Monday, April 9, 2012

Strategic Planning Analogy #445: Stifling Creativity

Several years ago, I was reading a book review on a book about creativity (I forget the name of the book). The book stated that there tend to be two approaches used by creative people. The book used Orson Welles as an example of the first approach. Orson Welles had great success early in his career with works like “Citizen Kane.” The greatness of his early works set a high standard that Welles wanted to continue. As a result, he often abandoned projects early because he didn’t think the projects would end up living up to his high expectations. Net result? Orson Welles’ finished creative outputs over his career were disappointingly low.

The other type of creativity was illustrated by an opera composer, whose name I have forgotten. Unlike Welles, he was very prolific. He wrote a large number of operas. The secret behind his large output of operas? He did not pre-judge them. Over time, he had found out that some of the operas he originally thought would be mediocre turned out to be rather good. And some of the operas he originally thought would be great turned out to be mediocre. As a result, he pursued them all, not knowing which would be great. So the quality level varied in his output, but it did result in a number of very good operas.

I have seen a similar situation in my own music writing. My initial impressions of the quality of the music early in the composition process are not well correlated to my final impressions after the composition is completed. Therefore, following in the processed used by the opera writer in the book, I pursue them all (at least until they are roughly fleshed out).

A significant part of strategy formulation is creative. Yes, the creativity is built within a context of knowledge. But merely gathering knowledge of the marketplace is not enough. To win in that marketplace, you need to create a winnable position. Many of these winnable positions are based on new propositions and business models which did not previously exist. They had to be created.

Think about Apple. Its success has not been based on Apple’s superior ability to gather data. In fact, Steve Jobs didn’t do consumer research. Instead, Apple’s success came from superior creativity in product and business model design. They created strategies which did not exist before, like the entire ecosystem surrounding its “i” products—the device, the software, the usability, the interconnectivity, the App Store, the Apps, the Apple retail store, and so on. This was very creative.

Given the importance of creativity to strategic success, it is worth examining the book referred to above. The book contends that depending on one’s approach to creativity, one can either enhance one’s output or stifle it. Let’s make sure we pick the right approach, so we don’t stifle our potential for success.

The principle here is that great innovative strategies as originally conceived often tend to initially look like craziness. And if that initial impression of craziness scares you away, you will never find the nugget of genius within the initial thought which leads to strategic greatness. Therefore, we need to be less like Orson Welles and more like that opera writer. We need to give those raw initial ideas a chance to grow a bit before we pass judgment on their true level of craziness.

In particular, there are three key points to keep in mind.

1. Living in the Shadow of a Great Legacy
Orson Welles lived his life in the shadow of the great legacy which came from his early success. He felt so much pressure to surpass his early success that he found it difficult to start anything new later in life.

The same thing can happen to businesses. A great legacy business can cast a large shadow over the future of a company. The legacy business is huge and is throwing off boatloads of cash. There is great pressure to only come up with strategies which can quickly surpass the success of the legacy business.

Unfortunately, new businesses often start small and consume cash in their earlier years. That doesn’t look good when compared with the legacy business, so the new idea is not pursued.

This is what happened to Kodak. They invented digital photography, but their analysis showed that digital was a less profitable business model than the legacy film development business. Therefore, they did not aggressively pursue digital photography. Why destroy a great legacy business with an inferior profit model? That’s crazy, isn’t it?

Well the problem is that somebody will come along who does not have that large legacy business casting a shadow over them. They will be happy to make the profits available in the new business model and turn the legacy businesses into extinct dinosaurs.

The old record labels let their legacy analog businesses prevent them from aggressively pursuing the less profitable digital downloading of singles. Apple had no legacy music business, so they were willing to go after it.

Look at those exciting new social media companies. They aren’t coming from companies with great legacy businesses, because the early analysis of these ideas doesn’t show an easy path to profits.

But those ideas could have come from legacy companies, if the companies could have gotten out from under the shadows of their legacy business (which will eventually become an extinct dinosaur). Don’t get trapped by earlier success like Orson Welles.

2. Abandoning the Absurd too Early
Initial impressions aren’t always correct. As the opera writer discovered with his music (and I discovered with mine), the final output can often surprise you (both favorably and unfavorably). If you stop development too soon, you may kill a great idea before it has a chance to blossom.

Innovative ideas initially look crazy because they are so different from what people are used to and comfortable with. If you eliminate those types of ideas, all you are left with are minor variations on the status quo. You cannot radically reinvent the status quo with ideas that are only minor variations on the status quo. And without a tolerance for a little initial “uncomfortableness”, you will never be able to escape the status quo. You are stuck.

That is why I do not like to condense the entire creative part of strategy formulation into a one-week strategy off-site meeting once a year. That is not enough time to get beyond that initial uncomfortableness and discover the great strategic breakthrough. Great ideas will be tossed away too quickly, because not enough time was given to flesh them out.

Google has all sorts of experiments and idea incubations going on all the time. Sure, not all of them are winners, but that’s how you come up with the next Android idea.

I like to use a process I call the “illogical extreme.” The idea is to push the limits of an idea to the point of ridiculousness and then slowly walk the idea back towards the status quo until it starts to look good. That way, you find the sweet spot between being too far away from the status quo and being too close to the status quo. This takes time.

Remember, just because the first draft of an idea looks crazy does not mean that the final draft will be crazy. Take the time to try a second or third draft before abandoning an idea. You may be surprised about how good that last draft can be.

3. Knowing when to Focus.
Not all surprises are good, however. Sometimes a seemingly great initial thought can lead nowhere. Some of those operas which initially seemed fantastic did not pan out. Therefore, not all ideas should be followed through to completion. Yes, spend enough time in thought and incubation in order to get a more informed point of view. But eventually narrow the focus to the few ideas with the greatest potential.

If you try to go down every path, you will never excel in the execution of any path. And you will quickly run out of time and money. And you will confuse the customer about what you stand for.

Therefore, narrow the major efforts to a small number of high potential initiatives, chosen from among the broad-based, but small effort, incubations going on all the time.

And if a major initiative eventually turns out to be a bomb, it is okay to retreat and start over again. Netflix quickly discovered that their idea to split the company and drastically raise fees was a bomb and smartly retreated. Don’t let your ego keep you from admitting mistakes. After all, you can’t fix a problem until you admit you have one.

Strategic planning has a significant creative element within the process. To ensure that the creative effort is allowed to create enough great ideas, one needs to avoid prematurely rejecting anything that initially sounds a bit crazy. Keep in mind that a legacy business will not last forever and if you don’t replace it, someone else will (often with an idea you rejected). Also, remember that it takes time to figure out which ideas truly have merit. Initial impressions can be wrong, so don’t be too hasty. Finally, if an idea goes bad during execution, it is okay to retreat and start over. Mistakes are only bad if you continue in them and do not learn from them.

A few losers don’t look so bad if they are surrounded by many more great successes. And sometimes the only way to get all those great successes is to take the risks which lead to a few losers. Doing nothing, in order to prevent any losers, also prevents any winners.

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