk I attended by Anijo Matthew (@anijomathew) on 2/13/2013.

What is Cool?

Posted on December 10, 2012November 30, 2015 by John Hannon

What is cool? Coolness is a preference objectified. It is usually asserted in relation to a group to which one attributes an authority in the realm of taste.

The objectification of the preference is important. To objectify something is in part to grant ownership to another. In the realm of the cool, this is to open an object’s status to debate among one’s peers. This is the reason that one can both prefer something, and agree that it isn’t particularly cool. For instance, you might really like a particular kind of sneaker, and agree that it isn’t a particularly cool sneaker. Or, alternatively, one can assert that something is cool, but not like it at all. In the latter case, you are probably saying that the item is preferred by a group that you do not identify with. For instance, an English professor might agree that Harry Potter is cool, but really not like of the writing or films.

Because of the connection to objectification, unlike a regular preference, one can challenge and debate the coolness of something. This rhetorical structure also means that your group of friends might be able to convince you that what you initially thought was cool, really isn’t.

Coolness is often said in relation to an age group or generation. What teenagers think is cool is often very different from what 30-somethings think is cool. For instance, Twilight tends to appeal to younger generations, whereas it doesn’t appeal to older generations. Conversely, a nightclub might seem cool to a 30-something, but not even be on a younger generation’s radar. However, most people would probably agree that younger generations seem to have more authority over what is cool. Teenagers seem to have unusual authority in this realm. This is perhaps because it is an age of rebellion, and what is cool is often the result of overthrowing preferences that were held before.

Yet, coolness can also be age-independent. When Steve Jobs first unveiled the iPhone, people in many different generations found it to be cool. It was a product that was just so superior to any of the previous offerings in the mobile phone category. Similarly, when someone is really passionate about something interesting, she or he can be imbued with coolness. Even a bunch of rebellious teenagers may think a particular oldtimer who has a unique perspective on life is cool.
Coolness also has temporal and geographic aspects. A judgment that something is cool is asserted at a particular time and place, and it may quickly cease to be cool. Friendster was cool once, but it rapidly fell out of disfavor when Facebook came along, which combined a Friendster-style framework with a sense of exclusivity. There will likely be a time when Facebook ceases to be cool too. (Some may think it became uncool when it lost its exclusivity, or when their families or bosses joined.) Place also matters, because something that is cool in Chicago may not be cool in Tokyo.

But coolness isn’t merely an abstract concept: coolness sells. That is why companies are interested in what is cool. It is a powerful force for consumerism. Someone may no longer want to wear a perfectly adequate article of clothing because the color or fit is no longer cool. Because of the tight tie between consumerism and coolness, this fact can often make coolness into a negative for some groups of people. An environmental activist might find the idea that you need to buy something because it is “cool” as a serious moral deficiency.

Coolness tends to be related closely with consumerism, but it need not be. Activities such as donating to a particularly worthy cause, or voting in an election may become cool in certain contexts. And in fact, making a cause cool is a good way to ensure its success. Even anti-consumerism, or being anti-cool can paradoxically become cool to some groups.

Coolness can be easy to define in the abstract, but very difficult to pin down in the concrete. This is because coolness is a rebellious category. It promotes the kind of disruptive innovation that causes us to revise existing categories and preferences. It is also constantly moving and changing. But one thing is for sure: coolness has real world consequences.

By @jfhannon, CEO at Justkul Inc., a research firm focused on the needs of strategy and private equity.

Thoughts on Reading Business Model Generation and a Note on René Descartes

Posted on June 20, 2011November 30, 2015 by John Hannon

I recently re-read Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. The book is available on Amazon.com, and you can currently download the first chapter of the book here. The goal of the book is to provide a useful framework and set of techniques for developing new business models. Reading it this past weekend also led me to reflect on the relationship between innovation and systematic approaches to business. As I have reflected on before, large corporations are often torn between two extremes: on the one hand the best way to control risk, to manage a large corporation, and to form incremental improvements is through systematization. On the other hand, such systems tend to reaffirm the status quo, and thereby stifle genuine innovation. Business Model Generation is an attempt to develop a system that can lead to more innovative business models, and thus bridge these two extremes. The system the book presents is outlined in the first chapter, and it involves separating a corporation or business into 9 key components: a value proposition, key activities, key resources, customer relationships, distribution channels, customer segments, key partners, cost structure, and revenue streams. The different components are arranged on a “canvas” in which the value proposition is front and center, and it is possible to chart flows between components. The “canvas” helps one visualize different business models. But the real value of the book is that it begins to augment this framework with actual examples of innovative business models and explains the trade-offs of each, and when it outlines design techniques that can be used to create new ones. The examples come from a wide range of industries. One reads about the contrasting approaches of the Maerki Baumann and Pictet banking institutions, how Telco unbundled the components of its infrastructure in order to better align its capabilities, how Lulu changed the publishing model, how Lego experiments with user-generated content, and how Nintendo Wii re-imagined the video game model. Apple and Google both have their requisite due. Metro’s publishing model is explored. Red Hat is used to introduce the fremium model and Skype and Amazon are discussed. P&G’s R&D gets significant attention, as does the classic Gillette bait and hook. All of these business models are related to the canvas developed in the first chapter, and it produces a type of alignment that allows one to see each innovative model as a general type. The presentation of each business model is entertaining and insightful. After this rich list of examples, the book turns its attention to more in-depth discussion of some aspects of the design approach to business including brainstorming techniques, how to gain customer insights, the importance of storytelling, and ways of analyzing markets for strategy. All of these topics are covered in more depth in other books, and serious innovation designers may find them old-hat. However, as with the canvas developed earlier in the book, having all these techniques in one place, with quick efficient overviews can give even an experienced innovation designer a nice bird’s eye view of the business model landscape. When all of this is put together the team responsible for Business Model Generation has created an ideal way to get a quick overview of cutting-edge approaches to business design. I have actually used the book on several occasions now. It has helped me and a group of colleagues understand our own business much better than other techniques we have used. But the understanding is peculiar: I have found that although Business Model Generation is a useful read, the practical utility of the “canvas” presented in the beginning can be somewhat limited. The divisions that the 9 components of business force on a particular case can often be too restricting and feel unnatural. This effect oddly reminds me of David Trood’s famous National Geographic photos in which David uses hundreds of photos to produce unified images. In both cases the resulting products end up giving you a general picture from which you can glean some insight, but one is struck by how much is lost in the resulting image. As in life we often learn more from differences than similarities. The limitations of the framework reminded me of a philosophical work I studied in graduate school. René Descartes once set himself the task of providing a unified system for developing new ideas. He called it his Rules for the Direction of the Mind. At the time Descartes was already an accomplished mathematician and had solved several problems that had baffled mathematicians for centuries. He did this by developing new innovative techniques for solving problems, including imagining the line of a curve to be traced by a complicated mechanical machine. The results of such thought experiments were not immediately accepted by the mathematical community, but in a suitably translated version they became the basis for much of modern mathematics. (The best account of Descartes’ mathematics is Henk Bos’ Redefining Geometrical Exactness: Descartes’ Transformation of the Early Modern Concept of Construction.) Having been extremely successful in mathematics, I assume Descartes thought it would be easy to develop a formal approach to creativity that could be applied in all instances. However, he soon abandoned his work, and left the book incomplete. Many theories have been offered for this, but I think it is very likely that he realized at a certain point that truly innovative solutions could not be codified or mechanized in such a formal manner. One has great difficulty formalizing the process of innovation.

Llull's random idea generation machine. — Llull invented a random idea generation machine.

I bring up the case of Descartes, because I think a similar phenomenon occurs any time one discusses innovation. A creative process generally ceases to be innovative the moment it is codified and mechanized. Even a system designed to produce random results, such as that of Ramon Llull, is rarely as effective as someone thinking creatively outside of the rules, whether it is through analogy, brainstorming, or applying an example from a very different domain. The best that one can do to capture this kind of innovative thinking is to review examples and develop rough techniques for thinking about problems. To Business Model Generation’s credit it is pleasantly situated between the extremes of random creative thinking and a mechanized and codified process that stifles innovation. It provides enough detail to stimulate thought, but does not attempt to develop it to the level of being a formalized and unresponsive framework. This means that the reader has a loose and flexible tool that she or he can use to think about their own businesses, and perhaps stumble on an insight that will lead to new, truly creative developments. But, it is important to understand that having a framework is only the beginning of the road to innovation. P.S. I should add that one of the most fascinating aspects of the book is the innovative way in which it was written. You can find more on the book website here. By @jfhannon, CEO at Justkul Inc., a research firm focused on the needs of strategy and private equity.

7 Ways to Turn Failures into Successes

Posted on May 22, 2011November 30, 2015 by John Hannon

If someone is really trying to be innovative, almost by definition that person will fail from time to time. This is because innovations that have never been tried before are often risky undertakings, and failure is far more likely than success. James Dyson went through 5,127 prototypes before he came up with his famous vacuum cleaner. Thomas Edison famously said, “I have not failed, I’ve just found 10,000 ways that won’t work.” To persevere is certainly a virtue, and many examples show that such persistence can ultimately pay off. But this kind of persistence is a virtue in an individual, not necessarily in an organization or company. A company that constantly follows failing strategies will be out of business rather quickly.

Because of this, businesses are very concerned with failure, and the punishment can often be severe: loss of jobs, financial penalties and so on. Although sometimes it is necessary to take such severe measures, there is a trade-off in terms of loss of communication, and such decisions can also limit the possibility for individual or organizational improvement. There are more constructive ways to respond to failure. Here are seven ways for a company to respond.

Use mistakes to pinpoint areas of improvement. In a recent interview Milton Glaser made the observation that failures are sometimes better than successes: successes merely reaffirm your previously held views and reinforce the status quo; only failure provides genuine opportunities for improvement. But to actually produce this improvement takes more than simply admonishing an employee with a cliche like, “Don’t do it again.” Successful people and businesses know how to focus in on the specific factors that led to a failure. A pianist who simply continues to play a piece from the beginning, is unlikely to perform the piece as well as someone who spends extra time mastering the difficult passages. Similarly, a company that doesn’t provide appropriate focus on the specific cause of a failure will not improve as quickly as one that does. Hence, you should offer people who have failed new ways to meet the challenge in the future. For instance, if a client presentation doesn’t go well, offer to excuse the employee from other tasks in order that she or he can obtain sufficient training to do better next time. For a company, this is a prudent investment in the future.
Use mistakes to understand the limits of current possibilities. Another way to learn from mistakes is to use them as opportunities for understanding the limits of a domain. I have a mathematician friend who spent more than a year with colleagues throughout the world working on a proof that ultimately didn’t work. However, the funding for the project required a specific output, and so he did what scientists often do, and turned the study into a disproof of the original methodology. Far from being a cop-out, such a move represents a genuine advance in knowledge. This lesson can be applied to companies too. For instance, if there is a client product that cannot effectively compete against the competition based on feature or price, then that might be the signal that the company should leave that market, and head in a different direction that better suits its strengths. This is a loss, but because it allows you to redirect your resources, the project also represents a positive gain for future strategies.
Steal from your mistakes. Google is a company that has managed to respond well to failures. For instance, consider the recent failure of Google’s Wave service, a service Google pulled the plug on in August 2010. The service developed a fresh new approach to online messaging, but for various reasons it never caught on. However, despite the fact the service had to be closed, many features of that service are now entering the market as enhancements to other services that Google offers, and vestiges of Google Wave can be seen in Google Docs. This is one of the ways you can respond to failure in a creative way. If the overall system doesn’t work, then analyze it down into its components and see if there are ways to construct new services from the pieces. This requires investing time in understanding a failure, and in seeing how to reintegrate the results into the overall strategy of a firm.
Keep a record of mistakes. This is closely connected to the previous observation. It may be the case that there are no obvious ways to steal from a mistake at the moment, or that the reasons for the failure are currently too opaque. However, it may turn out that six months or a year down the road a new opportunity will arise in which the learnings can be applied to significant advantage. In order to take advantage of these situations, many details of the previous failure may need to be recorded and reviewed. If blame is attached to specific individuals they may be less forthcoming about the real reasons for the failure. Hence, a database of previously attempted initiatives incorporating a certain degree of anonymity should be maintained. I’m actually surprised so many companies do not have specific people in charge of understanding failures and finding new creative applications for the results. Given that the development costs of these failed initiatives are already paid for, such failures can often provide the proverbial “low hanging fruit.”
Turn the failure into a challenge. If it is particularly important to overcome a failure, throw down the gauntlet and constructively challenge people to do better. There is an amusing story recounted on Michael Schrage’s HBR blog post of how Charles M. Schwab used a challenge to motivate workers. After learning that the day shift at a poor-performing mill produced only 6 heats, he proceeded to write a large “6.” on the floor. When the night shift came on, they saw the number and knew that they could do better, and worked extra hard to put a “7” on the floor. The process accelerated when the day crew arrived, and by the time the competition completed the mill was producing more than any other mill in the plant. Competition is an effective tool for improvement whether it be in business, evolution of species, or in breaking the four minute mile. For this process to work well in a business it is important that the emphasis be on the success rather than the failure: in a race in which only one person wins, there is little point in berating everyone who didn’t.
Outsource a part of a challenge. If a product or service is generally working, but there is one component that is consistently failing, you may want to consider outsourcing that component of the product to a company that has the knowledge or resources to make it work. Although these may not be prime examples of “failures” Netflix was able to retool their algorithms for movie suggestions by outsourcing it through a competition. P&G famously decided to increase efficiency and reduce cost by aiming to outsource up to 50% of its R&D work to third-party providers. When companies outsource capabilities to other firms they can focus their resources on those aspects of projects in which they can obtain the highest value.
Let an employee keep at it. There are a variety of ways of responding to failure, but one of the ones we value most in our society, whether it is in inventing or playing video games, is the value to keep at something. As the options above indicate, it is sometimes important to recognize when something will not work, but this doesn’t mean that one should always give up. For instance, if there is an employee who is particularly passionate about a cause, why not let him or her spent a few hours each week pursuing it long after the company goes in a different direction? The most you are losing are a couple of hours, but the added gain in letting the passionate employee own the task, and of keeping the project within the company’s fold may be significant if it does work out.

If you are striving to be innovative, it is important that you have a plan for dealing with inevitable failures. By concentrating creatively on what can be gained from a given case, one can turn current failures into future successes.

Do you have any interesting examples of failures that you turned into successes? Do you have ideas for other ways to make use of failures? Feel free to comment below.

By @jfhannon, CEO at Justkul Inc., a research firm focused on the needs of strategy and private equity.

Thoughts on Reading Sticky Wisdom

Posted on April 17, 2011November 30, 2015 by John Hannon

For Creativity and Innovation Week (April 15th-21st) I’ve decided to write something about a book that has recently had an impact on how I think about creativity. This is Sticky Wisdom: How to Start a Creative Revolution at Work. The book is relatively short, and can be finished in about a day. It has a number of interesting examples of creativity, and offers a framework for thinking about creativity and innovation.

The part of the book that I found most useful is the distinction between analytical and creative thinking and the importance of signaling when one is changing from the one to the other. I just defended a dissertation in analytical philosophy, so I am probably the poster-child for analytical thinking: whether it’s ancient mathematical proofs, Gödel’s incompleteness theorem, or applying skepticism to any proposition (“Do I exist?”—”Not entirely clear.”), I’ve done it. “Analysis” means breaking down a proposition into its component parts, and comes from the Greek word for loosening or untying a difficult problem. Analysis is not necessarily the opposite of creativity: it can take considerable freshness of thinking to be able to see the assumptions upon which an approach or statement is based. But there are contexts in which it can definitely be in tension with creativity.

This is often the case in a business context. Businesses are incredibly analysis-based. This is in part because of the complex types of problems that corporations face. A successful launch of a product in a new country depends on getting hundreds of details right, whether it’s understanding the customers, determining how to distribute the product, identifying costs, coming up with effective branding, and so on. If any one of these things goes wrong the launch could be a disaster. This is perhaps the reason why analysis is so central to MBA education, and why corporations and consulting firms can be obsessed with it in the interviewing process. But the analysis focus goes even deeper than this: most corporations are obsessed with risk management. There are people whose only jobs are to avoid risk, committees and boards are designed to distribute risk, jobs are reduced to such tiny pigeonholes that no one can cause too much damage, and at the top there is a CEO who’s job it is to never say anything that will risk the company’s reputation. Hence, when a new idea is proposed, the default setting for most people is, “What could go wrong with this? What are the risks if we do this?” Yet, although these are necessary questions to ask in some contexts, they can be inimical to truly creative and disruptive ideas that no one has thought of yet. This is because—by their very definition—such disruptive ideas are risky.

Hence, in Sticky Wisdom the authors argue that it is important to set aside space for another mindset. They call this “greenhousing,” and it can be roughly described as a context in which risky ideas are not only allowed to grow, but are in fact encouraged to do so. This is particularly important in the early stages of an idea, before it has had a chance to be worked out in any detail. As Sticky Wisdom emphasizes, at these stages a simple, “Yes, but . . .” or “We’ve tried that before,” could be enough to kill a potentially exciting and innovative idea. What one really needs is a context in which even an initially ridiculous idea can be explored. As I have said in an earlier post, I sometimes have started a brainstorming session with the question, “What’s the most ridiculous way to solve this problem?,” and have been surprised at how much insight can be gained in approaching a problem in this way. But given the focus on analytical thought in a corporation or in academia, you have to often make a point to signal when you are looking for growth-support rather than criticism.

The advantages of having an organization occasionally adopt this mindset are manifold: new opportunities can be identified, and genuinely innovative approaches to problems can be found. One might even argue that it is not accidental that many of the most influential technologies and innovations arise outside of a corporate setting: whether it be Twitter, Facebook or Google, small entrepreneurial groups can be more willing to take risks because they have less to lose if the idea doesn’t work out, and are often more willing to be creative. When large corporations are not at least sometimes willing to take similar risks, they create risks of their own, including the risk of missing the next trend in innovation. And the funny thing is that large companies don’t necessarily have to miss that boat: if a corporation provides contexts in which employees are encouraged to think creatively, they too can have the insight to come up with similarly innovative solutions. But this takes more than a mission statement about the importance of innovation, but a genuinely new way of looking at the world. Sticky Wisdom offers insights on how to look at the world in this way.

I hope in honor of Creativity and Innovation Week and Leonardo da Vinci’s birthday companies, schools and organizations set aside some time to think about creativity. Having the staff reading Sticky Wisdom can be a good start.

By @jfhannon, CEO at Justkul Inc., a research firm focused on the needs of strategy and private equity.