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Creativity is Bunk
Wharton
Professor Karl Ulrich Says Innovation Must Have Systematic Grounding.
Karl Ulrich, a Wharton professor of operations and information management, knew the business idea was weak and worrisome as soon as he heard it.
A group of his students — "creative guys who were going to be successful in life" — were proposing an offshore gambling website. It would be based in Morocco, but the main market, of course, would be the United States. "It had some legal problems," remembers Ulrich, who teaches product design and development. "It was even a little shady."
"They'd really just stumbled on it," he adds. "If they'd just spent more time, they could've come up with something better. But it was the first thing they thought of." After investing a year of effort, the students dropped the idea.
Episodes like this one are part of what motivated Ulrich and his Wharton colleague Christian Terwiesch to write a book on innovation management, which they're tentatively calling, "Mastering Innovation." They've drafted the early chapters and hope to publish next year.
Too often, aspiring entrepreneurs chase after the first idea that they dream up, Ulrich warns. He likens that to a wildcat oil-driller who sinks a single well, pours all of his money into it and prays he'll strike crude. "If he just spent a few weeks drilling a few test holes, he'd probably find a better spot to start," he points out.
So it was, too, with his students. They had thrown themselves at their first notion, rather than engaging in the sort of systematic idea generation and culling that Ulrich suggests in the book. "For the selection phase, the goal is efficient revelation of information and sound filtering based on that information to kill as early as possible opportunities that are unlikely to provide value," he writes.
Ulrich knows about entrepreneurship first-hand. He founded and managed Nova Cruz Products (now Xootr LLC), a manufacturer of high-performance personal transportation products including the Xootr scooter and Swift bicycle. Ulrich is also a founder of Epodia, the open network for higher-education teaching materials.
As an experiment he re-tooled a product design course to let students experience a type of speed-entrepreneurship. The experiment yielded TerraPass, a still-growing firm that allows drivers to "clean up after their cars." Featured in dozens of media outlets, the New York Times called TerraPass "one of the most noteworthy ideas of 2005." To learn more read Hot Air, the "Get it Started" article on Terrapass.
Ulrich suspects that aspiring entrepreneurs and even many established firms don't screen ideas rigorously because the popular press often misrepresents innovation. Reporters love to write about eureka moments and innovators like Steve Jobs who seem able to concoct revolutionary products over a bowl of Cheerios. And innovators, for their part, like to play up their genius.
"The conventional view is that innovation is a purely creative process, and that's why you get terms used like ‘spark of creativity' and book titles like ‘Creative Breakthrough Products,'" he says. "It's this idea that it's a spontaneous act."
That's often true in terms of the original inspirations. Devising an unprecedented product like, say, the Segway Transporter — an electric-powered two-wheeled cart that people can ride standing up — often does require a flash of insight. But the key to successful innovation is understanding that not every wild notion bears pursuing. An entrepreneur might devise and evaluate several before plunging ahead.
Many of the best innovators approach idea generation just as systematically as they'd approach building a factory, Ulrich says. Among the industries that manage the process well are ones that, on the surface, seem the least creative. Take the oil and gas business. "It's largely run by scientists," he says. "They use a lot of statistical analysis. They think about, ‘What do we know now, how can we learn more and what do we have to pay to do that?'
"The next best is probably pharmaceuticals. No one looks at pharma and says it's creative. But new drugs can literally come from handfuls of dirt collected around the world. When you work at Merck and you go on vacation, you're told to bring back a handful of dirt. You bring yours back, and they screen it for new [chemical] compounds."
At the other end of the spectrum are the most willy-nilly innovators — the media and entertainment industry. "There's almost no process management there," Ulrich points out. "They look for creative geniuses to find ideas and make a bet on them."
And yet, even media companies have a successful model in their midst. It's American Idol. "They're managing what we call a batch selection process, and it works very well," Ulrich explains. "They take 10,000 decent singers and put them in the front end. They have a systematic process and what comes out at the end isn't bad."
Ulrich distinguishes a batch process, like American Idol's, from a flow process, like the one used in the drug industry. In batch selection, an innovator can examine all of his options simultaneously. "It's where you need only one answer, and you need the best answer," he explains. Another example would be an entrepreneurial team evaluating potential business ideas.
In a flow process, in contrast, opportunities arrive randomly, and the innovator can't evaluate them all as a group without risky delays. A firm might use a flow process if it has specialized resources like drug labs and doesn't want them sitting idle. With a flow process, the labs would have a consistent stream of work.
Once innovators have made their selections, they move into development. For this, too, Ulrich advocates two different processes — the waterfall and the spiral — depending on the characteristics of the proposed product.
In industries where design and construction cost a lot — think of commercial real estate or aircraft manufacture — savvy innovators use the waterfall. Here, "a thorough design effort is followed by building a comprehensive prototype which is then followed by a test phase," Ulrich writes. Testing doesn't reveal lots of new information but merely verifies performance and spots major errors. The process is slow and careful because mistakes can cause serious pain. "You're not going to throw up a commercial building and knock it down and start over," he says. As with a real waterfall, you can't paddle upstream.
A spiral process, often used in the software business, operates like a jazz combo, with the innovator improvising. It is employed where "building and testing are cheap and likely to reveal new information," which can easily be integrated into subsequent prototypes.
Microsoft is famous for working this way. It releases a new software package knowing that it has a limited set of features. But based on early consumer feedback, the product can be improved and a new version released to market later
This approach can work well in unproven markets. It enables an innovator to explore not only the pros and cons of a proposed product but also the preferences of potential customers. "If you're in the Segway Transporter business, where there isn't a market category yet, you're better off getting a prototype out there and finding out what people like and don't like and how they'd use it," Ulrich explains.
Interestingly, that's not how Segway's inventor, Dean Kamen, pursued the development of his invention — though he probably wishes he had.
Dean Kamen refused to get feedback from users before introducing a refined product to market. His initial target market, postal carriers and other government and commercial delivery operations, was a bust. His company learned, after spending lots of money and enduring long delays, that the Segway appeals to very different markets, including tour operators in vacation destinations.
Ulrich, who is also Chairperson of Wharton's Operations and Information Management department and faculty director of the University of Pennsylvania's Weiss Tech House, hopes that his and Terwiesch's book will encourage wannabe innovators to be systematic in their approach to these sorts of problems. "I'd love for someone in a movie studio to read it and think, ‘Ours is a totally haphazard process. We really have to figure out how this works,'" he adds. "For me, the audience is those people who don't have a process view, which is probably most industries."
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