Andres Sadler: Wolters Kluwer is always looking for ways to raise the innovation quotient within our company. We innovate around products, business models, and customer needs. In 2011 we held a successful Innovation Tournament at our Senior Management Council and Leadership Forum attended by 200 executives. This tournament produced interesting ideas. In 2012, our goal is to extend this process to all 19,000 staff by launching a companywide Innovation Tournament. Dr. Ulrich, you’ve written a book on this topic. What challenges do you find companies like ours face?
Karl Ulrich: When you say we need to be more innovative, one of the key questions is who do you involve? How broadly do you cast the net? You need to reach individuals at all levels in the company who can share innovative ideas. Then you need to decide how to filter the ideas so the good ones rise to the top.
Andres: We need to involve people who are close to the customer to bring innovation to the core of our company, don’t you agree?
Karl: I absolutely agree with that. A primary uncertainty you’re trying to resolve with innovation is - how real is the need? How many customers have this need, and how deep is the pain that they feel. And if you can resolve that uncertainty, how can you create a solution for them?
Andres: Exactly, we need to understand our customers to be able to create the right solutions. Tell me, what’s the real potential of an Innovation Tournament?
Karl: Imagine if you could get 15 minutes of attention from each employee dedicated to innovation opportunities. Just imagine they could think of two ideas each, right? Imagine the possibilities! You’d be at 40,000 ideas or something like that. I mean, it would be a remarkable achievement, and that’s what’s so powerful about engaging the whole organization in an Innovation Tournament. You’re essentially deploying this huge number of parallel independent exploration activities and saying: “hey everyone, come back and tell us what you found.” The wealth of diversity that results from that parallel exploration is very powerful.
Andres: How do you allow for the fact that many of the ideas suggested won’t in fact make it? For every good idea worth pursuing, there can be thousands that are not.
Karl: Say you’re thinking about running a pizza restaurant and you have your choice between making 100 really good pizzas every night or making 99 inedible pizzas and one pizza that is so fantastic that it’s the best pizza in the world. Any rational operations manager or small business owner would choose making 100 pretty good pizzas every night, but that’s the wrong answer in innovation, and that’s because you don’t have to eat the pizza in innovation. It’s inexpensive to throw away 99 bad ideas if you’ve got one great idea, and so that requires a different kind of managerial thinking which says it’s okay to have a lot of variance, it’s okay to have some good ideas and some bad ideas as long as we have an efficient process for identifying which are the best ideas.
Andres: Others have succeeded with Innovation Tournaments. I believe Merck tried 10,000 different compounds and just one of those eventually made it to a drug that paid for all the other ideas that didn’t make it. That’s the power we have to incorporate within our organization. And there are other examples of successful tournaments?
Karl: Indeed. Netflix ran a tournament to see who could improve the prediction of which movie you should be serving to what customer next and improve that by 10%. It took one-and-a-half or two years to get to the winner. They had a leader board, and it became a badge of pride as to where your team was on that leader board. There was some fascinating behavior that came about because of that. One of the things that happened was that the winning team collaborated with another team.
Andres: So, in summary what you’re saying is that the methodology you propose for an Innovation Tournament is as follows: Instead of trying to determine ahead of time the few areas that are worth dedicating time to and trying to figure out a priori those that we should shepherd through the process, the power is in the number of ideas and there is a benefit from just having a lot of ideas coming through.
Karl: Exactly. The central idea behind an Innovation Tournament is to generate or identify a large number of raw opportunities and then to apply one or more development steps and filters to those opportunities until eventually you’ve identified the exceptional few.