Why ask your future customers only once about new product development, not twice?

More and more firms have begun practicing the consumer-centric approach to new product development (NPD). As part of this approach, firms use sophisticated market research to identify unmet customer needs that could be converted into successful consumer products. Now, it’s time to take the next step and use crowdsourced NPD research to also ask consumers to help design the new products.

(This article was first published on Crowdsourcing Week)

My wife often complains that her hair dryer has been designed by a bunch of bald males. I see her point. True, the device does produce a stream of hot air (accompanied by a loud noise). But it is heavy, and its handle is way too thick for a small-size female’s hand. Besides, control buttons on the handle are positioned in such a way that you cannot operate the device with one hand. When asked if she would buy a hair dryer from the same brand again, my wife answered with a simple “no.”

If you build it, they will come. Will they?

My wife’s hair-dryer experience is hardly an exception. A list of failed innovations in the consumer area is depressingly long. In fact, consumers reject new products at an alarmingly high rate: the late Harvard Business School professor Clayton Christensen calculated that of more than 30,000 new consumer products launched every year, up to 95% fail.

What’s going on? Unfortunately, many firms still practice poor customer research supporting NPD, especially when it comes to specific design and features of new models. “Let’s build it, and they (customers) will come,” the thinking seems to go. But customers, overwhelmed with the sheer number of new offerings and spoiled with the flood of online reviews and recommendations, are not rushing to open their wallets (physical and digital alike) for subpar newcomers. Crowdsourced NPD research and product design certainly has scope to make improvements.

The dawn of customer-centricity approach?

Things have begun to change. Customer centricity—a framework that places the end user at the center of customer experience—is gradually becoming a leading paradigm for new product and services development. Many companies began employing a variety of novel, more sophisticated market research tools, including ethnography and netnography, to identify unmet customer needs (“jobs-to-be-done”) that could be potentially addressed by new and supposedly improved offerings.

One of such new tools elegantly combines product research and crowdfunding. Instead of offering finished products, companies now test consumer demand by collecting online “pre-orders” for products that are still in early development. Once used exclusively by startups, crowdfunding is rapidly becoming a part of the market research toolbox of grand brands like Amazon.

Thank you very much. See you later.

Interestingly, however, that after customer input has been collected and systematized through crowdsourced NPD research (“thank you very much”), customer centricity gets rapidly forgotten, and firms turn to internal R&D teams to address the newly identified customer needs. As the prevailing thinking has it, it is only the firm’s own professionals (marketers, product developers, engineers, etc.)—and no one else–who has knowledge and experience to transform customer needs into working ideas that could be eventually realized into commercially successful products (“see you later at the counter”).

Ironically, the assumption that customers know what they need, but don’t know how to make it, is seldom tested—and when tested, is proven wrong. In a 2012 article published in The Journal of Product Innovation Management, Poetz and Schreier compared novel product ideas generated by a firm’s professionals with those submitted by a crowd of users. The field of innovation was baby feeding products, and all the ideas were evaluated, blindly to their source, in terms of novelty, customer benefit, and feasibility.

The study showed that the ideas generated by the users scored significantly higher in terms of novelty and customer benefits–and only slightly lower in terms of feasibility–than those proposed by the firm’s own designers. Moreover, it was found that the ideas that received the highest overall marks came predominantly from the outside users. So much for internal expertise!

One more time about experts vs. crowds

Of course, one could argue that Poetz and Schreier’s study is an exception. As mentioned above, the field of innovation was baby feeding; the analysis of the users who took part in the idea generation process revealed that about 90% of them were females, many with firsthand experience in feeding babies and a sound technical knowledge of the related products. It is easy to imagine a recent mom with a solid technical background who can come up with better ideas for baby feeding products than a team of professional designers—the majority of whom, I suspect, were males with less than perfect knowledge of the baby-feeding process.

Although I’d love to see Poetz and Schreier’s study replicated in different settings and product areas, I do believe that it has much broader implications. It yet again dispels a popular myth that crowds of problem solvers are composed of “amateurs” and that when posed with a question that requires knowledge and expertise, not just an opinion, crowds are becoming useless (or, worse, outright stupid).

The truth that many experts are reluctant to accept is that properly assembled crowds are composed of experts. They may not work for your company or in your field, but they are experts, nonetheless. Take, for example, InnoCentive, a commercially available crowdsourcing platform with a solid track record of solving difficult scientific and business problems for corporate and non-profit clients. The InnoCentive proprietary crowd is composed of 400,000+ solvers, with almost 70% of them holding advanced degrees. I strongly suspect that some of them are women with experience in feeding babies; I’m also sure that many of them have strong opinions about their hair dryers and other household products.

Firms would be wise to ask them—and other solvers—about products they need through crowdsourced NPD research. Firms would be even wiser to take the next step to ask for help in actually designing these new products.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

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Don’t bring me eggs…Sorry, I meant problems.

It appears that the resistance to the time-tested management wisdom “Don’t bring me problems, bring me solutions” has reached a critical mass. Writing back in 2017 for Harvard Business Review, Sabina Nawaz suggested to “retire the saying” and replace this type of mentality with a process of bringing up problems “in a more productive way.”

By now, the fallacy of prioritizing solutions over problems is evident to many. A recent piece warns corporate leaders that the “solutions-only thinking” damages innovation. Worse, it can blind leaders to potential downsides that can eventually culminate in a crisis.

I’m happy to say that innovation managers, myself included, have always hated the “don’t bring me problems” line. We insisted that a thorough investigation of the underlying problems must precede every innovation project; collecting solutions can only start when the problems are spotted, defined, and properly articulated. (Those with a habit of quoting Albert Einstein on every occasion like to mention this one in this context: “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”)

And yet, I’m not ready to swing myself to the “problem-first” extreme of the pendulum. To me, the discussion of what is more important, problems or solutions, reminds of the centuries-old philosophical battle over which came first, the chicken or the egg. I believe that instead of choosing sides—and even inventing better ways of bringing up problems—managers should take a more holistic approach and establish a sustained problem-solving process.

With such a process in place, the question of which is more important, a problem or a solution, is simply irrelevant. Small teams and large organizations alike will be constantly looking for problems, both old and emerging, and defining these problems in a systematic and actionable way. A solution-generating phase, involving various techniques (brainstorming, co-creation with customers, internal and external crowdsourcing, etc.) will follow, with the best solutions being selected and implemented. A solved problem will be automatically replaced by the next waiting for a solution.

The existence of a sustainable portfolio of problems-to-be-solved should also extract the best from the firms’ employees. Some people are better at sensing troubles and spotting trends, whereas others excel at finding fixes. With a constant flow of problems and solutions, everyone will find something to get excited and engaged.

But what are we going to do with the “don’t bring me problems” line itself? I’d suggest trying this instead: “Bring me problems, then solutions, then problems again…” Or anyone can propose a shorter version of the same?

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Daniel Tuttle on Unsplash

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A sober look at drinking and creativity

In one of my prior lives, I was a researcher in a Russian academic lab. A colleague of mine was studying the effects of ethanol alcohol on yeast cells. Every time she presented project updates to the rest of the lab, an atmosphere of joy would fill the meeting room. Regardless of the results, folks would smile, giggle, and drop witty notes, which in turn triggered a new round of smiling and giggling. At the end of each presentation, another colleague would always ask the same question: “Did you try brandy instead?” A burst of laughter would follow.

I suspect that my previous posts addressing the connection between alcohol and human creativity resulted in the same smiling and giggling, however muffled by the restraints of the social media channels. And I almost heard a sound of suppressed laugh by Alison Beard, a senior editor of HBR, when she interviewed, in 2018, with Prof. Andrew Jarosz of Mississippi State University who led a study of the effects of alcohol consumption on creativity.

Compare this frivolous attitude with a stern academic tone of another HBR article, published in 2017, that studied the effects on creativity of 10 minutes of mindfulness meditation. The authors concluded their article by providing a 10-step, “do-it-yourself” guidance to conducting mindfulness meditation sessions. Can one imagine an article on the effects of alcohol on creativity that would conclude with providing a step-by-step instruction to fixing a drink?

I also suspect that such a humorous perception of the topic is a reason of a discernible pause in the academic research on chemically induced ways to influence human creativity. For example, a 2017 study attempted to systematically review all published (by that time) articles that focused on the relationship between psychoactive substances and creativity/creative artistic process. A total of only 19(!) studies were identified that met inclusion criteria. Little surprise that the results were difficult to summarize because of different study designs, diverse methods used, and various substances examined. A conclusion of the review, nevertheless, was that an association between creativity and substance use did exist.

As I argued before, alcohol represents a convenient experimental model to study chemically induced ways to affect human creativity. As opposed to many narcotics or drugs, ethyl alcohol is a simple chemical molecule, whose behavior in the body is reasonably well studied. Using this model, researchers may start identifying specific neurochemical reactions in the brain that are responsible for creativity.

My preliminary review of the corresponding academic literature allows to make two basic conclusions. First, moderate doses of alcohol (resulting in a blood alcohol content of approximately .075, i.e., just below the U.S. legal limit) did improve creating problem solving in affected individuals. Second, alcohol did not influence performance on measures unrelated to creative problem solving, suggesting that alcohol influenced specifically creative performance.  

One article attracted my attention. It is widely accepted that the creative process goes through four distinct stages:

  • Preparation. At this stage, your brain is gathering information.
  • Incubation. It is at this stage that you let your mind wander around.
  • Illumination. This is “eureka!” moment. Connections in your brain collide, and you realize that you got an idea.
  • Verification. Your critical thinking skills return at this stage, and you start “packaging” your newly born idea in a consumable way.

Back in 2011, Torsten Norlander of Karlstad University in Sweden showed that alcohol consumption specifically stimulated the incubation and illumination stages of the creative process but inhibited its preparation and verification stages. This seems to be exactly what Prof. Jarosz’s team observed a year later: intoxicated individuals who solved more creative problems in less time that the control (sober) group perceived their solutions as the result of a sudden insight. Eureka, in other words.

Taken together, the data aligns with Prof. Jarosz’s hypothesis that people under the influence are more susceptible to so-called mind wandering, which results in losing some focus but gaining instead the ability to see a “bigger picture.” This effect, of course, can be harmful in many situations requiring concentration but it might be helpful in others where the ability to connect the proverbial dots is more important than the ability to collect them.

One can further hypothesize that creativity improves when an individual is capable of engaging additional, dormant before parts of the brain in the creative process. It is tempting to take one more step and speculate that the outcome of the creative process can be dramatically improved by the engagement of not just additional parts of a single brain but of additional brains of multiple, previously unengaged individuals. This is what happens when we use crowdsourcing: engaging multiple brains instead of one.

I will return to this idea in my following posts.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: https://www.dailyartmagazine.com/drunk-absinthe/

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Prohibition, disrupted networks, and innovation

The best answer to the question “Do government regulations hurt innovation?” seems to be “It depends.”

The suspicions against regulations are fueled by wide-spread belief that they damage economic growth, with which innovation is intimately connected. Yet, academic research on the topic paints much more nuanced picture. For example, several studies show that corporate innovation is fostered by laws that limit firms’ ability to discharge their employees at will. This phenomenon is called an insurance effect: feeling increased protection from negative consequences of failure, employees are more committed to engaging in risky innovative projects.

However, there is a shining example of a massive government regulation that had profound negative effect on innovation: Prohibition in the United States in 1920-1933. In a brilliant 2020 paper, “Bar Talk: Informal Social Interactions, Alcohol Prohibition, and Invention,” Michael Andrews provides a detailed description of what happened when a government action abruptly intervened in the established pattern of people-to-people interactions. 

Prohibition and patents

Before the passage of federal prohibition, states and counties could determine for themselves whether or not to allow alcohol consumption in bars and saloons. When federal prohibition went into effect, counties that were previously wet saw an 8-18% drop in patenting relative to consistently dry counties in the same state.

As a former researcher, I admire the rigorous checks Andrews applies to prove that the observed effects were caused by preventing people from going to bars rather than by other factors. For example, he shows that the drop in patenting was smaller for groups that did not typically attend saloons, such as women and ethnic groups that preferred to drink in private.

More importantly, Andrews presents evidence that prohibition did not appreciably reduce the total alcohol consumption in newly dry counties (surprise!). And this leads to Andrew’s major point: the negative effect of prohibition on invention was caused not by preventing people from drinking alcohol, but by disrupting natural social networks.  

Prohibition and disrupted networks

Prohibition presents itself as a particularly useful model to study the role of social networks in innovation. Prior to prohibition, the saloons acted as a social hub in which individuals could exchange information in an informal setting. Prohibition is so useful to studying the effects of social interactions on innovation because it disrupted the structure of social networks but not its scale or the identities of the individuals within the network.

In my opinion, one of the study’s findings carries special weight. If networks facilitated invention by simply making it easier for individuals to find collaborators, then only patents with multiple inventors would have declined. Instead, Andrews found that solo-inventor patents declined as well. That means that networks serve not only to bring people together but also as a venue to exchange ideas between them

COVID-19 and innovation

Andrews’s study is especially important considering massive disruption of global innovation network caused by the COVID-19 pandemic. Like prohibition, the pandemic did not change the scale or the identity of the individuals within the network. But by massive shifting to remote work (to “drinking from home,” so to speak), it disrupted informal interactions, and we can only guess about the long-term consequences of this disruption.

Following the initial euphoria over the fact that remote work did not result in the immediate end of the corporate world, voices of caution and concern might be already heard. In particular, experts warn that online communication are characterized by lower information sharing—and that means reduced exchange of ideas between innovators, a major factor in prohibition-induced patenting slump. To believe that this will not affect innovation in some negative way in the future is to be a techno-optimist on steroids.

Innovation and post-COVID

There is one more finding in Andrews’s study that deserves mentioning. While patenting fell dramatically in the years immediately after the prohibition onset, it rebounded over time, meaning that affected individuals gradually rebuilt their informal social networks.

Interestingly, however, when folks began rebuilding their social networks after prohibition, they did not collaborate with the same individuals as they did in the past. Instead, they connected with new people in new ways, being exposed to different ideas as a result. This was manifested in a long-lasting change in the types of inventions these individuals created, as measured by patent classes. In other words, while the rate of innovation will restore over time following disruption, the direction of innovation may change.

Sure, innovation will recover post-COVID. But it will be different innovation. Will we like it more? Less?

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: http://www.reddit.com/r/reddeadredemption/comments/9w5ehq/you_can_shutdown_the_saloon/

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Innovation and spirit. Yes, that spirit.

Recent evidence strongly suggests that the U.S. is facing a growing shortage of novel ideas. Worse, the cost of getting these ideas is growing while their quality seems to be declining. Left unchanged, this trend may have serious negative consequences for American innovation.

One of the possible approaches to reversing this trend could be strengthening the ideation process by stimulating creativity. In a recent post, I described a study showing that creativity could be boosted by moderate procrastination. The authors of the study argued that moderate procrastination sets in motion a mechanism of problem restructuring, which results in the production of more out-of-the-box ideas.

Promoting procrastination, however moderate, goes against the established cultural norms that force us to always stay (or at least pretend to be) busy. What the scientific data seems to be telling instead is that treating our brain with occasional spells of a quiet, unrushed deliberation may make us more creative.

Another way to stimulate creativity—while, again, going against multiple social boos and taboos–might be to consume moderate amounts of alcohol. This seemingly fancy (and even offensive to many) idea stems from a scientific study described in a 2018 article in Harvard Business Review. The authors of the study treated a group of men aged 21-30 to a vodka/cranberry juice mix in three drinks over a 30-minute period until their blood alcohol level reached near legal intoxication level (0.075). Then they were given a series of word association problems to solve.

The result? Tipsy subjects solved 13% to 20% more problems—and did it faster–than their sober peers in the control group. The authors of the study hypothesized that people under the influence were more susceptible to so-called mind wandering, which results in losing some focus but gaining instead the ability to see a “bigger picture.” This effect, of course, can be harmful in many situations requiring concentration but it might be helpful in others where the ability to connect the proverbial dots is needed more than the ability to focus on a single dot.

I like this study for one simple reason. Ethyl alcohol, as opposed to many narcotics or drugs, is a simple chemical molecule, whose behavior in the human body is quite well understood. Using this relatively simple model, researchers may start identifying specific neurochemical reactions in the brain that are responsible for creativity.

It turns out that the benefits of alcohol consumption may extend to our social life—all despite the widely-held assumption that drinking causes serious social problems. A study conducted back in 2006 found that self-reported drinkers earned 10-14% more than abstainers. Moreover, males who frequented bars at least once per month—so-called social drinkers–earned an additional 7% on top of the 10-14% drinkers’ premium.

The authors of this study hypothesized that the factor leading to higher earnings by drinking people was their increased social capital. Wikipedia defines social capital as “the networks of relationships among people who live and work in a particular society, enabling that society to function effectively.” To me, the key word in this definition is “networks.” Social drinkers might be more successful because they form and maintain networks with other folks—and do this better than non-drinkers.

A 2019 study linked alcohol-consumption-based social networks (and their disruption) to innovation. After the imposition of state-level alcohol prohibition in the U.S. in 1920-1933, previously wet counties had 8-18% fewer patents per year relative to consistently dry counties. The effect was largest in the first three years after the imposition of prohibition and rebounded thereafter. The author attributes this effect to the disruption of existing social interactions and subsequent formation of new, non-alcohol-based ones.

I suspect that when the final tally of the effects of the COVID-19 pandemic on innovation is tabulated, we’ll be shocked by the results, by the damage that the Lockdown of the Century has caused to our ability to generate new products and business models. Sure, disrupted networks will be eventually restored but how shall we make up for the irreversible loss of human interactions over the past year?

But I don’t want to end this piece on a sour note. A national survey in September 2020 found that American adults have increased their consumption of alcohol during the pandemic: the overall frequency of alcohol consumption increased by 14% among adults over age 30, compared to the same time last year. Who knows, a spike in creativity caused by alcohol consumption may compensate for the negative effect of disrupted networks.

If so, not all is lost for American innovation.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: “Absinthe Lover” by Pablo Picasso

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Does labor regulation hurt innovation?

Those who believe that government regulations, including labor laws, hurt innovation, please, raise your hand. Wow, quite a few hands raised!

Indeed, the suspicion against regulations is fueled by common belief that they damage economic growth, with which innovation is intimately connected. For example, some scholars have expressed concerns that slower economic growth in Southern European and Latin America countries with heavy labor regulation could be due to reluctance to fund innovation programs because of the burden of labor laws (for references, see here). However, a point of view has been strongly articulated too that if applied effectively, regulation can foster a thriving, competitive marketplace where innovation and technological progress flourish. 

Interestingly, academic literature on the effects of regulation, in particular labor laws, on innovation seems to favor the second, more sanguine point of view.

For example, a 2010 study compared the innovation output in five countries—the U.S., U.K., France, Germany, and India–and found that stronger labor laws positively correlated with a country’s innovation output. Interestingly, this effect was more pronounced in innovation-intensive industries, such as medical devices, than in more traditional industries, such as textile. Equally importantly, the study found that the only dimension of labor laws that had a tangible impact on innovation was the “regulation of dismissal” component, i.e., the ease/difficulty with which employers could dismiss employees.

Another study published by the same authors in 2014 analyzed the impact on innovation of the U.S. wrongful discharge laws (WDL). These laws provide employees with greater protection than employment-at-will, where employees can be terminated with or without just cause. The staggered passage of WDL across the U.S. states created a natural experiment assessing their impact on the innovation output. The study found increase in the number and improved quality of patents issued in the states that adopted WDL, with the effect starting to emerge two years after the WDL passage. As in the previous work, the positive impact on innovation was significant only in highly innovation-intensive industries.

Taken together, both studies indicate that innovation is fostered by laws that limit firms’ ability to discharge their employees at will. The authors call this phenomenon an “insurance effect”: feeling increased protection from negative consequences of failure, employees are more committed to engaging in risky innovative projects.

These findings are fully consistent with a theoretical concept proposed by Berkeley’s Gustavo Manso in 2011. The concept postulates that the optimal incentives motivating employees to innovate must include a combination of tolerance for failures in the short term and reward for success in the long term. Tolerance for early failures allows the employees to take risks at the initial stages of the innovation process without incurring the negative consequences of failed projects. The reward for long-term success encourages the employees to explore risky ideas that may allow them to achieve innovation breakthroughs in more distant future.

In other words, the best way to encourage risk-taking and experimentation is not to “celebrate failures,” as often suggested, but to remove the proverbial Sword of Damocles of punishment for them, something that any firm can easily do by modifying its termination policies.

A recent study adds an additional layer of complexity to the relationship between innovation and regulation. An international team of economists analyzed innovation outputs in France where many labor regulations apply to firms with as few as 50 employees. The authors found that regulations do negatively affect innovation, but in an interesting twist they saw that this regulation negatively affected only incremental, but not radical innovation. Using a sports metaphor, they concluded that “[a] more regulated economy may have less innovation, but when firms do innovate, they tend to ‘swing for the fence’ with more radical…breakthroughs.”

On emotional level, I hate regulations (hey, I grew up in the Soviet Union!). But regulations are part of our lives. There is no point in crying that “structure stifles innovation.” We should instead constantly look for ways to create conditions favoring innovation. Through regulations and otherwise.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Paweł Czerwiński on Unsplash

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Are you bored to death and procrastinating? Good for you!

In my two previous posts (here and here), I argued that the wide-spread belief that we are swimming in an ocean of cheap innovative ideas–solidified in a popular slogan “ideas are a dime a dozen”–is a myth. Available evidence suggests that the U.S. is facing a growing shortage of novel ideas. Worse, the cost of getting these ideas is growing while their quality seems to be declining.

What’s going on? One thing is clear: the quantity and quality of novel ideas are declining because sources of new scientific discoveries are drying up. Although the total U.S. spending on R&D remains steady at 2.5% of GDP, only about 30% of the money comes from the federal government; 70% of it is contributed by the private sector. With its focus on rapid returns, will private sector spend money on fundamental and, therefore, potentially risky R&D projects? No. (Of note, 75% of U.S. venture capital goes to software and 5-10% to biotech. How is the rest of R&D supposed to be funded?). The industry still can generate incrementally innovative combinations of old ideas–which indeed may be plentiful and cheap–but it is unlikely to create breakthrough innovations.

There are hopeful signs that the newly minted Biden administration is going to pay more attention to basic science; yet it may take a while to repair the damage incurred by decades of neglect.

I also feel we must consider another explanation: we have become less creative as a nation.

This fanciful—and I suspect, offensive to many—idea came to me when I recently re-read a 2017 Wired article. The article described a study showing that bored individuals generated more creative ideas than a non-bored control group. The authors of the study argued that boredom might spark creativity because a bored mind craves for stimulation.

The problem is that the proliferation of social media channels eliminated this “bored” state of mind. We are always “busy” playing with our mobile devices, numbing our brains with the constant flow of mostly useless input. Being constantly artificially “on,” our brains refuse to get positively stimulated. By refusing to get and stay bored we become less creative.

There is another human trait that carries significant negative connotation in the workplace and society at large: procrastination. Procrastinating folks are considered inefficient, unproductive, and—oh, the horror!—bad team players.

However, a recent study shows that procrastination may foster creativity. The relationship between procrastination and creativity seems to be inversely U-shaped: test subjects who procrastinated moderately received higher creativity ratings than those who procrastinated less or more. The authors of the study speculate that moderate procrastination sets in motion a mechanism of problem restructuring, which results in the production of more creative ideas.

According to statistical data, the U.S. is the most overworked developed nation in the world. The average productivity per American worker has increased 400% since 1950; yet we’re working the same 40-hour workweek, at least on paper. Of course, we have no time to procrastinate! But what was the price for this spectacular gain in productivity? What if we paid for that by the loss of our creativity?

Now, I’m not saying that in order to become more creative, we have to trash your mobile gadgets and delete time management software from your laptops. What I’m saying is we have to respect our own brain by treating it with occasional spells of a quiet, unrushed deliberation.

Especially, of course, if after a shower, we went out to the garden and sat under an apple tree.

Image credit: Magnet.me on Unsplash

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

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U.S. innovation: a perennial half-full/half-empty glass

In my previous post, I argued that a wide-spread belief that we are swimming in an ocean of cheap innovative ideas – solidified in a popular slogan “ideas are a dime a dozen” — is no more than a myth. Available empirical evidence strongly suggests that we are facing a growing shortage of novel ideas. Worse, the cost of getting these ideas is growing while their quality seems to be declining. Left unchanged, this trend may seriously damage American innovation.

Some folks believe we are already there. In the latest issue of Harvard Business Review, Curtis Carlson sets alarm bells ringing:

Innovation in the United States is highly inefficient. The per capita rate of job creation from new companies has declined for decades, and only 3% of patents are ever commercialized. Most university tech-transfer and start-up incubators lose money…Most venture capital firms…lose money. All this despite the efforts of some 220 university entrepreneurial programs, 6,000 professors and instructors teaching entrepreneurship, 1,400 venture incubators, and billions of dollars a year in government investments.”  

In addition to impeding economic growth, the decline in innovation capabilities may have profound negative consequences for U.S. national security, as highlighted in a recent report, “Innovation and Security. Keeping Our Edge,” composed by the Council on Foreign Relations.

Those who think that Carlson is way too pessimistic have ammunition of their own, however. They may point to the recently released Global Innovation Index 2020, an annual ranking of the world’s innovation capacities. In this year’s list, the United States occupies a respected 3rd place (after Switzerland and Sweden). This is the same spot the U.S. held last year and even a slight improvement over the 6th place in 2018, 4th in 2017, 4th in 2016, and 5th in 2015. Where is evidence of decline?

(As someone obsessed with indexes, I immediately remembered another ranking, the 2019 Global Health Security Index, an assessment of the health security capabilities across 195 nations. The Index specifically focused on nations’ preparedness for infectious disease outbreaks that can lead to pandemics. In an estimate that sounds like a bad joke today, the United States led the world in the overall preparedness score. It also scored the highest in a few specific categories, including Early Detection & Reporting of Epidemics.)

Folks who prefer to believe that the glass of U.S. innovation is at least half-full could refer to an unprecedented speed with which RNA-based anti-COVID-19 vaccines have been developed – along with an impressive list of fast and “frugal” innovations developed in response to the pandemic.

Their opponents take a longer-term view. They argue that virtual working environment, a necessary consequence of the increasingly popular working-from-home approach, damages social networks established in large organizations, which will inevitably have a strong negative effect on corporate innovation. (Another potential danger is the so-called “covidization” of academic research, but this topic deserves a special consideration.)  

I personally see one more troubling aspect: the lack of a strong public U.S. innovation policy. Previously, I found that there is a strong correlation between a country’s innovation potential and the level of democratic developments in this country (as assessed by the Democracy Index 2019). Although all five individual components of the Democracy Index positively correlate with innovation, the strongest correlation occurs for Functioning of Government. And yet, the above-mentioned Council on Foreign Relations’ report specifically criticized current administration for the weak role it plays in shaping the U.S. innovation policy.

One hopes that the incoming Biden administration will start paying appropriate attention to science, technology, and innovation. In the meantime, we must stop fancy ourselves with the chimera of “plentiful and cheap innovation ideas.” Quality ideas are rare and expensive, and it takes a lot of valuable resources to generate a potentially breakthrough idea. No efforts should be spared to understand how to make this process more effective and more efficient.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Nolan Simmons on Unsplash

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Ideas are a dime a dozen. Are they really?

Any seasoned innovation practitioner would tell you that idea generation is the most straightforward part of the innovation process. Generating ideas is easy, the thinking goes; it is at the stage of testing these ideas and deciding which one to scale into a new venture that the innovation process begins to choke.

Taken to extremes, this mindset feeds the perception that novel ideas are plentiful and cheap. “Ideas are a dime a dozen,” we can often hear. Are they really?

A joint team of researchers from Stanford and MIT has challenged the “plentiful and cheap idea” dogma. They  presented empirical evidence showing that research productivity, a scientific term for a layman’s “idea,” is actually declining. According to the authors’ calculations, research productivity across the whole US economy declines at an average rate of 5.3% per year. More specifically, in semiconductors (the playground of the famous Moore’s Law), research productivity is declining at a rate of 6.8% per year; in agribusiness and pharmaceutical research, the annual decline is about 5.0%.

In other words, contrary to a popular belief, ideas are not plentiful. We are experiencing a growing shortage of ideas instead.

If research productivity is on decline, how then has steady economic growth been sustained? The answer is simple: by rising what economists call research effort, which in layman’s terms means the number of researchers. Indeed, the number of researchers required to achieve the famous doubling, every two years, of the density of computer chips (Moore’s Law) is more than 18 times larger today than it was in the early 1970s.

In some areas of agricultural research, the number of scientists has risen 23-fold between 1969 and 2009. And while research productivity responsible for the drugs approved by the FDA between 1970 and 2015 has been declining at an annual rate of 3.5%, this decline was offset by the 6.0% annual growth in the number of involved researchers.

Now, if the number of ideas is declining while the number of people generating them is growing, how can these ideas be cheap? They cannot. The ideas are becoming more, not less, expensive.

One can hope that at least the quality of novel ideas remains high. Alas, there is little evidence supporting this intellectual refuge. Consider this: by the end of 2019, the venture capital industry had accumulated a whopping $121 billion in so-called “dry powder,” the money for which venture capitalists failed to find ideas to invest in. So much for plentiful and cheap innovative ideas! 

Let’s ponder for a minute over this fundamental question: where should novel ideas come from in the first place? The answer looks obvious: from R&D, where else?

Exactly, and here is the root of the problem. In the decades that followed World War II, entirely new sectors of the U.S. economy have been created, such as jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, and digital computers. All these developments happened thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.

Although the total US spending on R&D has remained steady for the past years, at 2.5% of GDP, only about 30% of the money now comes from the federal government; 70% of it is contributed by the private sector. With its focus on rapid ROI and the competition, will private sector spend money on fundamental – and, therefore, inevitably long-term and potentially risky – R&D projects? No.

The quality of novel ideas is declining because sources of new scientific discoveries in the United States are gradually drying up. Yes, the industry can still generate incrementally innovative combinations of old ideas – which indeed may already be plentiful and cheap – but it will fail to create breakthrough innovations.

We need a renewed focus on idea generation. We need to highlight current gaps in our scientific knowledge and to draw a step-by-step roadmap to bridging these gaps – with sources of funding clearly identified. We need to resume spending public money on R&D at the level that ensured the U.S. domination in innovation in the past.

It is time to bring “idea” back to innovation.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Josh Appel on Unsplash

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Why I Don’t Like the Term “Innovator’s DNA”

And just as each person’s physical DNA is unique, each individual we studied had a unique innovator’s DNA for generating breakthrough business ideas.”

This is a line from the influential HBR article written by Jeffrey Dyer, Hal Gregersen, and the late Clayton Christensen back in 2009. The inspiring image created by article has gone viral, and the term “innovator’s DNA” has become an innovation management buzzword. Google “innovation is in our DNA” and you would be surprised how many people and organizations have more than just adenine, guanine, cytosine, and thymine in their DNA.

Sure, I know that every popular business term immediately becomes a powerful magnet for clichés. Innovation is hardly an exception, and yet I think that mixing innovation with DNA is a bad idea and that “innovator’s DNA” is an awkward term.

To begin with, ascribing innovative (or any other) abilities of a person to her DNA implies that DNA is the sole determinant of who this person is. This simply is not true: our features are the result of a combined action of two major factors: our genetic material (represented by DNA) and our environment.

The relative importance of each factor varies for a particular feature. For example, the color of our eyes or the curliness of our hair are almost exclusively determined by our DNA. But other features, such as our behavior or predisposition to diseases, are greatly influenced by external factors, such as a lifestyle. A general rule is that the more complex the human trait, the more it is influenced by environmental factors.

There is, therefore, every reason to believe that our ability to innovate, a complex cognitive and behavioral feature, is predominantly determined by our environment. You’re an innovator not because you were born with innovator’s DNA. You’re an innovator because you’ve been exposed to innovation environment.

Second, it is fair to say that innovation is about change. Innovators must rapidly respond to changing business conditions, promptly adapt to shifting consumer preferences, and closely follow technology developments. It is also fair to say that innovation is about trying and failing. The only other cliché that comes close in popularity to innovator’s DNA is our obsession with failures (which we love to celebrate but hate to commit). 

At the same time, by virtue of it being the guardian of our genetic code, DNA is extremely stable molecule. Do you know that there are only 0.3 errors produced every time the whole human genome is reproduced – and the human genome consists of more than 3 billion elements? Sure, I can see why holders of Six Sigma Black Belts would worship DNA, but I do feel that innovation practitioners should be looking for inspiration somewhere else.

By the way, my sincere congratulations to Jennifer Doudna and Emmanuelle Charpentier for winning this year’s Nobel Prize in Chemistry for CRISP gene editing tool. You are true innovators, ladies! And you work with DNA.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: https://innovationdistrict.childrensnational.org/decoding-cellular-signals-linked-to-hypospadias/

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