Profits and Validity, the Validity of Profits

I came across this stunner of a Peter Drucker quote earlier this week:

Profit is not the purpose of a business, it’s the test of its validity.

There are two ways to take this, both of which are important topics of conversation for anyone involved in the art and science of bringing cool stuff to life.

First is the sense that making money is not the measure of a business, but is rather a measure of how you do business. Profit is not the motive, it is output of an equation.

This interpretation easily takes on a slight moral tinge, however, and does force us to ask questions about various types of business operations and the profits they create. When it comes to entities such as hedge funds (or at least the ones that actually make money), does the end justify the means? Are they more valid than others due to the extreme magnitude of profits that they generate? At a personal level, I made a decision a long time ago that I would rather be part of a business organization that treated everyone involved—customers, employees, business partners, society, the planet—exceptionally well over one that didn’t, even if the consequence of doing so was a diminished financial return. I believe what we should aspire to is a business that constantly seeks ever higher levels of validity, where the the standard of what is valid is defined as activities which increase the happiness and well-being of all those directly and indirectly involved. A business that creates wealth in this way provides for those under its roof without harming those who live outside of it.

My second interpretation of Drucker’s saying comes from the worldview of venture design. Just as you don’t feed a puppy the kind or quantity of food you provide to a mature dog, so it is that a startup requires a different standard of care and feeding than does an endup. Too much money or resources or people too early can, ironically, cause your nascent venture to crash. It’s a lot easier to scale something once you have a deep understanding of what its value drivers are. Before that point, giving it all the things it desires is actually bad for it, as all of those extra people and resources require attention of their own, which distracts the entire endeavor from figuring out the existential question of what it is and what it should be.

In that light, I’m quite fond of Clay Christensen’s notion of being impatient for profit and patient for growth: in the early days of a venture, we should be striving for profitability as a way to ascertain whether we’re creating real value out in the world. If you believe that ventures are designed (as I do), and that constraints fuel creativity, then agreeing upon profitability as a hard constraint will help the people growing the new venture to focus—really focus—on understanding the key drivers of value creation: creating new experiences that bring value to a person’s life, and differentiating that experience from all other alternatives in a way that’s authentic and memorable. A business that’s profitable AND whose customers love what it does is a valid one.

Both interpretations of Drucker’s aphorism work well together, actually: profits alone are not enough, nor is providing the perfect product or service if it can’t sustain itself, and by extension, the people who create it and the society they live in.

I’m thinking out loud here, so would love to hear what other people think.

From the Department of Don’t Get Ready, Get Started

When it comes to making a difference in the world, I am ever a disciple of Perry Klebahn, and try to live by his mantra of “Don’t Get Ready, Get Started”.  Better than any other, that phrase captures the essence of my philosophy of innovating.

I also take great inspiration from Harvard Business School Professor Rosabeth Moss Kanter. Her writings and books provide great insight into the art and science of bringing cool things to life, and I find all of her teaching quite inspiring. My favorite is her essay Four Reasons Any Action is Better than None.

In my aspirational vision of a perfect world, Perry has this essay framed and hanging on the wall of his office at Stanford. Please give it a read. But for the sake of reminding me to keep going back to it, here are her four big points on why getting started beats getting ready:

  1.  Small wins matter
  2.  Accomplishments come in pieces
  3.  Perfection is unattainable anyway
  4.  Actions produce energy and momentum

Energy. Confidence. Momentum. These aren’t words you run across in most of the literature about innovation, whose authors are obsessed with creating the best (or most esoteric?) 2×2 innovation typology matrix. Or even a three-dimensional one. I am guilty as charged on that front. But for anyone who has engaged in the challenging endeavor of bringing something new into the world, you know that it’s much more about confidence and momentum than it is about where you sit on someone’s theoretical design thinking/strategic thinking/innovation thinking spectrum.

Okay that’s it for today. Stop reading this and get back to work! Get started and… GO!

 

Some of the best innovation advice I’ve ever heard

metacool Compare to Reality

We had an embarrassment of riches. It was 1998, and I was leading an IDEO design team that had dreamt up so many cool ideas — and had created a range of working prototypes now standing in front of us — that we couldn’t decide which direction to take. Somewhere, shimmering out in the distance, was never-seen-before perfection, but we just didn’t know which path to take to get there.

In short, we were doing great work. But we were also stuck.

Then, as we stood pondering the prototypes that we’d made, and debating which was the most awesome, IDEO founder David Kelley strolled by to say hello and to watch us demonstrate our ideas. He listened patiently as we explained our dilemma, and responded with one simple question: “What’s the best alternative available to people today? Choose compared to that.”

Behind David’s powerful question is the best innovation advice I’ve ever received:

Compare to reality, not to some imaginary standard of perfection.

The truth was that even our least amazing prototype was miles ahead of the competition. It also happened to be the simplest concept, and the one that most tightly addressed the actual needs we’d heard from people we had interviewed and observed. Even if it didn’t fulfill our fantasies of perfection, we chose that option as the way forward, and we ended up nailing it: our award-winning design sold like hotcakes. Fifteen years later, it’s still in production, making people happy.

I put David’s advice to work every week, because when you get a bunch of talented, energetic people together, it’s incredibly tempting to try and cram as many amazing ideas as you can into whatever it is you’re creating. That impulse leads to things like the Amazon Fire Phone, a technological tour de force that included everything but the kitchen sink, but ultimately failed to satisfy. Compare the Fire’s laundry list of features to the reality-based point of view communicated by Steve Jobs at the 2007 launch of the iPhone, shown above.

Always going back to a benchmark anchored in reality forces you to articulate a clear point of view about what’s truly important. This is the path to excellence.

Some say that rooting your choices in reality is a sure path to mediocrity, but nothing could be further from the truth. Dedicating yourself to understanding what people really want — how they’ll experience a product in the real world — forces you to get away from your desk and make a tangible difference. Instead of just talking about a grand paradise of what might be, putting in the effort to understand people’s day-to-day lives, and then actually producing something that works, is what separates a true innovation from a merely good idea.

Great innovators dream, but they are also relentless about comparing those dreams to the real world, and acting accordingly.

 

image credit: Ernest Kim

WTF is a Product Manager?

Product management is a critical part of a healthy product development process, but it can be difficult to pin it down the specifics of it as a role.

I really like this essay by Ernest Kim, WTF is a Product Manager?  Definitely worth a read—he has a lot of miles under his belt as a product developer, so this is reality speaking.

Here’s a choice bit:

An example I’ve used in the past is that the designers and developers at Nike are so good that they could create a shoe that looks like a boat, yet still offers the performance and comfort of cutting edge athletic footwear. But if it turns out that there’s no market for shoes that look like boats, that product would fail—regardless of its beauty or functionality. In short, it doesn’t matter if the answer is right if the question you set out to answer is wrong. It’s the job of the product manager to ensure that the product team is working to answer the right question(s).

I think Ernest really nails it. Asking the right question is as important as coming up with the right solution. Out of respect for how hard it is to ship a great solution to market, I don’t want to say it’s more important, but it is really important.

Thinking about IndyCar 2018

Scott Dixon, No. 9 Target Chip Ganassi Racing Chevy, Verizon IndyCar Series, © Marshall Pruett 2014,

A few weeks ago I wrote an essay for RACER about the future of IndyCar. It’s part of a series called “IndyCar 2018”. Here is an overview from RACER editor David Malsher:

Welcome to a new series exclusively by RACER. While manufacturer aero kits will be the biggest technical story of the 2015 Verizon IndyCar Series, somewhere just over the horizon is the next-gen IndyCar, due to start racing in 2018.

If that sounds a long way off, it is…but ideas and philosophies need time to take root, germinate and grow before they finally bloom. It may sound conceited, but it’s true nonetheless – at RACER, we have the attention of the people who can make a difference to the path taken by IndyCar. And that “we,” includes you, the readers of RACER, which is why you’re invited to participate.

Over the next couple months, we’re running interviews with, and essays from, the great and the good of IndyCar past, present and future, asking what they think IndyCar should be in 2018. Topics included will be the basic design of the car; what technology it employs; how open the rules should be regarding engines, chassis and bodywork; safety; embracing “green” science; circuits; energizing the business model for teams, promoters, manufacturers, sponsors.

Some brave souls may tackle all these topics – just as IndyCar personnel collectively have to – but generally, we’ve let the interviewees/writers choose their points of focus.

I endeavored to look at the entire sport of IndyCar as a business system. If you had to balance the human experience, the technology platform, and the business model, what choices might you make? What might be a guiding framework for those decisions? Overall there’s been a positive reaction to my thoughts, with some impassioned debate in the comments section below the essay and in Robin Miller’s weekly reader mail column.

In my mind’s eye I expected all of the IndyCar 2018 essays and interviews to be released at one time—Netflix House of Cards style—but I am finding the actual serialization to be a much more interesting approach. Having everyone in the community focus on one point of view at a time helps focus the conversation in a way that having a buffet of options would hinder. That said, I’m very much looking forward to seeing the complete oeuvre—the public conversation RACER is facilitating is a fascinating way to share ideas and encourage innovation.

The first of the series is an interview with Indy 500 winner and F1 World Champion Mario Andretti. The third is an essay by four-time Indy 500 winner Rick Mears. The thoughts from yrs trly were sandwiched between those two, and it’s an honor to be there.  For my own convenience, I’ll add links below to each entry as they’re published.  Enjoy!

Never attend a meeting without a prototype

metacool Julep IDEO

If you’re at all like me, unproductive meetings are likely the bane of your existence. We’ve all been there: the conversation meanders, 50 minutes disappears from your life, and you’re no closer to your goal than when you started. At IDEO we dislike these kinds of meetings too. So we found a simple but elegant solution, captured by my colleague Dennis Boyle, in a saying I call “Boyle’s Law”:

“Never attend a meeting without a prototype”*

This law creates better meetings in three big ways. But before we get there, it’s worth asking: what is a prototype, exactly? We’re in the business of design and innovation at IDEO, and we use the word quite liberally. When I was a practicing engineer, a prototype was something that made a sound when you dropped it, but these days I define it as a single question made tangible. It’s lines of software code, a business model spreadsheet, or a few people acting out a service experience.

If it takes what’s in your head and creates something tangible that others can react to—if it helps probe the unknown—it’s a prototype. And I believe that you can prototype new ideas in your workplace, no matter its focus.

Expect three things to happen when you start bringing prototypes to your meetings:

First, a lot of your meetings will evaporate. Those that shouldn’t happen in the first place, the ones where nothing gets done, won’t. If you can’t bring a prototype of your latest thinking, there’s a simple solution: don’t have the meeting. Instead, focus your precious time and energy on making actual progress.

Second, the meetings you do have will be awesome. With something concrete in the room, discussions will be more productive and actionable, and the level of shared understanding and alignment will go through the roof. And instead of grappling with all the fears, doubts, uncertainties, worries, hidden agendas, and politics that bedevil any organization, you can focus all of that negativity on the prototype—it has no feelings or career prospects, and it just doesn’t care! As you critique, elephants in the room—the real problems at hand—will magically surface, ready to be addressed.

Finally, bring more prototypes to meetings, and you’ll boost levels of performance and engagement across your organization. Professor Teresa Amabile of Harvard Business School has shown that a sense of progress is the driving factor behind high levels of reported happiness and work satisfaction in the workplace. Not fancy coffee or bean bag chairs, just employees knowing that they’re making progress toward their goals. A prototype is an embodiment of all the work you’ve done, and it’s an easy, positive way to signal and celebrate forward motion. Meetings suddenly shift from being deep wells of dread to wellsprings of happiness.

But you say, I like meeting all the time! Well then, here’s another simple solution: create more prototypes! They’re the gift that keeps on giving.

So, what prototype are you going to bring to your next meeting?

 

 

* design engineering humor

Lessons on Innovating from OK Go

I’m more than a little obsessed with OK Go’s new video, I Won’t Let You Down. I love the tune, the choreography is impressive, and I can’t get over the chutzpah it takes to film a single-take video using an octocopter drone:

 

But what’s kept me coming back to watch it over and over are the lessons we can take from OK Go and their seemingly limitless appetite for innovating. Here are my top three:

1. Innovating happens when you embrace serendipity

You can’t think your way to an innovative outcome. Breakthroughs come from giving yourself the time to fool around with a bunch of random elements. By getting out of the office and doing stuff, you learn where to find the awesomeness you seek.

Here is how OK Go’s Damian Kulash describes the process of serendipity that fed this video:

What we try to do is get the best idea we can at that desk and then get out into the place where we’re going to be making whatever we’re going to be making and play with it a lot. We have a lot of trial and error, a lot of figuring out what does and doesn’t work. Usually, by the time we’re done with that process, the idea is pretty dramatically different from what we started with… And it means that we waste a lot of money and our production value is… we don’t shoot the world’s most clean and beautiful stuff, but we have videos that no one else could have.

This isn’t about waiting for inspiration from a muse, it’s about intentional serendipity, making your own luck via the hard work of experimentation and iteration. OK Go’s videos are so memorable because of the countless iterations they go through to get to the finished product. Because they’re careful to set the stage for serendipity to flourish, each cycle of experimentation increases the odds of them bumping into a piece of magic.

2. Business model innovations ripple through everything else

OK Go’s business model innovation was to choose a different metric: instead of tracking the number of albums sold—the usual measurement of success in the music industry—they focus instead on the passion of their followers.

OK Go made a decision early on to bypass radio and MTV and go directly to YouTube with its unique style of low-budget, single-take music videos. The resulting channel conflict (“You’re letting people listen for free? What about our sales?”) flew in the face of conventional wisdom about how to stay in business as a rock musician.

This unexpected choice is key to understanding the band’s ensuing success: when your goal is making your fans happy, you focus on the music and the videos and the quality of your tours, thereby setting up a virtuous cycle. Each time they create a video like I Won’t Let You Down, they affirm their relationship with existing fans, and win new ones. When it comes time to create their next video, their priorities will be in order, and mustering the courage and resources to do something even more spectacular will be relatively straightforward.

On the other hand, focusing on album sales means listening to a lot of people who may or may not care about the art—the marketing guys or the huge distributors. And that distracts you from doing the one thing you need to do as a rocker: create great, unique music. So here’s a question to ask yourself: is your business model helping you actually win at the thing you’re in business to do?

As it happens, those Honda UNI-CUBs piloted by OK Go are also the result of a business model innovation. In 1960 Takeo Fujisawa (an organizational design genius, and Soichiro Honda’s business partner) created Honda R&D as an entity independent of—but funded by—its parent Honda Motor Company. This structure was all about embracing serendipity. It gave Honda’s R&D scientists and engineers the permission to tinker and generally fool around with technologies that had no obvious short-term relationship to cars or even Honda itself. Over the years, Honda R&D has created many innovations that have eventually become mainstream hits.

3. Vision + Guts + Perseverance = Innovative Outcomes

The magic of many of OK Go’s videos is that they’re hugely creative performances done in just one massive, risky, glorious take. They couple a big vision with big guts. It’s the film equivalent of tightrope walking—one errant UNI-CUB and it’s back to frame one.

Pulling it off in grand style requires a ton of perseverance. The risks involved could lead to a diminished vision (“Why don’t we make this easier on ourselves?”) and a less vibrant performance (“I keep screwing up the choreography—I’ll dial back my grooviness”). But OK Go always has the guts to dream big, and the dogged perseverance to pull it off.

This specific video required around 2,300 people collaborating on about 60 practice runs and 44 filmed takes, 11 of which were done to completion. Of those, only three were of acceptable quality. Just imagine the emotional and logistical fortitude it takes to restart the filming process after a minor flub.

It’s the same with Honda. UNI-CUB isn’t even on the market yet, but Honda gave OK Go a second-generation iteration to use for this video. UNI-CUB literally stands on years of patient research that went into the company’s humanoid robot ASIMO and untold other projects that would seem to be unrelated on first glace.

It took 68 years to get here; back in 1946 Soichiro Honda wouldn’t have been able to imagine that his creation of Honda R&D would eventually lead to four men in black suits riding his company’s vehicles around on something called the “internet,” while thousands of women with bright umbrellas danced in psychedelic patterns. But that’s the nature of innovation—you don’t always know what the flower garden will look like, but that doesn’t stop you from planting the seeds.

So dream big, let it all get messy, and put in the hard work to make it happen.

And keep those umbrellas twirling.

How to Do the Best Work of Your Life

James Yurchenco metacool

Jim Yurchenco is the design engineer behind everything from the first Apple mouse to the Palm V to the Plié Wand from Julep. He just retired from a 40-year career at IDEO creating products which brightened the lives of millions.

Jim’s work was also about helping everyone around him excel. I was fortunate to have Jim as a mentor, coach, and project leader at IDEO. I did some of the best work of my life working with him. And the “how” was great, too: we never pulled all-nighters, but we always hit our deadlines, routinely achieving extremely innovative outcomes.

How to do the best work of your life? Well, here is Jim’s secret:

“Don’t accept done for good. And don’t accept good for excellent.”

Jim’s approach to excellence is anything but passive. It is rooted in action, passionately and optimistically pursued. He’s never one to sit back and procrastinate, waiting for inspiration and perfection to magically appear. He is constantly thinking, building, pushing, failing, learning—always striving to figure out a way to make things better. All of this coupled with an urgency to make decisions quickly and be productive, but with the sage perspective to step back and let things percolate when need be. In Jim’s world, excellence is both something you pursue, and something that comes to the prepared.

One morning in the late 90’s, while noodling on ways to cool the chips in the Intel Pentium II cartridge we were designing, Jim decided that our pursuit of excellence demanded access to a temperature-controlled, variable-speed wind tunnel. Today. Of course, we didn’t have one. But by that evening, after scavenging all of Silicon Valley for parts and applying some scrappy ingenuity, we had a twenty-foot long wind tunnel up and running in an unoccupied office we found at IDEO (whose owner was mildly surprised when she returned from her business trip). And then we used that wind tunnel to create a breakthrough design solution.

When you’re committed to excellence—and when everyone you work with knows it—failure becomes a mere bump in the road along the way to success. Once you stop accepting good for excellent, you can transcend limitations that would stop a normal team. Scarcity becomes abundance, hurdles becomes ladders, and you start doing the best work of your life.

That’s how Jim did it. And you can too: commit to excellence, believe there’s always a better solution, and make it all happen with optimism.

You can hear more of Jim’s wisdom in this wonderful video:

Innovation Lessons from Video Gaming

metacool video games

I’m a believer in William Gibson’s dictum that “the future is already here—it’s just not evenly distributed.” When I’m part of a team designing something new, we always search for inspiration from existing products that are running a few meters out in front of the pack. More often than not, the most future-forward ones are video games.

An edgy brew of technology, design, and business, video games are a wellspring of innovation. Moore’s law dictates that the processors they run on are always getting faster, and games in turn push computing technology to the max, so performance constantly rises. Games have to be reliable and desirable, a fiendish design challenge. Their complex algorithms must not only work perfectly, but also make us marvel in the beauty of their output. And we’re willing to pay for it: this year’s global video game spending is expected to surpass $100 billion. The competition for that big pie feeds a lot of radical business model innovation.

So if innovating is your business, why not shell out a few quarters on video game research? Not only is it a lot of fun, but you’ll learn a ton. Here are four ways video games can help you become a better innovator:

Experience World-Class Experiences
Good experiences bring you joy and make you happy, great ones get you to flow—that sense where time slows down and you’re in the groove. World of Warcraft (WoW) is a masterful flow-inducing game, with the best digital interaction design in existence. Period. With WoW, in the first ten minutes you’re given a challenge that’s just a little more difficult than you can handle, so you immediately experience learning and growth. Before you know it, you’re on the road to personal mastery. That feeling continues at ten hours, ten days, ten months, and beyond. For pointers on how to make flow happen with your own product or service, WoW is a master class. To see an analogous experience on a mobile device, check out Monument Valley.

Grok New Business Models
The rise of free app ecosystems, Facebook, and networked gaming environments has forced video game makers to focus on business model innovation. For example, WoW generates $1 billion in yearly revenue via a mix of upfront payments and monthly subscription fees. Others have created new ways to claim value by seamlessly interweaving payment with game play and narrative. Clash of Clans is among the very best at this, helping its developer Supercell rake in $892 million in revenue in 2013. Want that Level 5 P.E.K.K.A.? With just a couple of screen taps, iTunes processes your $19.99, and she’s ready to go bash down some Inferno Towers.

Become a Better Creative Leader
Creative leadership is about managing uncertainty, surfing serendipity, and navigating the future with a compass, not a map—all skills that video games often require. Great creative leaders are able to:

  • communicate effectively with teams of diverse individuals
  • make quick decisions in dynamic situations with a high degree of uncertainty
  • digest regular feedback to grow their leadership acumen, lest they lose their following

Leading people in a multiplayer video game is an amazing way to develop your creative leadership skills. Even if in “real life” you’re not in a leadership position, in an online game you can lead big teams of people for weeks at a time in order to hit challenging goals. Along the way, you’ll amass many more hours of real leadership mileage than you could by attending a training program or reading books.

Joi Ito, my erstwhile WoW guild leader (who also happens to be the head of the MIT Media Lab) believes that the “…leadership method of…World of Warcraft and open-source projects is actually really similar to doing something like leading a bunch of super-smart, creative academics and students.” Former Xerox Chief Scientist John Seely-Brown recently said, “I would rather hire a high-level World of Warcraft player than an MBA from Harvard.” * I share their sentiments: WoW is one of the best leadership academies out there.

Raise Your Own Innovation Game
Behind every great game is an equally fascinating creative backstory. How did they make it sing? How do they work as a team? How might elements of their approach work for you?

Killer Queen is a five-on-five video game that’s at once retro and progressive. Josh DeBonis and Nik Mikros—the creative duo behind it—nailed the game dynamics by having real people run around fields with foam swords—an epic, quick way to create a minimum viable product. An evidence-driven process—one built around employees actually using the stuff they create—is a great way to promote (or kill) new game ideas. The video game industry is as technologically sophisticated as they come, and more competitive than Formula 1, so rest assured that learning what makes it tick will make you a better innovator, too.

Although the stickiest learning is in the playing, I’m not suggesting that you need to develop a 24/7 World of Warcraft habit to master the four lessons above. You can learn a lot just by watching over the shoulder of someone else playing. Or ask your kids why they’re a master of a particular game, and what’s so cool about it. You will find myriad things to inspire better solutions to the challenges of your own work.

We’ve only scratched the surface of the thousands of superlative video games out there. As an innovator, which ones do you learn from? And what are the other big lessons to be had?

 

 

* to which I must ask, “Why not have both?”