How to manage uncertainty in innovative projects

A week ago I finished the first full draft of my MSc thesis. The title is Managing uncertainty in innovative projects: The experimentation-driven approach. My basic argument is that uncertainty is essential for innovation - the more uncertain your project outcome is from the get-go, the more chances you have for creating something truly novel. Contrast this to a project where the outcome is a predefined target of e.g. increasing production line energy efficiency by 10%. Unfortunately, the way most projects are managed - even those that aim for novelty and innovation - the focus is on eliminating uncertainty, or simply ignoring its existence in the first place. (1)

Perhaps most interestingly, however, my research shows that even seemingly simple and mundane projects may contain uncertainties that cannot be planned for (i.e. they cannot be predicted beforehand), and those uncertainties can be very significant for the outcome of the project. I studied how an experimentation-driven approach to managing innovative projects can be used to uncover these uncertainties, as well as validate our existing claims and assumptions regarding the idea we are pursuing. The result? It works very well indeed.

In short, the experimentation-driven approach starts with an idea you want to develop, identifying the key assumptions regarding that idea, and coming up with creative ways to test those assumptions in practice. Key assumptions are those that can either make or break the idea. In the case of Zappos, which has grown to become the largest online shoe store, the key assumption in the beginning was "are customers willing to buy shoes online, without seeing and trying them on before purchase?" Where a business school educated MBA graduate would have approached this topic by spending hour after hour doing market research, crafting a business plan - which in itself is a fictitious document describing a reality that is definitely not going to happen - and carefully calculating cash flow potential, the founder of Zappos did something else: He went to a local shoe store, asked the owner if he could photograph the shoes and put those for sale online. If someone would make a purchase, he would then buy the shoes himself from the store and ship them to the customer. No IT systems, no warehouses, no marketing. Just a rudimentary website that helped validate the key assumption, without which there would be no business. And in the process he also learned a thing or two about what kind of payment options to offer, how to handle returns, how to do customer service and so on. (2, 3)

The basic assumption behind experimentation-driven innovation is that uncertainties cannot be resolved by planning. As a method it shifts the focus to learning as much as possible about your idea, quickly, while keeping costs low. Furthermore, when experimentation is the main tool, what you learn will be based on experience, not on assumptions. In other words, you get actual proof about the validity of your idea. This is especially true when your idea has anything to do with human behaviour as opposed to something that is purely mechanistic. For example, in one of the cases I studied a simple idea aimed to increase motivation and decision-making of employees lead also to increases in productivity, teamwork, trust between workers and the supervisors, and perhaps most surprisingly got the workers to proactively start taking ownership of and improving the internal work processes in the team. It might be too far off to say that none of these effects could not have been seen beforehand by thorough planning, but even so, without actually experimenting the idea there would have been little proof about them.

In fact, quite often it is simply less costly and much faster to do a hands-on experiment to see what happens instead of planning all the possible scenarios inside one's head. As my boss in the MIND research group has a habit of saying; "show, don't tell."

Perhaps the most interesting thing that has happened in the field of entrepreneurship research in the past 15 years is the work done by Saras D Sarasvathy from University of Virginia and her colleagues. She studied how expert entrepreneurs - meaning people who have built businesses with annual sales between $200 million and $6.5 billion - approach starting a new venture. And guess what? They pretty much use approaches similar to the experimentation-driven method, focusing on what they can do with their existing means, using low-cost ways to validate their key assumptions, and getting the first customers and other stakeholders on-board. In other words, they focus on acting instead of planning, control instead of prediction, and without risking what they cannot afford to lose. (4, 5)

It is becoming something of a cliche to say that the world is getting more and more complex, and that uncertainty is similarly increasing as a result. However, the advent of Big Data has not made us much better at uncovering uncertainties, especially in emerging contexts where there might not exist any data. This calls for a model of rational decision-making that is not rooted in the Newtonian worldview of clear cause-and-effect relationships and linear thinking. When it comes to creating something innovative, the focus needs to shift from emphasis on prediction to emphasis on control - meaning that you put your energy into what you can do, here and now, to develop your ideas and keeping options open so when uncertainties inevitably do happen, you are able to learn from them and adapt your approach.

The future is constantly being created and shaped by human action. It does not exist 'out there' to be predicted. And this means it is up to you to help create the kind of future you want.

References:

(1) Kline S. J., & Rosenberg N. (1986). An Overview of Innovation. In Landau, R., & Rosenberg, N. (Eds.) The Positive Sum Strategy: Harnessing Technology for Economic Growth, Washington: National Academy Press, 275-305.

(2) Sykes, H. B., & Dunham, D. (1995). Critical assumption planning: A practical tool for managing business development risk. Journal of Business Venturing, 10, 413-424.

(3) Hsieh, Tony (2010). Delivering Happiness: A Path to Profits, Passion, and Purpose. New York: Business Plus.

(4) Sarasvathy, Saras D. (2008). Effectuation: elements of entrepreneurial expertise. Cheltenham (UK): Edward Elgar Publishing.

(5) Dew, N., Sarasvathy, S., Read, S., & Wiltbank, R. (2009). Affordable loss: behavioral economic aspects of the plunge decision. Strategic Entrepreneurship Journal, Vol. 3, Iss. 2, 105-126.

What 12-year old kids can teach you about innovation

This spring I have been taking couple university courses on the Coursera online education platform. One was about gamification, or how to use concepts that are more familiar to us from different kinds of games in non-game contexts, in order to e.g. improve business performance or job satisfaction. The other course was about innovation, and one of the reading materials included this gem of a list of advise for aspiring innovators:

• Start simple

• Work on things that you like

• If you have no clue what to do, fiddle around

• Don't be afraid to experiment

• Find a friend to work with, share ideas!

• It's OK to copy stuff (to give you an idea)

• Keep your ideas in a sketch book

• Build, take apart, rebuild

• Lots of things can go wrong, stick with it

Local kids playing ball at Lake Toba, Indonesia.

The first two lines, "Start simple" & "Work on things that you like" serve one main purpose: minimising friction. Often the hardest part is to get going, and the simpler you can make a task appear the less internal resistance you will face. Also, when you get to work on something you enjoy, the more motivated you will be. It stops feeling like work and more like fun, and as you probably know you don't need to spend precious willpower to force yourself to have fun.

The next two lines are about finding direction and refining your goal. "If you have no clue what to do, fiddle around" is helpful to keep in mind when you have only a vague idea of what you want to reach. Or if you are trying to solve a problem, the solution might not make itself apparent at first. In that situation fiddling around, experimenting, and trying new things is essential to keep you moving. You can't stumble on new discoveries, solutions and ideas by standing still.

Creativity and innovation are inherently social activities. The myth of a lone genius has been crushed long since. Furthermore, if you "Find a friend to work with, share ideas!" you will not only learn from each other, but also have more fun in the process. Jon Krakauer had it right when he wrote in Into the Wild that "Happiness [is] only real when shared".

"It's OK to copy stuff (to give you an idea)" might sound deranged in this crazy CISPA and RIAA paranoia induced world we live in, but in reality not a single innovation has been born in isolation. We are unconsciously drawing knowledge from everything we see, hear, and touch. The Wright brothers wouldn't have created the first engine-powered airplane without learning from non-motored flyers as well as from the flight of birds. Google was not the first Internet search engine, but it improved upon the ones that came before and the world ended up better because of it.

"Keep your ideas in a sketch book" highlights the importance of documentation. Trying to remember everything is unreliable and inefficient. It takes away capacity from our already limited working memory, which can handle only a couple different simultaneous thoughts. By externalising the memory function you will have more brainpower for what matters; creative thinking. Furthermore, having your ideas outside your head helps tremendously with sharing and discussing them with others.

Innovation is, if anything, an iterative process. "Build, take apart, rebuild" and learn from your failures is the fastest way to move from an idea to the final solution. When each iteration contributes to the outcome by teaching you something new about your idea, your confidence about the final solution will also increase. Contrast this to an approach where you would come up with an idea that looks good on paper, and then implement it as-is without any testing or experimentation. Like communism.

Last but not least, innovation is about perseverance in the face of failure. As is said, it's 1% inspiration and 99% perspiration. "Lots of things can go wrong, stick with it" and eventually you will come up with the winning concept. On the other hand, though, it is also vitally important to know when you should quit and change approach or work on another idea. Seth Godin wrote a whole book about this. However, more often people quit too early than too late.

You could read hundreds of research papers and books about innovation, but this list by 12-year old schoolchildren is easier to remember and already covers the most important parts. Do not overthink innovation. Just start doing and learn on the way.

References:

Resnick, Mitchel (2007). All I Really Need to Know (About Creative Thinking) I Learned (By Studying How Children Learn) in Kindergarten. Presented at Creativity & Cognition conference, June 2007.

Increase your productivity... by playing Angry Birds!

Looking back the few years since I started getting interested in how to change human behavior, how to be productive, and in general how our brains work, I can confidently say that I have gotten the most done when I have used a method of working in focused and uninterrupted blocks of time. At first I experimented with working for 50 minutes at a time, followed by a 10 minute break, and a longer 30 minute break every 2 hours. Lately I've found the Pomodoro technique with its shorter 25 minute bursts of work, followed by 5 minute breaks, quite efficient. Especially when having to do something that is difficult to get started with.

However, one major difficulty with this kind of periodization is how to really detach yourself from the task at hand when it's time for a break. How to, e.g., take your mind off cognitive work and do something else. I have tried listening to music, doing a few push-ups, a bit of housecleaning etc., but these activities tend to require so little attention that most of the time work creeps into consciousness anyway. This is not good, as it effectively diminishes the restorative power of the break.

Another issue is that 5-10 minutes is too short a time to really do much. Go to the toilet and drink a glass of water and the time's pretty much up.

Luckily, I think I have found the solution to really improve the potential for recovery during those breaks, and it's called Angry Birds*. Here's why:

1) Angry Birds takes your mind off work

Brain is like a muscle. When extorted it gets fatigued. As with self-control and the ability to make decisions, there are limitations to the capacity to do demanding cognitive processing. Like a car using fuel to run, you also have limited resources that become depleted during intense concentration and thinking. (1, 3)

One way to ensure that you won't run out of steam in the middle of a workday is to track your use of time, and within steady intervals switch from work-mode to recovery-mode. The most important thing in successfully doing this is to push all work and task-related thoughts away.

The beauty of Angry Birds is that even if you only have 5 minutes for a break, it's enough to finish couple levels. More importantly,  Angry Birds, Bad Piggies, Where's My Water, Cut the Rope, and other similar mobile games, are quick to start and require just the right amount of thinking to take your conscious thoughts away from work, but not so much that they become a further drain to your limited mental resources.

2) Short breaks are equally, or more important for recovery, than long ones

There is some rather interesting evidence showing that even short breaks have significant positive effects when used in a way that takes your mind off the task at hand and make you feel good and, dare I say, happier.

Doctors who were primed to feel positive emotions  showed almost 3 times more intelligence and creativity than doctors in a neutral state. They also made accurate diagnoses 19 percent faster. (2)

In another study students were primed to feel stress by giving them a task to make a difficult speech under time-pressure, and told that the speech would be videotaped and evaluated by their peers. The subjects were then shown one of three short films; a neutral, sad, or a positive film. Those who were shown the positive film for just couple minutes recovered from the physiological effects of stress 3 times faster than those who saw the sad film, and 2 times faster than those in the neural condition. (3)

One more argument in support of short breaks is the finding that if a resource becomes severely depleted, it falls to a so-called "Burnout Range." When that happens, otherwise reliable restorative sources tend to provide significantly less restorative effect, and otherwise insignificant sources of depletion will cause significant resource losses. So take your short breaks now so you don't end up completely non-functional in the long run. (4)

3) Your subconscious mind will not stop working

An article in Harvard Business Review reported couple weeks ago about a study where participants had to make a complex decision. There were four cars from which to choose from. Each was described by 12 different attributes, and participants had to pick one that was the best match for multiple specified wants and needs. Only one of the fours cars was the "right" choice, having twice as many positive than negative attributes.

As stated in the article: "One group had to make a choice immediately. These people didn't do very well at optimizing their decision. A second group had time to try to consciously solve the problem. Their choices weren't much better. A third group were told the problem, then given a distracter task to do first — something that lightly held their conscious attention but allowed their non-conscious to do more work. This group did significantly better than either of the other groups at selecting the optimum car for their overall needs."

The real kicker was that the distracter task was no longer than two minutes, but it seems that even two minutes is enough to significantly boost your problem-solving skills.

There you go! Don't worry about time wasted, but squeeze in a few minutes of Angry Birds once an hour and you'll not only keep your cognitive performance at a higher level throughout the day, but also feel happier and more energized for it.

References:

(1) Muraven, M., Tice, D. M., & Baumeister, R. F. (1998). Self-Control as Limited Resource: Regulatory Depletion Patterns. Journal of Personality and Social Psychology, Vol. 74, No. 3, 774-789.

Vohs, K. D., Baumeister, R. F., Schmeichel, B. J., Twenge, J. M., Nelson, N. M., & Tice, D. M. (2008). Making Choices Impairs Subsequent Self-Control: A Limited-Resource Account of Decision Making, Self-Regulation, and Active Initiative. Journal of Personality and Social Psychology, Vol. 94, No. 5, 883-898.

Baumeister, R. F., Bratslavsky, E., Muraven, M., & Tice, D. M. (1998). Ego Depletion: Is the Active Self a Limited Resource? Journal of Personality and Social Psychology, Vol. 74, No. 5, 1252– 1265.

(2) Achor, Shawn (2011). The Happiness Advantage. [Kindle Edition] Virgin Digital.

(3) Fredrickson, B. L. (1998). What good are positive emotions? Review of General Psychology, Vol. 2, No. 3, 300-319.

(4) Greenblatt, Edy (2002). Work/Life Balance: Wisdom or Whining. Organizational Dynamics, Vol. 31, No. 2, 177-193.

* None of the links in this article are affiliated. These referrals are my own recommendations, and I do not get any compensation for making them.

Thoughts, ideas, and freeing your mind

It has been a long time since my last article. I have found excuses to keep me from writing, afraid that I wouldn't have anything to say. But each journey begins with the first step, and for me the first step seems to be the most difficult one to take. After that my mind starts to work on its own and words flow through my fingertips. I hope you enjoy my incoherent ramblings! 

Emancipate yourselves from mental slavery;
None but ourselves can free our minds.
- Bob Marley

Thoughts have power, moreso when followed by action. And action is rarely present without the thought. You don't just get out of bed in the morning and go to work like a robot who has no say on what it's programmed to do. You think about what needs to be done before leaving the house, and you may even stop to think why you are going to work. Maybe you're saving money for a vacation, or maybe you feel like you are helping to make the world a better place through what you do for a living. In any case, you did not just end up where you are, but you rather got there as the end result of countless actions; actions preceded by thoughts.

Thoughts have power to manifest themselves in physical reality. The Wright brothers thought that a flying machine can be created. They believed it to be possible, even though the idea seemed ridiculous to others. But then again, it was the Wright brothers who created the world's first airplane. It was not someone who thought it couldn't be done.

Edison thought that it is possible to create light in a controllable way with electricity. He believed it so much that he famously invented 10 000 ways how to not create light before coming up with the lightbulb. What if he would have quitted? What if he would have buried his head in his hands in defeat, saying that "it is not possible" and fully embraced that thought?

Edison's lightbulb and the airplane of the Wright brothers did not exist in observable reality. They were literally born out of intangible ideas, and by taking action these men were able to turn their ideas into physical reality. Ideas and thoughts behind these inventions existed before their physical manifestations.

Our thoughts, beliefs, and how we see our relationship with the outside world provide a framework through which we operate. And our belief in what is possible and what isn't is a direct result of how that framework is built. For many people that framework was structured in a way that prevented them from even thinking about the possibility of a human being walking on the moon. But there were some with different frameworks. Some people thought it could be done, and believed in it, and it became reality.

Here is the kicker: that framework has your mind on a short leash. Since childhood that framework has been built in a way that certain things are taken for granted; as a truth that should never be questioned. This has lead most people to succumb to the notion that life is a fixed pattern of birth-childhood-school-work-retirement-death, and as a result they aren't able to see it for what it is: just another idea.

Consumerism is another example. It has become such an ingrained part of our thinking of how life should be that most people keep on creating artificial wants and needs; they buy this and that in pursuit of fleeting moments of happiness and excitement. I don't think many of them have stopped to question the origin or motives of this kind of behavior.

How the culture or the society wants us to live our lives is not a physical object that you can touch and observe. It is something that has gotten into our minds already at an early age, and then entangled itself to the framework. After you realize that these are just ideas, you begin to see you don't need to act upon them unless that is what you truly want.

This is what seeing things differently means. You can dismantle the framework that other people take for granted, and identify where it serves your purpose and where it is better to be reshaped or torn down altogether.

If you adopt this mindset you start to notice some interesting things around you. Take manners as an example: What we consider to be 'good manners' is simply one kind of behavior among other behaviors. That behavior in itself does not carry any value or any notion of 'good' and 'bad'. It is the framework in our heads that provides the context through which we observe and judge whether a certain behavior fits inside our concept of 'good' or 'bad' manners.

I think here lies the essence of an entrepreneur. They are, by definition, people who have an ability to question things that others take for granted, see them differently, and evaluate their worth. They are not limited by what others think can or can't be done. They have the ability to decide for themselves which behaviors provide value and which ones are better to get rid of.

For most people the framework is a master who needs to be obeyed. For entrepreneurs and other creative minds the framework is a tool. And if that tool is wrong for the purpose or task at hand, it needs to be changed.

In which group you belong to?

We have failed to fail

One common topic of discussion we have had this fall at the Aalto Entrepreneurship Society events is how fear of failure is one of the biggest obstacles stopping people from starting their own businesses. Some are concerned about their financial security and what would happen if the business fails, but on the other hand the steps that can be taken to minimize the financial impact of failure are rather simple. For example; don't quit your day job until you have some idea about the feasibility of your business, and make sure you have enough savings to last 6-12 months with no other source of income.

I dare say, that the financial side is not the real issue here. It is the culture, especially here in Finland. It is the fear of how others will see you if your business fails; the social pressure. We do not have a culture that celebrates those who try and fail - frankly, in Finland the ones who try and succeed are probably hated even more. Jealousy runs deep in our veins.

It is easy for the government to say "we need more entrepreneurs", but much harder to change peoples attitudes towards those who take the leap to pursue their dreams. So it is not very hard to see why we have so few truly ambitious startups.

Why is it then such a taboo to fail? I think the problem can be traced back to the way we have been educated. Ever since the first grade we have been taught that there are only two types of answers; the right and the wrong. And if you don't have the right answers you will be scowled at by your teacher and by your parents, you will not be successful, you will not get into a good university and you will end up having an unappreciated job.

From a very young age you are conditioned to provide the answers you think the other party (your teacher, boss, or parent) wants to hear instead of just having a go at it, and trying to come up with alternative options. Your brain becomes more of an information silo where everything is organized and filed to provide off-the-shelf answers. In the process, however, you also start to lose your creativity, and the ability to form new connections between different ideas and information.

The reason I brought up entrepreneurship at the start of this post is, that the capability for creative thinking is where the money is made. The vast majority of people only have generic answers that every single one of their peers have also learned at school or by following what others are doing. Successful entrepreneurs, by nature, have a different view on the world. They are the ones who have the creative ability to combine apparently unrelated things into something wonderful.

Every year worldwide more and more people are graduating with university degrees, so how are you going to differentiate yourself from them? Why should a company hire you when so many others have exactly the same education? Is it a wonder, that the most valued employees today are those who can come up with creative solutions and make them happen?

In one of my all-time favorite TED talks, Ken Robinson is making a case about how difficult it is to teach children in the modern world when it is changing at such a rapid pace. How can you educate someone who starts school now and will enter working life in 15-20 years? How do you know how the world is in 20 years when you can't even tell what it looks like in 5 years? And yet you are supposed to provide education that prepares for this unpredictable future.

With so much uncertainty it is even more important to nurture creativity, and to get rid of this mentality of right and wrong answers. We simply do not know yet what the future challenges will be, so the best tool to face those challenges is the extraordinary human capacity for creative thinking.

Failing at something should be celebrated instead of frowned upon, and the mindset that we need is not how to avoid failures, but how to learn from them. Anyone who has ever studied or tinkered with something on their own knows that the best way to learn is to actually do it, make a mistake, find out what went wrong and learn how to avoid it the next time. Unfortunately, the current form of education is not cultivating this approach.

The brain is like a muscle, creating new neural pathways the more you use it and the more you apply what you know in different ways. Intelligence is not a static quality you're born with, but something you can nurture. You won't, however, be giving your brain the exercise it needs by simply memorizing information that someone else has prepared for you. Don't be so concerned about being right or wrong, but instead have the courage to take a shot and be creative!

"An expert is a person who has made all the mistakes that can be made in a very narrow field."
- Niels Bohr, Nobel Prize winning physicist