Radical Rules for Radical Innovation

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There are countless books, blogs, articles, cases, and conferences dedicated to identifying techniques that drive innovation. Most offer the same tired ideas – hire good people, empower employees, reward risk, embrace innovative culture, create a progressive work environment, etc. While these suggestions are all reasonable, they are anything but radical. If companies want radical innovation, they should look at exploring more radical solutions. What would happen if your eradicate HR from your company? Will you innovate better if you require all employees to take an IQ test?

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Radical Rules for Radical Innovation

  1. 1. Radical Rules For Radical Innovation ILIYA RYBCHIN Bloomberg LP @rybchin Digital Strategy Innovation Summit New York | 20 Mar 2014
  2. 2. Radical Rules For Radical Innovation ILIYA RYBCHIN Bloomberg LP @rybchin Digital Strategy Innovation Summit New York | 20 Mar 2014
  3. 3. 3| ILIYA RYBCHIN INTRODUCTION It seems like innovation is the most important topic in business 51% of companies have increased funding for innovation in 2013 93% of companies say their long-term success depends on their ability to innovate But only 18% of CEOs say their innovation investments are paying off
  4. 4. 4| ILIYA RYBCHIN INTRODUCTION Everyone claims to be an innovation expert
  5. 5. 5| ILIYA RYBCHIN INTRODUCTION Most “experts” offer reasonable and pithy advice Hire diverse staff Empower employees Promote experimentation Embrace chaos Cultivate entrepreneurship Invest in startups Reduce bureaucracy
  6. 6. 6| ILIYA RYBCHIN INTRODUCTION However if you want to DISRUPT, you need to be bold Innovation §  The introduction of something new §  A new idea, method, or device Disruption §  Change that has meaningful business consequences; new business, service, or product concepts that have positive financial impact §  New ideas that fundamentally change the basis of competition within the industry Disruptive innovation requires much more than… §  …making incremental improvements to your products/services §  …acquiring an early stage startup §  …hiring a Chief Innovation Officer Faster  Horse   Car  
  7. 7. 7| ILIYA RYBCHIN INTRODUCTION Being bold is dangerous §  These innovation rules are not meant to be followed literally §  Without appropriate safeguard, these rules can be dangerous §  These rules do not reflect the opinions of any past, current, or future employers
  8. 8. 8| ILIYA RYBCHIN Let’s Begin
  9. 9. 9| ILIYA RYBCHIN ERADICATEHR •  A company with an HR department larger than 5 people will struggle to be disruptive •  HR’s very reason for existence is to maintain order, enforce bureaucracy, foster inefficiency, tolerate mediocrity, protect antiquated culture, etc. •  The key to radical innovation is to not treat HUMANS as RESOURCES •  Resources are raw materials that are used up until all value is sucked out of them •  Humans are the living beings that offer creativity, inspiration, passion, energy, loyalty, etc. RULE 1: Eradicate HR… IMMEDIATELY
  10. 10. 10| ILIYA RYBCHIN ERADICATEHR •  Is it easier to book a $10,000 trip to Asia than to hire a temp contractor to build prototype? •  So you re telling me I can trust you to give you a company car and to have you responsible for tens of millions of dollars, but I can t trust you to dress appropriately? – Mary Barra, CEO General Motors •  Think about why firms need to establish innovation groups OUTSIDE of the corporate offices – what are they really escaping from? DIAGNOSIS: HR drains innovation potential from an organization
  11. 11. 11| ILIYA RYBCHIN ERADICATEHR SOLUTION: Treat your employees… like humans •  Assume your employees are rational, motivated, and talented human beings who know the difference between right and wrong, are capable of thinking, and making decisions, •  Outsource everything administrative (payroll, benefits, recruiting, etc.) and condense your employee manual to one sentence: DON’T BE STUPID
  12. 12. 12| ILIYA RYBCHIN ERADICATEHR •  When employees are unshackled by the burdens of pointless process, baseless bureaucracy, and constricting structures, they can innovate •  They take risks •  Their thinking is not constrained •  They will act in the best interests of the company •  Essentially, you need to strip away “corporate stupidity” RESULT: Empowered employees who care
  13. 13. 13| ILIYA RYBCHIN TESTIQ •  A good manager can foster/nurture risk-taking, creativity, problem solving, and technical skills. S/he can't make someone smart •  Radical innovation requires rapid action and exceptional intelligence - decelerating your progress hurts your ability to innovate •  Organizations often optimize for the lowest common denominator RULE 2: Hire based on IQ
  14. 14. 14| ILIYA RYBCHIN TESTIQ When Mihaly Csikszentmihalyi studied geniuses for his book “Creativity - The Psychology of Discovery and Invention”, he realized something fascinating about IQ: No one who changed the world had an IQ under 130 — but the difference between 130 and 170 was negligible. DIAGNOSIS: Brilliant ideas do not come from mediocre minds Worst   Drivers   Poor   Drivers   Be-er  Drivers   Best  Drivers   If something as simple as driving ability correlates to intelligence, what does that say for highly complex tasks your employees perform daily?
  15. 15. 15| ILIYA RYBCHIN TESTIQ SOLUTION: Don t level the playing field… hire better athletes The mere act of assessing intelligence gives you valuable insights about your potential employees: •  Creativity •  Problem solving •  Ability to deal with ambiguity •  Ability to deal with stress •  Even personality
  16. 16. 16| ILIYA RYBCHIN TESTIQ or RESULT: Brilliant employees beget brilliant innovation Who is most likely to come up with the next genius idea that will transform your company, reshape your industry, and change the world?
  17. 17. 17| ILIYA RYBCHIN UNDERCOVERBOSS You can’t innovate if your key employees have never (or rarely) •  Taken calls in a call center •  Stood on a sales floor and tried to sell your product •  Worked a factory line and assembled your product If you want to disrupt a market, you need everyone to spend more time in the market RULE 3: Mandatory “Undercover Boss” for ALL managers
  18. 18. 18| ILIYA RYBCHIN UNDERCOVERBOSS •  Innovation can be correlated with how frequently management is “among the people” •  Why pay expensive firms to do ethnographic research? DIAGNOSIS: Contact with customers is a religious experience
  19. 19. 19| ILIYA RYBCHIN UNDERCOVERBOSS All employees should spend: •  1 day per quarter at a call center •  1 day per quarter selling (at retail on in field) •  1 day per quarter building/ packing/shipping •  1 hour per month meeting customers …or they don t get their annual bonus/raise SOLUTION: Connect compensation to “field work”
  20. 20. 20| ILIYA RYBCHIN UNDERCOVERBOSS How many kickstarter campaigns came from a customer frustration with existing products/services? RESULT: Profound market awareness yields profound innovation
  21. 21. 21| ILIYA RYBCHIN EMBRACEMIGRANTWORKERS •  Finding an employee who worked at one company for 10+ years is not always a good thing •  The longer an employee s tenure the less likely they will be the source of fresh ideas •  Think back to your first week at your last job… how many fresh ideas did you have that week? •  Would you rather hire a CTO who worked at IBM for 15 years or who worked at 5 interesting technology companies in a variety of industries? RULE 4: Embrace migrant workers
  22. 22. 22| ILIYA RYBCHIN EMBRACEMIGRANTWORKERS •  Employees desirable to multiple companies should be desirable to you •  Employees who actively manage their careers are ambitious •  New roles = new experiences, skills, and knowledge •  Job switchers are not risk averse DIAGNOSIS: Resume gaps are good
  23. 23. 23| ILIYA RYBCHIN EMBRACEMIGRANTWORKERS •  It’s not about someone who switched companies… strategic jumps within the same company are just as compelling •  Higher compensation and bigger title (by themselves) are not sufficient reasons for switching jobs •  Look for the employees who seek out new challenges, new experiences, and growth opportunities SOLUTION: Find employees who hopped for the right reasons
  24. 24. 24| ILIYA RYBCHIN EMBRACEMIGRANTWORKERS Inherent diversity involves traits you are born with, such as gender, ethnicity, and sexual orientation. RESULT: A truly diverse workforce with original ideas Acquired diversity involves traits you gain from experience Companies that have BOTH types of diversity are 45% likelier to have grown market share over the previous year and 70% likelier to have captured a new market than peers SOURCE: Harvard Business Review, 2013 - How Diversity Can Drive Innovation
  25. 25. 25| ILIYA RYBCHIN GETHELP •  Not all the smart people work for us - Bill Joy •  Come to terms with the fact that there will always be more intelligence, innovation, creativity, and general bad-assness outside your company than inside your company •  Innovation is an ego-less endeavor •  Drop your hubris / arrogance and seek help RULE 5: Get help
  26. 26. 26| ILIYA RYBCHIN GETHELP Even if you do have a dramatically disproportionate amount of exceptional talent, they will always benefit from external perspective, fresh ideas, and industry expertise DIAGNOSIS: External expertise may be just the fuel you need
  27. 27. 27| ILIYA RYBCHIN GETHELP SOLUTION: Hire the RIGHT external advisers What is the stock price, gross margin, and hurdle rate of your biggest client? Have you ever managed a business, product, and/or service P&L? If we develop a plan for a disruptive business, are you prepared to invest? If they can t demonstrate unquestionable mastery of critical business issues facing a client – then they are not capable of understanding the business consequences of innovation. If fewer than half their team has proven operating experience – then they are not capable of executing in the real world. If they do not immediately say yes – then they are not a real long-term strategic partner. These are idea people Ideas are the easiest part of innovation, you need advisors who understand your business These are the theory people HBS case studies and new frameworks/paradigms don t always translate to reality These are the project people They simply want to sell you consulting engagements and bill you for time Three questions to weed out noise and mediocrity:
  28. 28. 28| ILIYA RYBCHIN GETHELP •  Cross-function, cross-industry, cross-level, and cross-market insights •  Deep focus on one problem •  Subject matter expertise •  Limited political constraints RESULT: Combining what’s inside with fresh outside perspective
  29. 29. 29| ILIYA RYBCHIN CONCLUSION Every practice has a set of rules which governs it. Innovation occurs at the point of intelligent and creative rebellion against them. -Fiel Valdez Ultimately, these rules are not meant to be followed
  30. 30. 30| ILIYA RYBCHIN CONCLUSION Everyday, deep in your organization you will have people who… •  … work on projects •  … make choices •  … allocate time •  … manage budgets •  … hire other people These are the ingredients for innovation – how you assemble them will determine your propensity for innovation It s all about the people
  31. 31. 31| ILIYA RYBCHIN Thank you ILIYA RYBCHIN Bloomberg LP @rybchin Digital Strategy Innovation Summit New York | 19 Mar 2014

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