ARE YOU SURE YOU WANT TO DO THIS?
Of course I know what I’m doing! What could possibly go wrong?
—Ralph Kramden in almost every episode of The Honeymooners
If you knew the odds against creating a successful innovation, you’d never pursue it. If you are trying to extend an existing product line, you have a reasonable chance of success. But if you are trying to create something new, it is a totally different story.
Out of every hundred ideas, only one can be considered a good idea, an idea that has a chance of becoming a reality, whether you are starting from scratch or working inside an established organization.
Out of every hundred good ideas, only one is worthy of pursuit, of building a new company or division around.
Of those hundred start-ups, perhaps only one will be considered successful.
So, your odds of hitting a grand-slam home run are 1:100 3 1:100 3 1:100, or only 1/1,000,000. When the odds are literally a million to one, why even step to the plate?
And if you do step to the plate and try to get under way, you are bound to get depressed. The beginning stage of invention is the worst . . . and best of times.
Even as I write this I find myself in the start-up stage. I am always trying to start a new company. And now that I have the extreme sporting goods superstore and the consumer electronics product that I mentioned in the introduction well on the way to market, I want to do it all again. But I have no idea what idea I will pursue, and while I’m trying to figure it out, I know that the odds are stacked incredibly high against another success.
While I wait, I worry.
• What happens if I can’t create a good idea?
• Or raise the money?
• Or hire great people?
• Suppose ten other people are already working on the same concept and beat us to market?
I’m starting to sweat just thinking about it.
But on the flip side, the beginning stage is also the most exciting. You can go in any direction. Maybe you’ll become the greatest inven- tor since Thomas Edison or more powerful than Bill Gates (unlikely, but still . . .). Perhaps you’ll create a company or even an entire indus- try that revolutionizes the world. Man, the beginning is an exciting time.
I guess that’s why I keep doing it. I’ve helped create dozens of products and three separate companies, and I’ve invested in over a dozen early-stage companies. ICC was our first start-up; it helped pioneer the PC software industry by, among other things, making it possible for personal computers to connect to corporate mainframes. Sounds pretty boring now, but twenty years ago, it was voodoo!
ISS, with revenues over $200 million, is a leader in the security software space, serving more than nine thousand corporate clients worldwide, including forty-nine of the Fortune 50, ten of the world’s largest telecommunications companies, and major agencies and departments within United States local, state, and federal governments.
And then there is DoubleClick, which people tend to lump in with eBay and Amazon when they talk about successful Internet survivors. DoubleClick is the leading provider of tools for advertisers, direct marketers, and Web publishers to plan, execute, and analyze their marketing programs. To oversimplify, our online advertising, e-mail marketing, and database marketing solutions help clients yield the highest return on their marketing dollar and also helps them measure performance within and across channels. We now employ more than fifteen hundred people in twenty countries.
Today I spend most of my time helping to start other new companies. Dave Strohm, a general partner at Greylock (a venture capital firm that helped fund both ISS and DoubleClick), described me awhile back as “a serial entrepreneur.” I never pictured myself that way, but when I thought about it, I realized that, as usual, my friend was right.
Back in 1983, when I cofounded ICC, I had barely heard of the word “entrepreneur.” Not only did I not know any entrepreneurs, I didn’t know how to spell the word. (I think I got it right in the last sentence. I still have to spell-check it to make sure.)
Whether you are trying to create something new or innovate within an existing company, the steps are the same—and there is a process that will allow you to do it faster, cheaper, and better.
A lot has changed in the past two decades, and I now talk to a lot of people who are thinking about starting companies or who have just started companies. In addition, I frequently meet people who want to become “intrapreneurs” (an ugly buzzword for an interesting process) and create new products and/or implement ideas inside the established companies for which they work.
Over the past few years, as I talked to these people and we traded stories about what we have done and hope to do, many of them told me I should write a book. As DoubleClick got more and more press, publishers got the same idea. I started receiving phone calls from editors who would ask me to write something about the “secrets” of starting a (technology) business.
I was always flattered, but I always said the same thing: I didn’t have time. I was then CEO of DoubleClick, and I told them I needed to focus on running the business. (What I didn’t tell them is that I knew writing a book is a horrible return on investment.)
Well, two years ago I handed over my CEO duties to Kevin Ryan, and while I’m still chairman of DoubleClick, I have a little more time on my hands.
WHY YOU SHOULD KEEP READING
I’m writing this book because there’s been so little good stuff written about innovation and how you bring an innovation to market. I’ve found that most of the books out there simply talk about the importance of innovation, but not about how to do it. Or they tend to focus on ways you can increase your creativity—some of the stuff by Roger von Oech, such as A Whack on the Side of the Head, is good—but nobody, including von Oech, tells you either how to be creative systematically or how to bring your ideas to market.
Getting my process down on paper is why I wanted to write this book. In doing so, maybe in some small way, I can accelerate the innovation curve and we’ll all live a little bit better. This process will help you avoid the numerous mistakes I made along the way (I will recount them in detail, so you know exactly what not to do). I know it can help you, because the process I describe here is the approach I followed in creating three separate successful companies and dozens of products.
As counterintuitive as it sounds, I think you can innovate methodically. You can force innovation. There is a process you can follow to improve both the number and the quality of ideas you can come up with.
I know this is true, because it is exactly what I have done in creating dozens of successful products. I’ve been a student of innovation for twenty years, and because I was never in a position to let the proverbial lightning strike me—I have too many obligations to wait for that, and even if I didn’t, I don’t have the kind of temperament that would allow me to wait for things to come to me—I needed to figure out a way to force innovation. It’s that process of forcing innovation that you will learn about here, a process that I developed by trial and error over two decades and that has been refined and proven over time in a number of different industries.
I only wish Thomas Edison had better documented his serial approach to innovation. I’ve always loved and agreed with his famous quote “innovation is 1 percent inspiration and 99 percent perspiration,” which reinforces my belief that innovation can be forced. Edison would find a problem and work his ass off finding the best solution. That’s what we’re going to try to do here.
What’s in it for you? This isn’t a get-rich-quick book. If you are looking for that, put it down now and go buy some lottery tickets. The only people who get rich from those kinds of books are the people who write them, from consulting and speaking fees. I always strive to create companies and products that solve real problems, generate profits, and stand the test of time. I love technology and innovation, and I’m fortunate that I now get paid for what was once only a hobby: creating new ideas.
This book is targeted toward anyone who wants to innovate by:
• Creating something new from scratch—developing new products or services, or making existing processes more efficient within an existing organization. (I believe there are a lot of commonalties between a successful innovation within a company and a stand-alone innovation. In both cases, you have to create the idea; put together the strategy; get money; recruit the right people; and bring what you have to market, even if that market is internal. As you will see, the process you use is nearly identical.)
• Making something better. Organizations either innovate or die (to be replaced by firms that have figured out how to improve a product or service or solve a need).
In short, this book is designed for those people who share the passion and entrepreneurial urge to come up with a new idea and do something about it once they do either by starting a new company or improving an established one.
So why should you listen to me?
I’m not a Ph.D. I don’t even have an MBA. (I’m University of Michigan class of ’83, bachelor of science in electrical engineering.) I’m not a consultant. And there are plenty of examples of people who have been far more successful entrepreneurs such as Thomas Edison and Bill Gates, two people I have tried to learn from.
Thomas Edison was one of the few people to create multiple inventions that not only spawned multiple industries but also radically changed our world: the incandescent lightbulb, the phonograph, and the motion-picture camera are three quick examples. Edison didn’t chase “cool” technology; he focused on solving societal problems.
I think the best lesson I learned from watching Bill Gates is what I call “incremental innovation.” Microsoft seems to believe that there is no way to truly learn about a market unless you are in it, and the best way to get into a market is to release a product. Their first version of a product is rarely the best, but through hard work and incremental innovation, they end up dominating many of their markets. Which of course leads to other problems . . . but that’s not important here.
I’ve always tried to learn as much as I can from reading about innovators like Edison and Gates. Yet in all my reading, I couldn’t find a common denominator among the best innovators, and that frustrated me. The biographies are more about what they did than how they did it. I wanted to find an approach that was reproducible. Of course, no approach can guarantee success, but I thought there had to be ways to increase your chances.
My metaphor for this is baseball. (I don’t particularly like the sport, but the images work.) Let’s say your goal is to get a hit off a Major League pitcher and you are a so-so athlete. What would you do?
Well, you might go up to the plate and give it your best shot. You could swing from the heels three times, and who knows? You might actually hit the ball, it might go fair, and you could get a hit.
But while it might happen, I think everyone would admit that the chances are pretty slim.
If you wanted to improve your odds, you’d probably focus on the fundamentals of hitting. You’d first learn how to swing the bat properly. You might start going to a batting cage, then work your way up to having good amateur pitchers throw to you. You’d study the pitcher you were about to face to figure out how he threw and to get an idea about what worked against him in the past.
Would all this guarantee success? Of course not. But if you focused on the fundamentals, it would improve your chances dramatically.
That is exactly what this book is about: improving your chances for success. You could go off and wildly try to create something new, and you might very well be successful. But the more you can develop a systematic plan that can improve your skills—and steer you away from problems—the better chance of success you will have, whether you are working inside an established company or starting something on your own.
So think of this book as a form of batting practice. It will let you focus on the fundamentals, the things you will need to do successfully. There is nothing more important when starting a company than to focus your full attention on the core fundamentals that will either make or break you. Too often people focus on things that simply don’t matter, or they waste their time trying to find answers to questions that can’t be answered. In every start-up or attempt to innovate within an existing organization, these are the fundamental issues that deserve your full attention:
1.Creating a large number of viable ideas
2.Picking the right idea to pursue
3.Creating a highly focused strategy to bring the idea to market
4.Getting the money to fund the strategy
5.Hiring great people to implement the strategy
And that’s pretty much it. Everything else you do outside these five areas might prove to be a total waste of time. If you get the five things right, you improve your chances of success dramatically. If you get one of the five things wrong, you’re not going to have much fun, because your new idea will fail, and that is no fun at all. You need to do all five things well.
Based on my own experiences and what I have learned from others, I have developed and refined innovation techniques over the past twenty years. These techniques work. That’s the only conclusion I come to when I look back to find commonalities among the companies I helped to create, companies that now employ thousands of people and have generated many billions in shareholder value. While you can get lucky once, luck can’t be the only explanation for my helping to create three successful companies and dozens of successful products.
I started down the innovation road a long time ago. One of the chores I had while I was growing up was taking out the trash. Every night I’d take out the garbage, and every night this huge raccoon would come behind our house, flip over the garbage can, and strew the garbage everywhere. Of course, I had to clean it up.
After trying lots of different ways to keep the garbage can from tipping over—none of which worked—I came to the conclusion that either I had to kill the raccoon or scare him off. You had to see this raccoon to appreciate the problem. They grow them big in Michigan. This animal was gigantic.
I love animals, so killing the world’s largest raccoon wasn’t an option. But something I had learned earlier was.
A few months before, I had accidentally discovered, as part of a different experiment, that if you touch a battery to the input leads of a television transformer, you generate thousands of volts of electricity that will hurl you across the room.
Armed with this painfully acquired knowledge of electricity, I rigged a trap involving a much smaller source of electricity and smeared it with peanut butter. I did that for two reasons. Peanut butter is moist, so it’s a great conductor of electricity, and—equally important—raccoons love peanut butter. (To be honest, I think this raccoon would have eaten anything I put out.) When the raccoon stepped on the trap to lick the peanut butter, it would touch the leads to the battery and receive a shock.
I set out the trap that night, and we never had a raccoon problem again. (Before you write to People for the Ethical Treatment of Animals, let me tell you the raccoon didn’t die. He was just scared off. At last sighting, he was foraging a couple of streets over, where I am sure he found the garbage more to his liking.)
I continued my inventions after college. Right out of school in 1983, I cofounded ICC, the software company I mentioned earlier, with Bill Miller and Mike Schier. During my next nine years there, as vice president of research, I created and brought to market more than twenty products, mostly along the lines of terminal emulation products that would tie PCs into Burroughs and Sperry mainframes. We also developed file transfer software and many other related ideas. We grew ICC to about $35 million in revenue by 1992, then sold it to Digital Communications Associates (DCA), where I eventually became chief technology officer.
In January 1995, DCA merged with Attachmate. My new boss told me innovation wasn’t important, so I left to pursue the Internet, then a relatively unknown area. I was looking to start a company and searching for ideas. I soon met a twenty-year-old college dropout named Chris Klaus who had created a unique security software product that could search out, find, and recommend potential fixes to computer network security problems.
I invested $50,000 and worked more or less full-time for the next four or five months writing the business plan, recruiting people, selling, and raising money, using many of the principles that I will outline in detail in this book. Today ISS is a public company with more than a thousand employees who offer companies of all sizes a way to detect, prevent, and respond to ever-changing Internet threats across networks, systems, and desktops.
I had a great time at ISS (I remain on their board), but I really wanted to start something on my own from scratch. I was convinced the World Wide Web was the place to be (in the next chapter, I’ll explain the thinking that led me to that conclusion), so I teamed up with Dwight Merriman, who, like me, had gone from ICC to DCA. We came up with more than a hundred Internet ideas. To come up with potential businesses, we used the Brainstorming Prioritization Technique (BPT), which I will talk about in the next chapter.
As we thought of what we might do, our goal was simple: to create a huge Internet company. We didn’t have any other preconceptions. Our ideas ranged from a site that would rate the quality of products on all other sites to a search engine that would locate the websites catering to your preferences in porn. (As I said, we didn’t limit our thinking going in.)
One of the ideas we came up with—delivering extremely targeted advertising on the Web—became the foundation for DoubleClick, the company we founded in September 1995.
With DoubleClick, as with the other companies and products I helped to build, I followed the same general outline I’ll present in this book. I believe that this approach, which has worked for me, will work for you. It should greatly increase your probability for creating a successful venture.
This book won’t guarantee that you will succeed, but it should increase your chances.
I worded that last sentence carefully. I know that what I am advocating will increase your chances of accomplishing your goals, but I am not guaranteeing success. No one can. As I mentioned at the very beginning, if you really considered what is required to innovate successfully, you’d have to wonder why anyone would try to innovate at all.
WHY WOULD ANYONE TRY ANYTHING NEW?
If you are looking for a secure career choice, innovating within an established firm or founding a new company is definitely not the place to start. The odds are just too long. If you want proof of how hard it is, you don’t have to look any further than me. Even though I have figured out ways to increase my chances of success, I have had a number of misses. (“Misses” is a very polite word for losing all your investment.)
Here are some of my failures:
• A directory for professionals, similar to the Physicians’ Desk Reference for medical doctors, went bust.
• A college note-taking service went under when they couldn’t raise money in early 2000 after the public markets shut down.
• OpenMind, a revolutionary new groupware product, fizzled in the marketplace.
• I missed a huge opportunity with a remote LAN node (RLN) that I invented. RLN essentially allowed a PC to dial in to any local area network and act as if it were locally connected. (This is something we take for granted today.) We created the product when I was at ICC and never fully went after the market, missing a huge opportunity.
I feel marginally better about these misses when I consider that other innovators—people far, far more talented and smarter than I—experienced lots of failures as well. For example, Thomas Edison refused to patent his motion-picture inventions in the United States because he thought the fifty-dollar fee excessive. He patented them only in Britain: imagine the lost revenue! Albert Einstein never achieved his Unified Field Theory. The list goes on.
As you can see, there is no magic formula that will guarantee your chances every time at bat, even if you follow the ideas we are going to talk about here. But hey, even the most successful baseball players get a hit only one out of three times.
I’d love to be able to tell you the ten easy steps to innovation success, but they don’t exist—and if you ever find a book making that promise, don’t buy it. Success is a game of probabilities. By focusing on the key elements required to innovate successfully, we can hopefully increase your chances.
And that is what you have to do, try to increase your probabilities, instead of hoping for the best. Luck is great anytime you can get it, but the idea that you will be able to create a successful business randomly is as probable as winning the lottery (or, to go back to our previous metaphor, as probable as hitting a Randy Johnson fastball without any serious preparation).
If you apply this system, it’s just like taking a lot of batting practice—your odds will go up.
In the next six chapters, I’ll go through all the steps for creating something out of nothing. Though I won’t spend a lot of time on it, I’ll also show you how many of these techniques can be used to solve all sorts of business or even personal problems. The approach will work on any problem that requires an innovative solution.
While not everyone who applies these principles will be successful—in fact, few of you will—I’d love to hear about both your successes and failures. Please e-mail me at firstname.lastname@example.org.
IT’S ALL ABOUT TIMING AND APPROACH
I believe there are three key factors that determine if someone will innovate successfully:
1.Genetics; that is, you were born with a willingness to put ideas into action
This book focuses on timing and approach, because I don’t think there’s any way to change your genetics. The other two factors can help you enormously, but they cannot completely compensate for an internal drive to create. That is something I learned early on.
I had a dream when I was fifteen to win an Olympic gold medal in wrestling. I worked my ass off in high school to become a great wrestler. I lifted weights. I ran. I practiced long hours. The result? I turned out to be a good high school wrestler. But there would be no gold medal for me in the Olympics.
At the same time, there were others (you know who you are) who did half of what I did but went on to greatness in wrestling or some other sport. I didn’t have the genes to be a great wrestler. (Obviously, it was all my parents’ fault.)
But I think I was born an inventor. From my earliest memories, I was ripping apart and building things, and I have always looked for ways of doing things faster and better. For me, inventing is a hobby. I can’t believe I get paid for it.
Do you have to be a natural inventor to be an entrepreneur or someone who can innovate effectively? I don’t think so. Even though I never won the gold in wrestling, I still had a respectable career, and I was certainly far ahead of people with similar genetics who didn’t work as hard. However, if you do have the natural ability, it raises the probability that you’ll be successful. Still, everyone can improve.
As for timing, I firmly believe that big trends create big opportunities. When I look back on my own successes, I see that they all evolved around the three biggest tech trends over the past twenty years: personal computers, computer networks, and the Internet. (How you can spot trends of this size is part of what we will talk about in the next chapter.) Timing is certainly important. You want to have the best solutions to a problem—first, if at all possible. Life is much easier if you are first with the best solution. We’ll talk throughout about how you can improve your timing.
As for approach, that’s the focus of the rest of the book.
HOW THE BOOK WILL LAY OUT
A lot of people think that coming up with an idea is the key when it comes to innovation. It’s not. The idea is important. But ideas are cheap. You have to come up with a lot of ideas and then pick the right one, the one you will focus on exclusively. The problem with good ideas is that you can come up with any number of them and get pulled in all directions. You need to concentrate. That is what the next chapter is about: How you can winnow down all your ideas to focus on the one that offers the greatest chance of success.
But you just don’t need to have a lot of ideas to choose from to be successful. With every important decision, you want to have many options. The more options, the better the probability that you are picking the best alternative. The next chapter deals with that as well.
Every successful business must solve a problem or fill a need. The word “need” is important. Customers, whether you are selling to consumers or business to business, will pay to have their needs met. They may or may not buy the things they want. So, in the first version of your product, you must concentrate on customer needs. Don’t try to satisfy their wants until the second or third version of your product. We will go into all of this is in detail in chapter 2.
Technology is increasingly becoming the critical component for delivering the best products and services at the lowest cost. When you apply the best technology to the biggest problems, you have the largest chance of success. (Your new idea doesn’t have to have a huge technology component, but you will have more ideas to choose from if it does.) So creating products that satisfy customer needs—using technology to leverage that product whenever possible—is your starting point. With an idea firmly in place, and your vision locked in on what you are and, more important, are not going to do, it is time to implement your idea. That involves strategy (the subject of chapter 4). Strategy is everything you need to do to bring your idea to market and be successful. Usually, there are only these few things you really need to do, so the more resources and time you can focus on these few things, the greater your probability of success. In this chapter I will practice what I preach and concentrate on only the tasks you need to do, such as positioning your idea correctly; pricing it right; selling it well; and promoting it effectively. As you will see, your business plan is your strategy document.
Strategy in place, there are a lot of other things you could do, but there are two more things that you must do: determine how to get your necessary funding, and find the right people to hire to make your innovation a reality. These are the subjects of chapters 5 and 6.
My thoughts on money are pretty simple: raise three times more than you think you could ever possibly need, and do it at a time when you don’t need it. Of course, that’s a lot easier said then done as I sit here trying to help two consumer-product companies raise money during a terrible recession. We will talk about the progression you should follow in raising money, how you start by putting just about everything you own at risk, and going from there. We’ll go through it step by step.
Hiring people is another area where innovators—and everyone else—tend to make things more difficult than they need to be. The key is to hire smart “athletes.” As you will see in chapter 6, I’m not literally talking about hiring the captain of the Stanford football team—although I certainly would try to get him if I could—but you want people who are bright, understand the need for hard work and for teamwork, and don’t quit until they win. We will discuss why this is the case and more important, how to find these people.
And that’s about it. I think we all make business a lot more complicated than it has to be. The secret, if there is such a thing, is to concentrate exclusively on the things you need to do and ignore everything else.
You’ll notice that I talk a lot about what needs to be done, and I think this is probably the most essential point of the book: There are only a few things that need to be done to create a successful company, so focus all resources on just these needs.
Now let’s start talking about how you can do just that.From the Hardcover edition.
Excerpted from The Map of Innovation by Kevin O'Connor with Paul B. Brown. Copyright © 2003 by Kevin O''Connor with Paul B. Brown. Excerpted by permission of Crown Business, a division of Random House LLC. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.