Three reasons to tackle the hard problems, right now.

It’s common for businesses to prioritize solving the easy problems while delaying the greater efforts needed to solve the hard problems. It’s usually a low-risk (at least short-term), low-effort and low-cost approach that can return incremental advantages within a single budget cycle. The collective and cumulative effects of that habit are that we usually witness the emergence of parity stop-gap solutions across an industry. Eventually parity leads to price comparisons and margin reduction until some entity finally takes on the risk of investing enough time and treasure to take on the hard problem.

The question here is does it make sense for a business to take on a high-risk/high-reward strategy of taking on the hard problems in our current environment? At this moment in time, making sense of any business risk associated with innovation or change is saddled with the added calculus of considering the impacts of a global pandemic, an economic downturn and potentially massive social change. A short-term perspective might point you away from taking on any additional risk in this environment, but I’d suggest, there are powerful reasons to consider taking the long view and making significant moves, even now.

1. “The best chance to deploy capital is when things are going down." - Warren Buffet

While Buffet was referring to purchasing a controlling share of corporations, the philosophy applies to an investment in your own enterprise. The underlying driver of buying on the way down is an understanding that markets are cyclical and if there is a sound business model supporting long-term viability, it makes sense to buy/invest when prices are low. 

Today, we can find an historically low cost of capital, supply exceeding demand for externally sourced goods and services (excluding cleaning products, PPE and ventilators, et al), and, given the general slowdown of commerce in most sectors, little in the way of opportunity costs. 

Meaning, in short, your dollar can potentially go a lot farther in a down market and return a much better multiple when markets return. Contraction, or waiting for the markets to return to normal, simply drives your realized returns to zero in the short term, increases the cost of the same improvements in the future and lowers your ROI.

2. If you wait until everything comes back, you’ll be in a long line.

Contraction is happening at an unprecedented level. The resulting and pervasive fear is causing a lot of businesses to simply pause until they understand what’s going to happen next. On the face of it, that sounds like prudent risk management. But there’s a flaw in the logic. There is never a moment when anyone can say with any real certainty what will happen next.

Let’s assume, for argument’s sake, that your market demand will eventually shift back to pre-COVID-19 levels. When that occurs, the impending feeding frenzy amongst you and your competitors will likely be as unprecedented as the great pause that preceded it. It will be a battle for share. There will be competitors whose offerings remained stagnant. There will be competitors who spent the time during the downturn actively responding to changing market conditions, gaining a better understanding of the changing needs of their customers, and improving their offering, their features, or customer experience. We believe the latter will be prepared to take a greater share, command a higher margin, or both. The question every business needs to answer for themselves is which of those future positions is a better bet, today?

3. If the math works, why wait?

I want to be clear that I am not advocating for blindly taking on risk. Just the opposite, actually. What I am saying is businesses should also not blindly avoid risk because general conditions are, at least for the moment, frighteningly bad. Obviously, no matter what potential investment or transformation you might be considering, these are exceptional times and evaluating any investment requires exceptional diligence. 

That being said, when I was in business school, one point drilled into our heads was if you can engage your resources and return even $1 of profit, you should. Unless, of course, there is an alternative opportunity that will return more than $1. They also taught us the time value of money—that a dollar in your hand today is worth more than that same dollar at some point in the future.  

So, for many businesses, now might be the best time to look seriously at options for making major improvements —even if they require a different operational approach, a sizable investment of capex, or a longer-term expectation of market recovery. If you can create a reasonable proforma, based on valid well-researched assumptions, that projects a positive value for your project, why are you waiting? 

Practicing what we preach.

It’s time to refocus our efforts around innovating new products and services, developing digital transformation strategies, and designing and build new user experiences that address our most difficult business challenges. Admittedly, in this great economic pause, we are all facing challenges. But we should not be pausing to wait and see what might happen. We should work and invest in our people and our businesses to build new capabilities, explore new platforms and technologies, and create a more relevant offering for the very different market we see emerging over the horizon.

Brainstorming vs. Ideation

Brainstorming and ideation are different tools for different purposes.

You’ve undoubtedly been in brainstorming sessions. Some of these sessions have likely been fruitful, others disappointing. I often get asked how ideation is different from brainstorming. A very smart and talented friend of mine, Matt Phillips distinguished the two types of sessions by asserting most brainstorms are simply “meetings… with better food.” But beyond that perhaps undeserved jab at brainstorming, there are several aspects that separate brainstorms from formal ideation.

First, what is an ideation session, anyway?

Before I jump into the difference between a brainstorm and an ideation session, I should provide some context for anyone unfamiliar with this process. In traditional design-thinking, the ideation phase is often the most exciting step within the process. The ideation session itself is the organized gathering of minds within that step where the litany of ideas is generated against some highly defined problems or desired outcomes. These ideas range from the possible to the seemingly impossible given current organizational constraints.

A time and a place.

For what it’s worth, I love a good brainstorm. They’re fun, engaging and often produce creative ideas. They are collaborative and aid in generating new ideas to improve internal processes, develop creative campaigns, share ideas, etc. This is all important work.

But let’s remember that ideation is the third step in a more formal design-thinking process and should be treated as such. It should be informed by learnings emerging from the Empathize stage, address specific challenges outlined in the Define phase and, finally, create a starting point for the Prototype and Test phases.

Ideation is about not only generating ideas but also systematically upending and exploring the mental models surrounding those ideas, assessing recurring themes, evaluating ideas through a variety of lenses and, ultimately, converging and consolidating various branches of thought into manageable future areas of innovation. Ideation, to that point, also requires more time, commitment, homework and buy-in from stakeholders. 

Ideation may be utilized for a multitude of business challenges. Some examples include:

• Developing new product or service directions

• Exploring new business strategies and revenue streams

• Finding new business angles by solving complex customer-centric challenges

Leave it to a professional.

When led by a trained moderator, ideation sessions get users beyond the myriad obvious solutions often generated in traditional brainstorming sessions. The session moderator leads participants through a series of carefully structured exercises designed to create an abundance of ideas and then explore, build on and refine the most viable. There is a substantial amount of exercises out there (this site is a nice repository for a number of tools and methods), but understanding which exercises are best suited to address your particular challenge is a skill honed through repetition and experience. Having a moderator who can teach or lead your team through the effective use of these tools is equally as critical as wielding them in the first place. 

A successful session leader will help you:

• Ask—and answer—the right questions

• Break through organizational constraints to view challenges in a new light

• Keep your “hero” user’s needs and behaviors at the foundation of your innovation

• Rise above the obvious solutions to increase innovation potential

• Identify and leverage different perspectives to uncover unexpected angles for innovation

There’s definitely a team in “I.”

In ideation, fielding the right team is critical. Sure, brainstorms usually include teams. But, yet again, ideation is different. It’s important to bring in the right expertise and perspectives to maximize the value of a session. A diverse group of resources is the most effective, from internal subject matter experts and designers to trend experts and sometimes potential customers. The diversity of expertise within the group can be critical in creating and enhancing groundbreaking ideas, ensuring all angles have been explored, examined or exhausted.

It’s always a matter of time.

In addition to being internally focused with little structure or outside perspectives, most teams dedicate an hour or two for a brainstorm. Little thought or prep work is required. Ideation, on the other hand, is a commitment—session preparation, session execution and idea refinement. To be successful, most sessions require a time commitment of one to two business days.   

Just interesting people kicking back, sharing a beer and developing a breakthrough innovation?

If only it were that easy! The truth is, while they may be fun and stimulating, ideation sessions are hard work. When done right, most participants leave both stimulated and exhausted.

TL:DR?

Here’s a quick snapshot of the difference between a brainstorm and an ideation session.

Brainstorm

• Often a standalone meeting based on a singular objective

• Used to generate new ideas

• Good uses of a brainstorm include:

  • Improving internal processes

  • Developing creative campaigns

  • Naming exercises

• Often unstructured with takeaways delineated at the end of the meeting

• Often include homogenous teams

• Time commitment: 1–2 hours

IdeationSession

• The third step in the design-thinking process: informed by gathered insights and defined challenges to solve

• Used to generate ideas and explore what surrounds those ideas, assess themes and evaluate ideas

• Good uses of an ideation session include

  • Developing new product/service directions

  • Exploring new business strategies and revenue streams

  • Finding new business angles

• Highly structured with pre-work and post-session refinement

• Includes diverse perspectives and internal and external resources

• Time commitment: 1–2 days

Three reasons Uber should never have invested in self-driving technology.

R&D and innovation are not the same thing.

There’s a classic Venn diagram generally attributed to Ideo’s Tim Brown that points to the reality that for an idea to be considered an innovation, it needs to satisfy three criteria: desirability (people would want it), feasibility (it is something that can realistically be created) and viability (it can be made and offered in a way that makes financial sense for the business). Academics or inspired home tinkerers may be satisfied with any combination of one or two of these qualities, but a business, especially a publicly held business, needs to satisfy all three.

Viewing Uber’s sustained autonomous vehicle R&D efforts against this framework, I think we can safely question the reasoning that led to this endeavor. That’s not to say that I disagree with the underlying premise that self-driving vehicles will ultimately take over the role of your cousin Tommy who earns a little extra cash driving for Uber or Lyft, now. I just question whether Uber did the smartest thing for its business or its investors by taking on the Herculean task of developing the technology themselves. 

The liabilities are potentially massive.

The National Transportation Safety Board (NTSB) just released a report outlining the results of their investigation of a fatal accident involving a pedestrian pushing a bicycle and a self-driving Uber vehicle. The NTSB chose not to find Uber criminally liable for the accident. But according to new documents released as part of the investigation, the software inside the Uber car in question was not designed to detect pedestrians outside of a crosswalk, and the self-driving car, in general, failed to consider how humans actually operate.

I have to think this was likely Uber’s one and only free pass. As we have seen in corporate liability cases lately, juries are quite willing and capable of doling out judgments in the multibillion-dollar range. One might argue that even that risk would be worth it for Uber to reap the rewards of working autonomous driving technology long term. But, as we’ll see in point two, one might be overestimating Uber’s ability to reap those rewards in any significantly advantageous fashion.

Long term, there is no competitive advantage.

In 2018, Uber spent nearly $500 million on transportation research. Of course, all of that was not on driverless vehicle research. Some was on autonomous delivery drones. The point here is that massive R&D budgets should be at least theoretically correlated with massive payouts—as in risk and reward should be expected at equal levels. But the potential rewards seem unlikely to be Uber’s alone, if theirs at all. It appears that if Uber does, somehow, develop working autonomous driving technologies, it’s unlikely they will be alone in doing so. And as it stands today, Google is more likely to win the race to market, and perhaps more germane, Uber will most likely have to license much of their self-driving tech stack from Google, anyway.

So, let’s assume Uber eventually figures out self-driving. They already know they will be multiple billions in the hole, day one, on the software front. But now they’ll need a fleet of vehicles. I have doubts Uber is poised in any way to become an auto manufacturer as well, so they’ll need to purchase a fleet built to run their software. Meaning, the costs they’ll need to recoup on capital expenditures will be disproportionately higher than a competitor who simply buys vehicles that will most certainly be available through any number of auto manufacturers who will license Google’s tech directly.

It seems like a scenario that has Uber “winning” this competition would need to be based on the assumption that customers have such goodwill toward Uber that they would be willing to either pay a premium for their services or that Uber would be able to once again operate at a loss for an extended period of time while they roll out the service. Both seem unlikely, especially the latter, which brings me to point three.

Short term, they simply cannot afford it.

Scale is a funny thing. It’s either on your side or it’s not. And in Uber’s case, it is not. At least not yet. In their earnings report for the third quarter of 2019, bookings, or total rider receipts before expenses (like paying drivers), grew to $3.7 billion, a 29% increase over the same period in 2018. Total net loss, however, grew to $1.1 billion—18% more than the same period of 2018. So, losses are positively correlated with revenues. Not good. Since that report, the stock has fallen by nearly 10%. Now, we cannot attribute all of their losses to the investment in self-driving technology, but it is a significant portion of that. It will be seen in the next few quarters whether the market believes those losses are an investment in a more lucrative future or another outsized Silicon Valley wager. Obviously, from my previous point, I fall into the latter, more pessimistic camp. Further, in the past few weeks, we’ve seen states coming after Uber with massive employment tax bills. If the courts side with any of the local and state governments, you can be sure every other state and municipality will get in line to file a suit of their own.

A lesson in sunk costs?

While one would be hard-pressed to find fault in the reasoning that prompted Uber to begin researching autonomous vehicles (it is undoubtedly the future of on-demand transportation), in my humble opinion, it’s time they reconsider their internal calculus on the build-or-buy question. Would Uber potentially lose face by abandoning the project? Potentially. But I think if the company accelerates its transition to profitability, they will be in a more competitive position, with no shortage of “buy” options when the technology matures.

Looking for big corporate innovations? Think small.

Image source: https://upload.wikimedia.org/wikipedia/commons/thumb/6/66/Cabin-Like_Tiny_Home_in_the_Woods.jpg/1024px-Cabin-Like_Tiny_Home_in_the_Woods.jpg

What most people forget about the most game-changing innovations is that, more often than not, they satisfied some unmet basic need in a simple way. The breadth and complexity of the effect of that innovation came later, as more and more people found more and more ways to utilize that innovation to address some variation of the original need. Keeping that in mind, if you’re charged with corporate innovation, there are a lot of reasons to focus on simple, small innovations. Let’s explore!

A small solution can have a massive impact.

The perfect example of this phenomenon is the World Wide Web. According to, The Birth of the Web (wow, that was that the most meta link I’ve ever created), “The web was originally conceived and developed to meet the demand for automated information-sharing between scientists in universities and institutes around the world.” Pretty simple. If you authored an academic paper, and cited prior research papers, HTML and a browser made it possible to quickly access the original cited paper and all of the papers cited in that paper, etc. Hence the term, “web.” 

No one intended the web to be the de facto backbone infrastructure for virtually every modern consumer experience and business transaction. That came later as untold coders, entrepreneurs and global enterprises thought of new things to connect and invented new bolt-on technologies with which to make more complex connections and transactions possible.

Small helps manage exposure to risk.

Ask any scientist about experimental design and the first thing you’ll hear out of their mouth is “controls.” Controls are how you know that what you think is contributing to the results of your experiment is actually the thing contributing to the results of your experiment. If you change too many factors at once, it becomes difficult, if not impossible, to truly understand the impact of any single factor. 

This is incredibly important to understand when you are evaluating and testing innovative products or experiences. By limiting the number of attributes around which you’re innovating (staying small), you’ll improve your ability to isolate and quantify underlying factors affecting desirability or adoption. Increased accuracy and specificity can only improve the confidence levels of your pro forma projections and risk assessments.

Small improves time to market.

In virtually every large organization, increased complexity of the innovation being proposed equals increased development and approval times. It makes sense. Every department that needs to make, approve or design some sort of change will be a potential source of delay. It’s not through ill will or stubbornness; it’s simply the result of increasing the number of interdependent decisions and actions required for completion.

Early on in your evaluation of any proposed innovation idea should be a full life-cycle resource assessment. How does the innovation differ in materials or labor cost? Are their operational changes that need to be made? Is there retooling required? Are there digital infrastructure or software updates or changes necessary? Does it affect distribution outlets, costs or partnerships? Try to create the corporate narrative of this new product or service coming to market. The smaller the number of players you need to invoke in your story, the sooner you’ll be likely to launch.

Small is an easier sell.

Initiating change in any enterprise takes a lot of selling. Selling the idea up to management. Selling the idea laterally to enlist the support of peers managing other departments affected by the change. And, depending on the visibility, selling the idea to every employee to ensure their buy-in and/or adoption of new language, behaviors or procedures. Small ideas, by nature, are easier to understand and consequently easier to encapsulate into actionable sound bites. Simpler messages are easier to analogize. They are easier to evaluate in the abstract.

Innovation of any size is always a win.

Regardless if your innovations are ultimately small and evolutionary, or massive and revolutionary, the most important thing for anyone responsible for driving corporate innovation should commit to is the continual drive to make the business more competitive, one small step at a time.