Nearly 66% of companies on the Fortune 100 list in 1990 are not on the list some twenty-odd years later. You might ask, what is the reason for this? The fact is that while those companies were run, by and large, by competent and smart businesspeople, the odds are against them for one simple reason: They didn’t innovate and open themselves up to their next market.
Throughout my career, I’ve spoken to people around the world about the history of innovation—getting it right, and in some instances, getting it all wrong. When we talk about this concept of innovation, I’m almost always asked the same questions: Is there any way for large, established companies to innovate? How do companies find destructive innovation? The short answer is yes, but there are some distinct rules to follow when innovating an established brand, and/or starting fresh.
These questions always bring me back to three distinct rules that I’ve learned along the way. First, hire people who annoy you. Second, don’t copy, remake. Third, don’t create, listen.
1. Hire People Who Annoy You.
A lot of research shows that diverse teams tend to come up with a wider variety of answers, and, thus, are more likely to find the surprising winning idea. The converse is also true: If you build a team that looks alike, thinks alike, and wears the same shoes (pardon the pun), you will get groupthink and generate only one answer, and hope it’s the right one.
In my opinion, this is a recipe for disaster. So, how do you make sure you don’t have uniform teams? While almost all companies have some sort of diversity plan in place, sadly, many of them are just that, plans. I propose actions.
Social psychology has taught us that we tend to like people who are similar to us, and the higher the similarity, the more likable the person. This suggests a hiring strategy—hire people who annoy you. As long as you’re ensuring they are smart, the people who annoy you represent the diversity you and your company require.
2. Don’t Copy, Remake.
There is an entire cottage industry devoted to teaching you how to be innovative. This industry exists because it’s easy to be glib about innovation. You will hear that about everything, from the need for brainstorming to how key it is to give your employees free lunch.
Glib is easy, and, worse, compelling. These answers are glib because they point to some surface feature of a behavior. In other words, they tell you what was done, not why it was done. For example, at my company (and the previous one, Google) we provide lunch every day because it creates an easy place for introverts (i.e., engineers) to talk to other people about what they are working on and to get wildly divergent ideas. It’s not about the food, but about the conversation. And, of course, it amplifies the value of hiring people who annoy you, since lunch is a great place for views to get aired. Don’t copy the surface behavior—understand the goals, and do them in your context. In other words, given your culture and workforce, what’s the best way to ensure people who don’t directly work together talk to each other?
3. Don’t Create, Listen.
Finally, once you have hired people who annoy you to diversify your team, and you have found ways for them to talk to each other, you need something useful for them to do. You’re the key barrier to your organization’s innovation, because you are serious and you believe you know what your customers want.
However, the purpose of innovation is not simply to build something new, but to win new customers, new markets, or new products. While you think you may know what they want, in reality, you don’t. Rather, you knew what customers wanted back when the company started, but now the only people who really know what customers want are the customers.
So how do you find out what the customers want? My advice would be to nix the focus groups. While they’re generally not representative of your actual customers, it’s also true that humans can’t describe what they don’t know. Henry Ford (probably didn’t) say "If I’d asked my customers what they wanted, I’d have built a faster horse." His customers knew horses. They didn’t know cars. Or, at least, they didn’t know cars in a way they could talk about them.
In many cases, you can see what customers want by watching their behavior. For example, we recently optimized our website to make it mobile friendly. We didn’t do this based on our customers asking for it; rather, we identified the mobile need by looking at data around the 15% of customers who were interacting with our site on their mobile device. I believe that they didn’t ask, because they didn’t know we could build an application that would make their mobile experience markedly better.
This is an example of how we didn’t innovate just to innovate, but how we innovated to solve a customer problem.
While I doubt that following these three rules will guarantee your long-term survival and victory, I do know that ignoring them definitely increases your chances of failure.
—Author Douglas Merrill is CEO and founder of ZestFinance, a Los Angeles-based financial services technology company that uses big data to help make better credit underwriting decisions in order to provide credit alternatives to the underbanked. He was previously CIO and VP of Engineering at Google.
[Image: Flickr user Thomas Hawk]