Outsider Innovation 101

This article is an introduction to an idea — outsider innovation — whose time has come. I’ll present the idea, and along the way include short reviews of three fun books about innovation (Thinkertoys by Michael Michalko, Make us More Innovative by Jeffery Phillips, and Awake at the Wheel by Mitch Ditkoff) that belong at what I would call the 101 level. These are books that treat the subject at extremely basic levels, compared to the advanced end of the literature that full-time researchers like me try to keep up with (and which I review more often here). I almost decided not to review them, until I suddenly realized, while taking a walk, why such books are extremely important today in enabling an economy based on true ‘innovation everywhere’ principles. Or as I prefer to call it at its current stage of evolution, ‘outsider innovation,’ by analogy to outsider art. If you are an ‘insider’ this article should help you prepare for the coming ‘outsider’ fueled models. If you are an outsider eagerly awaiting the democratization of innovation, and itching to one-up us smug PhDs, this should help you get started.

Why This, Why Now

I define outsider innovation as innovation by people outside the formal institutional structures and training/career paths in innovation. Unlike outsider art, which has a patina of legitimization-by-condescending-interpretation about it, outsider innovation, I believe, will eventually displace the insider variety as the dominant source of innovation. Professional innovators will increasingly take on orchestration roles. The economic imperative is clear — a cadre of trained PhDs working in government, industry and university labs, along with pockets of entrepreneurial/startup culture, is simply an obsolete model, when it comes to dealing with the innovation challenges of today. It just has too many structural problems, including inefficiencies in funding and risk-management, poor access to the real-world data that can drive ideation, poor leverage in driving absorption/diffusion of innovations, and most importantly, criminal levels of underutilization of the creativity and knowledge of people outside the formal innovation systems.

Ideas like open innovation represent gradualist attempts to address this. While these are important, they are not enough. Two things are needed to enable more radical solutions. The first is the development of adequate technology-enabled-business models that can support innovation on such a pervasive scale. This is not a trivial challenge, but the answer is emerging, as chronicled by Wikinomics and Megacommunities.

The second requires the recognition of a harsh truth. Even the best savants among the amateurs need an education. All too often, smart but naive amateurs end up believing (and operating by) comforting ideas along the lines of “Everything I Need to Know I Learned in Kindergarten” that helps them devalue the importance of the innovation training that professionals go through, and the institutional support they rely on. All too often, the professionals shy away from contradicting these ideas, out of a fear of appearing elitist.

The mental models that amateurs operate by — half-remembered high-school lessons involving Archimedes’ Eureka! moment or the more modern romantic (and extraordinarily atypical) tale of the discovery of Ramanujan by Hardy — are simply not enough to support an innovation-everywhere economy. The world of innovation today, thanks to three centuries of evolution, is so professionalized and optimized for a certain economic environment, that amateurs are extremely unlikely to be able to contribute to it on a large scale without learning a few new skills.

Which begs the question: what sort of education do (current) outsiders need, to enable them to be effective part-time participants in innovation?

The Missing Education Revolution

So we need an education revolution on par with the diffusion of high school education in American around the turn of the century, and college education after World War II. Those education revolutions fueled the growth of America as an industrial-age and high-technology-age power respectively. But though equally demanding in magnitude, simple extrapolation will not work for powering America or any other country to World 2.0 power status. You can’t simply legislate a democratization of the doctoral degree the way the GI bill democratized the bachelor’s degree. More important, you wouldn’t want to. The Masters’ and PhD degrees are not logical continuations of the K-12 and undergraduate education pipelines, but were evolved for very different social purposes. Even if you could figure out a way to pay the social costs, this would be dumb, and not actually do the job. The economy already has a PhD glut, and it isn’t fueling more innovation. Merely more frustrated postdocs and adjuncts in holding patterns, waiting to be absorbed by a formal institutional landscape that will never catch up in job creation. You want a way to deliver innovation education and capability in situ, wherever people happen to be working in the economy, and equip them to innovate as part of their everyday work.
What might such a basic innovation education, perhaps delivered by corporate new-hire training programs, comprise? One answer might be:

  • basics of individual and group creativity (it isn’t as much of a mystery as laypeople assume)
  • basics of left-brained individual and organizational processes
  • basics of right-brained individual and social processes

Not enough, but it would be a start. Individual stuff, gemainschaft stuff, and gesselschaft stuff in short. Here are three books that exemplify these three categories of education:

Michael Michalko, Thinkertoys

It is a boring piece of unlearning, but it has to be done — most innovation doesn’t require impenetrably mysterious subconscious processes. But once you get through the unlearning, the learning of disciplined techniques is a lot more fun. To the extent that amateurs are exposed to disciplined creativity techniques at all, it tends to consist of a few badly-facilitated brainstorming exercises that actually reinforce the creativity is mysterious assumption. Thinkertoys is a brainstorming-and-beyond compendium of tips and tricks of varying levels of sophistication, supported by interesting anecdotes. Professional researchers/innovators will find that they already employ enough of the tactics (or functional equivalents) for their needs, but there are a few surprises even if you think you know the game pretty well (I liked one called Dali’s technique). A very useful dip-in-when-you-need-to style reference, for whenever you are stuck, or simply in need of a little cue. For amateurs wanting to break into the innovation game, a more through reading, maybe even cover-to-cover, is recommended.

Jeffrey Phillips, Make us More Innovative

This is the kind of pragmatic left-brained book you need, to learn to innovate in the real world, as opposed to your bathtub. It is somewhat depressing, the extent to which amateurs believe the completely false better mousetrap model, (the one which says, if you build a better mousetrap, the world will beat a path to your door). You only need to see the shock on the faces of failed American Inventor contestants to realize how pervasive this myth is. I even wrote a comic-book story about this.

Though Phillips’ book is, to a certain extent, a piece of (honest) marketing for the products and services of his innovation-consulting company (Ovo consulting), the book is nevertheless a very useful introduction to formal innovation management processes. It is primarily written for companies that are trying to build an innovation capability (which we in the hi-tech sector take for granted), but it can also serve as an education for individuals trying to get active in innovation within companies with already-mature and in-place innovation management systems.

Mitch Ditkoff, Awake at the Wheel

Finally, it actually takes a bit of education to get people used to the idea that even within apparently rigid, cold and lifeless institutions, the actual work of innovation is fun, rewarding, and a great social activity, not a lonely struggle against entrenched resisting forces that are out to deny your genius. That is, if you are willing to learn how to manage the sociology.

The book is written as a disarming and apparently simple-minded little parable — the imagined story of the invention of the wheel, set in Neanderthal times with Flintstonish characters. But the story is actually pretty sophisticated, and effectively communicates some of the principles that more commonly trip up amateurs, like the need to champion your ideas through increasingly sophisticated proof-of-concept prototypes that match the level of investment you are seeking, and consciously engineering buy-in.

The Emerging Model: Reverse Surge Protection

So where might this brave new world of innovation everywhere, fueled by an outsider-centric culture, look like at capability maturity?

I cannot guess at the answer for the economy at large, but I had an insight into what it might look like within an individual large enterprise recently, during a conversation at work.

Companies with an R&D function and budget usually use the R&D organization in 3 ways today — to conduct (a shrinking amount of) blue-sky basic research, to conduct more short-term development research, and finally, as surge capacity when operational firefighting calls for deeper subject-matter expertise than front-line employees have. Today, the business cycle drives the ratio of the three. In good times, there is more of the first category. In okay times, the second kind dominates. If the company is struggling, it is all surge capacity use.

The insight I had was this — underneath the process paraphernalia like online brainstorming tools to engage the rest of the enterprise, the way innovation everywhere will actually come about is via what I call “reverse surge protection.” The R&D function will be designed to be understaffed with respect to peak capacity needs, and during good times, the function will be expected to bring people from the rest of the enterprise into research roles in systematic ways (including sabbaticals for non-researchers to the research organization, and researchers orchestrating in situ innovation efforts in departments like manufacturing or sales). In essence, the R&D function will be expected to act as the seed/DNA of innovation rather than the tree, managing the scaling of innovation activity up or down, tracking the constraints of the business cycle.

To make up a somewhat realistic example, if the business model calls for say, investment of 3% of revenues in R&D, the actually installed capacity will be more like 1.5%, with the average target of 3% being met through the reverse-surge processes. Think of it as an agile, research-on-demand model, rather like Amazon cloud hosting. You run your Website on a single captive server, and call up more servers from the cloud to track demand. The R&D function will be the single dedicated server, the rest of the enterprise would be the on-demand cloud.

I can’t wait for the fresh blood (functionally speaking) to yank us jaded old-mould innovators out of our increasingly ineffective rut.

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About Venkatesh Rao

Venkat is the founder and editor-in-chief of ribbonfarm. Follow him on Twitter

Comments

  1. Hi

    Most government organisations I know seem to be persisting with the idea that they can design a square wheel that will work better than the round one those nasty people built.

    Power is everything and on occasion it seems to be in the wrong place. Voters are lethargic ; bureaucrats peddle furiously.

    Innovators – outside or in – make changes. I agree with you that on the outside they have an environment that will foster more innovation.

    Alex

  2. gregory says:

    there are some parallels to the subtle physiology derived from advaita vedanta

    in short, life happens a bit out front in time from the pov of the subtle body.. intuition is an example …

    and here is some social history about this current time .. psychics and gurus have been talking about this decade for thirty years, the changes that are happening … futurists, for twenty years …. strategic edge economists for ten years … your basic tuned in intelligent guy, for about 5 years, … and wall street and the politicians still don’t get it

    bright guys have know the american automobile industry has been dying for thirty years, the companies themselves are the last to know…

    so, your point is pretty well known, at least by outsiders…. who also recognize that institutions are into maintaining, after a certain size, and real innovators simply wont be found in such places.

    smart stuff … my only question is, i can see why the institution needs the outsider, but why would the outsider need the institution?

  3. I have a different opinion on a slightly different problem – innovation in the context of “creating a successful new product”. You often hear “let’s act like a startup” in the corridors of a large ent., but there are several reasons why an l.e. can’t, exceptions like Apple notwithstanding. The CEO of one of the BigTechCompanies was once asked whether he would consider a Cisco-like spinoff model for new products. He couldn’t see why – if it was promising, we should do it in-house. And we’re always open to acquisition, letting the Darwinian processes of the market pick the winner for us. Let the VCs bleed on the other nine which didn’t quite make it.

    Well… it’s not going to work. Most of the time, anyway.

    First, large tech companies are in the grips of what I call the quarterly manic-depressive cycle. A few million lower, miss the guidance, and it’s the ritual blood sacrifice to appease the high priests of Wall Street. A few million higher and the smiles break out, the expense budgets balloon and next quarter, you’re again in the depressive phase. A related phenomenon is the annual (or semi-annual, or quarterly) reorg-o-round.

    Secondly, large companies tend to be run by policy. Delegation doesn’t happen as much as it should. The empires of old vested significant powers in the regional governors. Communication latencies were such that a governor couldn’t email the emperor about fine points of casual Friday attire. Lightspeed communication, a tendency to CYA, and a reluctance to ask for policy exceptions, ensures that “one-size-fits-all” policies prevail even in situations where common sense would indicate otherwise.

    Thirdly, collaboration across groups is difficult because of crude and inefficient trading mechanisms, mirroring the worst features of traditional government departments. At the same time, a new product group can’t just, for instance, go and hire a sales and marketing team, or a QA team. It’s got to “work across silos”, which means convincing the S&M chaps to give you some bandwidth, with little by way of currency or barter which you can use. Even when you do make a deal, it’s difficult to ensure priority inheritance.

    These factors make it difficult to sustain an initiative over the one or two years of gestation, followed by the two or three or even more years until it starts making serious money. Sometimes a product which has been given up for dead suddenly sees an uptrend in revenue, years after it was released, coinciding with the disbanding of the team.

    I’ve saved the most important point for last: there’s simply not enough upside for the people involved in the new product. If it succeeds, the best they can hope for is maybe a 20-30% bonus. If it fails – and the failure coincides with a depressive phase, which may in fact be the reason for the closure – there are unlikely to be open positions anywhere else in the organization. So the downside is the same as that of a startup – you’ll be out of a job. Startup success, however, has a much larger potential upside. It’s pretty clear where yon Cassius, of the lean and hungry look, is going to be headed, and where the men who are fat and contented are going to put up their tents.

    That’s why I like the spin-off idea. The parent company forks off a child, gives it seed money, takes a significant stake and then gets out of the way. The spinoff is free of the policy constraints, financial and business cycles and matrix management overheads of the parent. It can hire and execute at will. The spinoff also has the right, but not the obligation, to use any of the IP of the parent. This can give a tremendous boost to the maturity and time-to-market of the new product, and also provide a protective IP shield. In spite of open source, there are still a number of useful things which big companies have cached away; things which have been beaten into shape with years of grunt work, motivated by customers with sharp sticks and million-dollar support contracts. The parent company gets an “outsider” to look at its entire IP portfolio and come up with winning combinations, with a higher chance of success than insiders trying to “integrate across silos”. Moreover, a future re-absorption is much more likely to be successful than acquiring J. Random Startup, because of fewer integration issues, pre-shared philosophies and a better fit in the product portfolio.

  4. Gregory: you lost me. Possibly there is something in what you say. But over the years, as my patience for loose analogies has diminished, I’ve developed a functional blindness for metaphysical analogies that are too abstract. Thanks, but sorry :)

    Tubelite: interesting, you are coming up with an alternate causation pattern for disruptive innovation. Where Christensen placed the blame on the carrot/stick dynamics of a mature company with respect to its most important customers and Wall Street, you are placing the blame on structural friction effects as well as incentive misalignment.

    I think there is truth to both the customer-signal view and your internalist view. If you propose a new product/innovation idea that’s bang-on with respect to what your top customers are demanding, the company will typically move mountains and build in all sorts of capacitances to weather quarterly and business cycle weather effects and get your idea to market. In this category, there is career risk to NOT championing the idea, even if it is technologically very risky, because somebody will, or the competition will, and then the internal/external relationship ground shifts under you. If you go too long without taking risks in the ‘sustaining innovation’ direction (whether incremental or radical), you’ll be marginalized.

    When it comes to disruptive innovation, yes, the system is unlikely to work. That’s why Christensen too suggested that the spin-off model (either captive, like IBM’s PC division, or the full spin-offs from Xerox PARC) was the only workable way if the existing value chain was optimized for delivering different types of value to different markets.

    The last part of what you are saying is almost word-for-word the ‘open innovation’ gospel of Henry Chesbrough & co, and has already been put in practice in modest ways at lots of companies.

    But the one part of what you are saying that has NOT been adequately addressed, is the incentive mis-alignment. There is not an enough of an ‘upside sharing’ incentive infrastructure. To the extent that companies have stock options type mechanisms, they are linked more to seniority than performance, and within performance, more to relative ‘bell curve’ grading against peers than actual contribution.

    This is partly for practical reasons. Say I come up with a great idea and write up an anchor patent application that goes on to create a billion dollar line of business. It is VERY hard to tease apart the contributions both ex-ante and ex-post. Clearly, the billion dollar line of business could not have come about without the contributions of a huge number of other people. Equally clearly, the privilege of being immersed in an intellectually stimulating environment was a large part of the causal forces that probably drove the ideation in the first place, including probably dozens of sub-citation-level influences from hallway conversations.

    That said, the current incentive schemes could probably be rewired to benefit the risk-takers more, but that is so phenomenally hard to do that I have to agree with you… most people will not pursue their truly high-risk, high-return ideas in an employed context. They will file them away in a mental ‘startup dreams’ folder. Those with no inclination to be startup types will toss the ideas away as ‘screw it, never gonna get an opportunity to pursue this.’

  5. Venkat,

    yes, elephants can dance. Like you said, they can move mountains and make things happen. However, they will do so only when there is an absolutely clear and unmistakable signal to move in that direction. Like a committed customer. Or as a second mover in a space which has already been validated by someone.

    The other type – the one where there is no clear voice from the sky giving you directions – is very vulnerable to being destroyed by the internal structural friction.

    You’re right that both external/customer/stock market and the internal-friction views are complementary. One keeps you going in the same direction you were going and the other acts as a powerful antibiotic which discourages any nascent straying efforts. It’s a deadly combination.

    Overcoming this phenomenon (internally, without a spinoff) requires a strong, committed, visionary leader – someone who can figure things out by himself, and believes in it in spite of the surge and ebb of the fashions of technology. I’ve seen too many ideas fail not because they were bonkers, but simply because they were given up on too early.

  6. If the success criterion is really “requires a strong, committed, visionary leader – someone who can figure things out by himself, and believes in it in spite of the surge and ebb of the fashions of technology…given up on too early” then probability of pulling off such coups is vanishingly low. I am hoping, for the sake of my projects, which are all in this bucket, that more mortal scale efforts can sometimes also work out, through some luck. Maybe a critical mass of believers can substitute for a single ‘do it all yourself’ visionary leader. I definitely wouldn’t want to take on the sorts of things we are talking about by myself.

    You’re right that quitting early is the biggest failure mode though. Seth Godin’s The Dip is a nice treatment. But one of the things that

  7. A few observations:

    1. Despite the barrage of books on innovation and creativity in the past 3-5 years, and CEOs like Jeffrey Immelt getting quoted everywhere on innovation being the foremost imperative, there is an appalling level of ignorance about the basics. So, we need more of these “basic” books and more posts like yours to inspire and inform the uninitiated.

    2. “Think Better” by Tim Hurson is a recent book that probably falls somewhere between your basic and advanced categories. Good examples and a structured framework that encompasses the idea generation (creative) techniques as well as the evaluation and selling phase (now understood as the equally if not more important phase, also the differentiator between practical innovation and mere creative thinking). One old book that got me interested in systematic development of creative ideas is “Brain Stretchers” by Eugene Raudsepp. While its many different categories of puzzle-like exercises are fun, the brief notes explaining the concept behind the exercises and suggestions to develop inherent creative thinking abilities are very useful. Any list of basic books on creativity must include Edward de Bono’s “Lateral Thinking” or his later more elaborate and logical exposition called, “Serious Creativity”. His other 70-odd books are less notable.

    3. You could add your views to the highly reviewed “The Age of Innovation” by CK Prahalad and “The Future of Management” by Gary Hamel.

    4. To gregory’s question on why the outsider would need the institution, because it is a platform. Intrapreneurs (also a title of an interesting book that introduced this new coinage) often move companies when they perceive constraints to continue doing their innovation stuff (e.g. Evan Williams moving out after Google bought Blogger). Not all creative and innovative outsiders would want to take on all aspects of starting a business.

    5. As new and innovative startups grow and succeed, they find it difficult to sustain the intellectually stimulating environment that led to their existence in the first place. The same insularity that makes market leading companies get “disruptively out-innovated” seems to afflict the top management of organizations. Beyond a certain level in any organization, the subtle incentives to align and conform are too strong, stronger than any explicit incentive schemes. I believe enlightened leaders should therefore permit some amount of “underground skunkwork projects” where the on-the-ground and usually younger folk can bring in fresh perspectives but may be unable to sell it all the way upwards.