Why Outsourcing Innovation Makes Sense
July 22nd, 2009 | Posted by innovEarlier this year, BusinessWeek asked readers how they would advise their boss to boost innovation internally. Only 3% of the 614 respondents said they would hire an outside innovation and design firm. In fact, hiring an outside firm was the least popular solution. (Other options included internal crowdsourcing, which got the most votes, or hiring a chief innovation officer.)
Faced with this alarming reality, design and innovation companies have been forced to hustle. The innovators have had to innovate themselves, to tailor their pitches to acknowledge clients’ straitened circumstances and show they’re not themselves a luxury. One way to do that: to make the case that companies should use them to get a head start on developing new products and services for the post-recession marketplace.
“Some [clients] were hit hard and are hunkering down. But crisis is a great opportunity. If it will take years to show results, [they] might as well start now,” says Dev Patnaik, founder and chief executive of Jump Associates, a San Mateo-based consultancy with clients that include Nike (NKE) and Target (TGT). Patnaik says that business started to pick up again in the end of the second quarter.
Boeing (BA) has worked with the Seattle-based industrial design firm Teague since 1946. “I’m sure Teague would be quick to tell you Boeing‘s spending on design has been reduced in recent months,” says Klaus Brauer, the former director of Boeing’s Passenger Satisfaction & Revenue for its commercial airplane business. During his tenure there he spent seven years working with Teague on the interiors of the 787 Dreamliner, retiring earlier this month. “But reducing is very different from dropping outside design and innovation consulting altogether,” says Brauer. “You have to preserve your capability to come back.”
The idea of outsourcing innovation might seem counterintuitive to the pressures of a recession, but it’s a strategy that clients can use to provide fresh perspectives—and save themselves hours of time and effort in terms of industry research.
Sepracor (SEPR), the Marlborough (Mass.)-based pharmaceutical company, recently downgraded but did not ditch a relationship with a New York innovation firm, futurethink. In 2007, before the recession, Sepracor had hired futurethink to conduct live innovation workshops. These customized workshops generally cost between $9,000 and $15,000, according to Andrew Der, futurethink’s director of marketing.
This year, Sepracor opted to spend $1,900 on membership to futurethink’s online tools, which include items such as checklists for questions to ask job interviewees to see if they think creatively. Recently, Sepracor employees logged on to a customized Webinar on “innovation in difficult times” created by futurethink. It’s certainly not as hands-on or as engaging as the workshops that Sepracor had paid for before the recession, but such online innovation tools still provide employees with access to futurethink’s research and thinking.
Why doesn’t Sepracor cut the expense entirely? “Bringing in a third party brings in a level of credibility,” says Melissa Klinkhamer, the company’s senior director of corporate learning and development. “Our employees know that they’re doing research with other big companies. Maybe it’s just human nature, but we like to partner with experts.” Just as companies such as futurethink like to partner with clients.
Rare Optimism from Caterpillar’s CEO
July 21st, 2009 | Posted by stockPosted by: Ben Steverman on July 21, 2009
The recession has been tough on companies like Caterpillar (CAT). The heavy equipment maker has slashed production and cut thousands of jobs. Investors have seen Caterpillar shares lose half their value since the downturn began.
So it’s an important day when we hear some optimism from Caterpillar’s management team. When the firm reported second quarter earnings on July 21, chairman and chief executive Jim Owens issued this statement:
There is still a great deal of economic uncertainty in the world, but we are seeing signs of stabilization that we hope will set the foundation for an eventual recovery. Credit markets have improved significantly. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work. In addition, we’ve seen many key commodity prices increase from their lows in the first quarter, and they are holding in a range that is usually positive for investment.
To review, those are a surprising array of reasons for hope: Credit markets are better, presumably helping Caterpillar’s customers get financing for equipment purchases. Government efforts to revive the economy might be working, especially in China, and may support spending on infrastructure. The recovery in commodity prices is apparently giving Caterpillar’s customers — in mines or oil fields, for example — the confidence to buy again.
Shares of Caterpillar jumped 7.7% on July 21, the day the news was released. Despite falling 66% from a year ago, Caterpillar’s profits were called impressive by analysts. The firm earned 60 cents per share, beating Wall Street analysts’ expectations of 22 cents per share.
There are still plenty of concerns about Caterpillar. Execs warned the third quarter of 2009 could be weak. Owens is seeing “signs of stabilization,” but not recovery. The housing industry remains weak as do other industries that are key users of Caterpillar products.
Despite this, Owens’ willingness to show a little optimism was a welcome sign.
Many N.J. businesses will be hurt by income tax increases
July 20th, 2009 | Posted by taxHEADNOTE
Companies organized as S corporations may face steep hike, experts say
AN INCREASE IN individual income taxes passed by the state Legislature last month will also affect many New Jersey businesses, since many business owners pay personal income taxes on their
business profits.
The state increased taxes on upper-income earners as part of its effort to close a budget gap worsened by the recession.
Nationally, nearly one-third of all business taxes are paid through the individual income tax, because many companies are organized as “S corporations” – limited liability companies or partnerships whose business profits are taxed as the personal income of the company’s owners.
The state increased the income tax from 6.37 percent to 8 percent for income between $400,000 and $500,000; from 8.97 percent to 10.25 percent for income between $500,000 and $1 million; and from 8.97 percent to 10.75 percent for income exceeding $1 million. The increases are set to expire after one year.
July 20th, 2009 | Posted by taxMatthew Krane is a Harvard-educated attorney who soared to the top little circle of L.A. entertainment lawyers and who lived in the exclusive Hollywood Hills above the trendy Sunset Strip.
But for the past year, he has been sitting in a cramped cell at the Metropolitan Detention Center,
a federal holding facility in downtown Los Angeles. He faces federal charges over money laundering and conspiracy in what a federal prosecutor has called one of the largest tax evasion schemes in U.S. history.
At the heart of the case is a shelter that Krane used to allow his star client, Haim Saban, to evade taxes on capital gains of $1.5 billion Saban made after selling his interest in the Fox Family Channel in 2001. In surprising testimony in 2006, the media mogul told the U.S. Senate that his limited formal education prevented him from understanding the shelter was illegal. He ended up paying $250 million in back taxes and penalties.
That would appear to end it for Saban. But several insiders, most of whom did not want to be identified, pointed out that since a trial is in Krane’s future, it is possible–but by no means a certainty–that Saban or others could be touched by Krane’s ongoing legal troubles.
Actually, Krane’s troubles with tax shelters are only part of his problem. While authorities were investigating the case, they served a search warrant at his West Hollywood home, where they found the fake passport documents, along with crystal meth, date-rape drugs and horse tranquilizers.
The judge in this case, Dale Fischer, has ruled the 55-year-old attorney a flight risk. That’s why he’s remaining locked up, although a bail heating is scheduled for July 27.
In a statement to the Business Journal, Krane’s attorney, Robert Barnes, denied that his client committed any wrongdoing.
“Allegations of any criminal conduct against Matt are false, and will be proven so at trial” said Barnes, who is best known for defending Wesley Snipes in a high-profile tax fraud case.
A representative for Saban did not return requests for comment. However, in his 2006 statement to a Senate subcommittee investigating the high-level tax scheme, Saban said Krane “assured me that the transaction was legal.”
Meanwhile, another attorney–Robert Jason, a former classmate of Krane’s–involved in the same tax shelter scheme has pleaded guilty. The plea is under seal, which, other attorneys said, implies that he is cooperating with the prosecution.
Vouching for Quality Health Care
July 16th, 2009 | Posted by innovAs an entrepreneur, CEO, and venture capitalist, I’ve experienced virtually all the headaches our health insurance system can bring. For instance, a chief engineer left a company backed by my venture firm so he could work at a larger company; alas, the bare-bones (and barely affordable) insurance plan at our portfolio company didn’t cover his child’s illness. Or consider our encounter with rates that varied by as much as 100% in a year because one employee had expensive back surgery and we couldn’t spread the apparent risk over our tiny base of co-workers. Then there are the hours of wasted time filling out unintelligible claims forms to pay for unexpected tests and procedures of unpredictable expense.
It’s hard to contribute to the national recovery when you are so distracted. I know I would never invest in a company as badly run as our health-care system.
Meanwhile, Washington is mired in arguments, real and imagined, over “public options,” “health-care rationing,” and “socialized medicine.” These debates drone on despite the fact that we’re already living with a successful public option in Medicare/Medicaid, or that “choice” is an illusion when your employer rotates insurance providers every year in order to save money—and suddenly you can no longer visit your family pediatrician because he is no longer in the plan.
So what approach would balance a moral imperative for universal health care with an ethical respect for people’s freedom to choose and control their own expenses? Without a practical solution, capable of responding to the next century’s health-care challenges, our economic engine is likely to catch a persistent cough—or worse.
I believe a voucher system is the right medicine. Of course, vouchers are often suggested as a panacea for everything from improving school performance to reducing big government. Sometimes the unspoken intent behind them is to roll back advances in racial integration.
But in this case, vouchers can serve a progressive public goal. In this proposal, all citizens—every man, woman, and child—would receive a yearly health-care voucher from the government. The voucher would have to be used to pay for insurance. The value of each would start at $1,000 in 2010 and rise to $3,000 by 2020, giving the system time to adjust. True, this wouldn’t cover all the costs of many insurance plans today, but the hope is that average aggregate costs of coverage—currently about $5,000-$7,000 a person per year in the U.S.—would diminish over the next decade. And that a multitude of existing, scattered government health programs would fold into this initiative.
The plan would include rich and poor alike, without exception. And don’t worry. The rich will pay out more in taxes than they are granted back in vouchers. But why conflate tax policy and health care? No need to isolate some citizens from the process in such a way that they no longer have an interest in its success.
I also advocate making the vouchers assignable, letting individuals use them to defray the costs of an existing plan partly paid for by an employer. People also might create their own group plans to lower costs and spread risks. For example, a dozen businesses might pool small employee bases to match large-company economics, optionally kicking in matching funds against the yearly voucher.
Alternatively, members of a church, mosque, synagogue, or other group could pool vouchers for themselves while helping other possibly disenfranchised members of the community. A family with special needs could partner with others across the country, to ensure their group plan has terms that cover a particular malady. Or a group of doctors could accept patient vouchers in exchange for a prix fixe care plan, reducing worry and improving preventative care.
Of course, these vouchers come with attached strings designed to encourage cost savings and care quality. When an insurance company accepts the voucher, it agrees that its policies meet certain minimum standards of care, transparency in billing, administration, and efficiency and effectiveness in health-care delivery. Longer term, a combination of market competition, negotiations by newly empowered groups, and sensible standards will drive out costs.
The “public option” is to simply open Medicare to all age groups. There’s no need to add complexity by creating a new bureaucracy. I wouldn’t be surprised if many of the elderly prefer a community-based health insurance program over Medicare, and leave the system. Nor would I be surprised if private insurers vigorously compete to offer Medicare supplement plans, or to “catch” those people who don’t make an insurance decision on their own.
As Einstein once remarked, one should make everything as simple as possible, but no simpler. The American health-care system is a complex and often foreboding landscape. It will never be simple, but it can be simpler. A voucher system brings coherence and clarity to the environment, allowing a multitude of coordinated health-care solutions to thrive, driving innovation, and lowering costs. And then we can finally get on with the business of developing a healthy economy.
Innovation Summer Reading List
July 15th, 2009 | Posted by innovAs popular as short sleeves and flip-flops is the summer reading list. We’ve pulled together some fresh reads on innovation and design that should both entertain and educate. Innovation-speak can often be impenetrable, but we’ve done our best to find material that offers real enlightenment along with ideas you can put into practice.
The titles come at a time when innovation is on the chopping block. As budgets thin, the desire or ability to pursue breakthrough ideas can be derailed. It’s tough to say what actually happens behind company doors in tough times: Executives could face a choice between cutting new initiatives or jobs. But while executives often talk about their continued commitment to coming up with new ideas and products, it’s often no more than talk.
Still, whether the market ebbs or flows, companies must push on. Several of the titles on our list aim to teach businesses how to trim the fat from innovation processes. In a recession, efficiency becomes a matter of survival. In The Silver Lining, Scott D. Anthony instructs on where and how to prune innovation programs and home in on results. Meanwhile, BusinessWeek cover star Jim Collins warns against bloated, complacent company culture in How the Mighty Fall: And Why Some Companies Never Give In.
Your hammock reading doesn’t have to be all doom and gloom. Jeff Immelt and the New GE Way tells the story of General Electric’s (GE) CEO. Though the stock has done poorly in the past year or so, Immelt’s focus on insistent innovation saw the firm grow solidly through the beginning of the decade. In The Blue Sweater, Acumen Fund founder and CEO Jacqueline Novogratz recounts her experiences bringing microfinance and other blends of philanthropy and market systems to Africa, India, Pakistan, and a post-genocide Rwanda.
Some authors are introducing new realms of thought to business thinking. Former Time magazine editor Joshua Cooper Ramo takes us into The Age of the Unthinkable. By studying political and economic figures and movements, from George W. Bush to Hezbollah, Ramo emphasizes the importance of flexibility and adaptability—traits crucial to riding out the current market woes. In Free: The Future of a Radical Price, Wired Editor-in-Chief Chris Anderson delves into the “free” and “freemium” strategies some companies are using to drive up revenues.
Just because it’s summer, don’t take these reads lightly. If there’s one lesson to learn from them all, it’s that businesses can’t afford to coast, no matter what happens. Like sharks, companies must keep moving or die.
Global Sales Report – It’s Not Just Jobs
July 14th, 2009 | Posted by stockPosted by: Howard Silverblatt on July 14, 2009
For the full report click here
I just released my annual S&P 500 Global sales report, and as has become the custom, the annual reports are full of nice glossy pictures, the text professes globalization, but the actual tabular tables of data are few to be had. One new finding this year – it’s not just jobs being exported anymore. U.S. companies sent more money abroad for income taxes in 2008 than they sent to Washington.
• Of the reporting issues, 47.9% of all sales were produced and sold outside of the United States, up from 45.8% in 2007 and 43.6% in 2006.
• In 2008 S&P 500 foreign sales increased 8.5%, while domestic sales decreased 0.3%.
• European sales represented 27.7% of foreign sales, with 9.3% coming from Canada. Asian sales decreased to 13.2% from 16.8% in 2007.
• It’s not just jobs exported – more income taxes were paid abroad than were paid to the U.S. government.
• Foreign income taxes increased US$ 11.5 billion or 9.3%, as U.S. federal income taxes declined US$ 43.9 billion, or 29.1%.
While the current recession has had significant impacts on local markets, the overall trend has not significantly changed. Growth outside of the United States is expected to be greater than that of the growth within the U.S.
The shift of labor, capital, and resources are expected to continue outside of the U.S. where a growing worldwide middle-class is emerging, even as the U.S. is viewed with much higher political stability.
The shift of labor, capital, and resources are expected to continue outside of the U.S. where a growing worldwide middle-class is emerging, even as the U.S. is viewed with much higher political stability.
It’s no longer jobs that we’re exporting, now it taxes – Foreign income taxes paid increased $11.5 billion in 2008 while those paid to the U.S. government declined $43.9 billion, with Financials paying 16 times more abroad than domestically. Taxes paid to the U.S. now represent a minority of income taxes paid by U.S. companies.
July 14th, 2009 | Posted by innovWe are often asked about ways to innovate beyond the traditional business setting. In honor of the All-Star Game, here is our suggestion to the owners of professional Major League Baseball teams.
Sports teams run on statistics. Players are signed, promoted, rewarded, or released based on how well they perform against an agreed-upon set of detailed metrics. Yet when it comes to figuring out the best way to attract and keep fans—especially during a recession—it’s a whole other matter. These same teams are, for the most part, relying on either outdated research approaches or “gut feel” to determine what fans want.
And not surprisingly they are swinging and missing. Want proof? Consider some of our recent findings:
• Every sports executive we have ever met says the No. 1 thing fans want is a winning team. Fans rank it 11th when asked why they show up at a game.
• What the paying customers want most is a “fan friendly” environment, right? Nope. Fans rank it 6th in importance.
• Teams worry that their ticket prices are too high. Fans say cost ranks 7th when they are deciding whether or not to attend a game.
This discrepancy between what sports executives believe and what is actually going on in the marketplace reveals that most have failed to take notice of two related and depressing facts: A) Few sports teams recognize the power of their brand/customer relationship. B) Most fail to leverage the unshakable fan loyalty, simply because they have not taken the time to figure out what fans truly care about.
The issue of understanding exactly what fans want is vital in both the short term and long term—given ever-rising ticket prices and increasing competition from not only other choices within the same category but also the plethora of other entertainment options available.
The obvious conclusion from all of the above: Teams need a whole new approach to sports marketing. After years of working with ESPN and major league sports teams and studying the teams’ audience, we have come up with one.
As we thought about this and talked to clients and people in the sports industry, it seemed clear that the industry needed an easy way to measure what fans truly value about their sports teams. Specifically, we needed a way to reduce all the factors that go into their decision to support a team—with an investment of both dollars and emotion—to a single number that would be comparable across all entertainment options.
This measure would do three things: A) Tell us why fans go to a sporting event instead of doing something else (having dinner with friends, seeing the latest movie). B) Provide a barometer for how the on-field and off-field influencers (economy, politics, personalities, local media) affect our fans’ perceptions from a local standpoint. C) Provide a baseline from which to measure all marketing/communication expenditures.
The challenge with developing such a metric is obvious: You need a way to measure both the easily gauged quantifiable (how much fans will pay for tickets and merchandise and how much time they are willing to devote to the team) with the not easily gauged quantifiable (the perceived investment in enthusiasm, love, and emotion, and ultimately what fans get for it). It would be a research project of the highest order.
After talking to thousands of sports fans—everyone from the hard core season-ticket holder to the casual follower—we developed the first true measure that identifies what fans actually care about. We call it Return on Commitment™ (R.O.C.).
R.O.C. is a diagnostic tool that judges the overall health of the team from the perspective of its fans. It is derived from understanding the relationship between two key elements that sports executives should be trying to maximize: the investment fans make in their teams and the return those fans get for that investment.
Let’s take those elements one at a time, starting with the fans’ investment in their team. There are three variables that determine whether—and to what extent—a fan will support a team:
• Time spent following the team: attending, watching reading and talking about
• Money spent on all aspects of fandom: games, merchandise, betting, subscriptions to magazine, and cable or satellite sports packages)
• Emotion invested in the team
Knowing your R.O.C. score is amazingly powerful. It lets you easily identify your best and most profitable customers. (The higher their R.O.C., the more valuable they are to your team.) And it easily lets you evaluate any component of your marketing plan. (If it increases your R.O.C. score at a reasonable cost, it is worth continuing.)
But perhaps the most crucial thing that R.O.C. does is identify why fans go to the game, according to Scott Reifert, vice-president of the White Sox, one of the earliest adopter franchises to prove that the R.O.C. delivers a competitive advantage. “Sure, they want to see us win. And becoming World Series champions in 2005 was thrilling for everyone,” says Reifert. “But ultimately R.O.C. tells us the value of baseball is its unique ability to create lasting memories that fit into a much more significant context of our lives. Our owner, Jerry Reinsdorf, and everyone associated with the team, is committed to making that happen.”
In other words, attending a Sox game is a means to an end—the end being the creation of lasting memories—and not an end in itself. That is going to surprise those executives who believe the most important thing to fans is hanging a championship banner from the roof.
Sure, winning can cure many ills in the short term. But unless you can guarantee a dynasty (and even that isn’t enough—just ask the Yankees how they’re doing with seat sales in the new stadium), your competitive advantage in capturing entertainment dollars comes from knowing what your fans really care about. And that is exactly what R.O.C. can tell you.
Fans are faced with countless entertainment choices at exactly the same time that, for many, the resources they have for their entertainment consumption is shrinking. So the challenge is to figure out a way to make the choice you are offering stand out.
We think R.O.C. is the most innovative tool that allows you to do just that.
SendMe: Watch Out, iPhone App Makers
July 13th, 2009 | Posted by innovReaders of a certain age will remember TV commercials aimed at showing that Kellogg’s Frosted Mini Wheats appeal to both the adult and the kid in all of us. In the 30-second spot, grownups who crow about the cereal’s nutritious value suddenly morph into younger versions of themselves who plug the cereal’s sweet frosted side.
I’m a bit like that when it comes to mobile startups. The consumer in me welcomes the explosion of fun, useful, and innovative games, activities, and tools on smartphones. I’ll admit that I’ve livened up many a dull train commute with rounds of Flight Control on my iPod touch.
On the other hand, the business reporter in me is getting bored by endless press releases and pitches from companies whose entire business model involves running an app on the Apple (AAPL) iPhone. We get it—the iPhone is awesome. On a recent visit to China, I was stunned at how many expats from the U.S. and Europe have flocked to the country and are spending their time developing iPhone games—this in a country that doesn’t officially have the iPhone yet. Many said they were attracted not just by the large market opportunity but also the low-cost talent for designing casual games there. Fair enough.
Under the Radar
But I’m highly doubtful about the prospects of building a lasting business dependent on people like me who will pay at most $1-a-pop to play a game until we get bored and then move on to a new, probably free alternative. And even while the iPhone is very popular, it’s part of a niche that still accounts for a small slice of the larger mobile-phone market globally. Smartphones, including the iPhone and Research In Motion’s (RIMM) BlackBerry, made up 13.5% of all cell-phone sales in the first quarter, according to Gartner (IT).
What gets the business reporter in me far more excited is the handful of companies designing content, games, or social networks that can run on the much larger pool of plain-Jane cell phones. Some are even making money.
A very under-the-radar case in point: SendMe. The San Francisco startup sells run-of-the-mill mobile content under three brands. SendMeMobile makes ringtones and wallpaper, mBuzzy is a mobile social network, and SoLow.com runs sweepstakes via cell phones.
Driven by Licensed Content
Thanks to its subscriber base of more than 1 million youngsters, mainly in their early teens, who pay an average of $9.99 a month, SendMeMobile is making $10 million a month in revenue and has reached profitability. And since sales are rising, it’s not a stretch to expect the company to end the year in the range of about $150 million annually.
The company is just three years old. And unlike almost all Silicon Valley companies, SendMe started generating tens of thousands of dollars in revenue the day it launched, stunning investors. It’s raised $35 million to date from True Ventures and Spark Capital, and doesn’t expect to raise more—ever.
SendMe is hardly the only company selling mobile games and ringtones. But it’s distinct for several reasons. For one thing it invested a ton of venture capital in building a huge portfolio of licensed content, such as music and celebrity images.
Price Transparency a Plus
The company has also capitalized on a structural change in the market, whereby software developers can build applications that will work on a variety of mobile operating systems; in the past you had to build an app on a system-by-system basis. And because it’s downloadable via the Web, SendMe can market directly to consumers. It uses low-cost marketing vehicles such as search ads on Google (GOOG) and Microsoft’s (MSFT) Bing, and partnerships with companies including imeem, Eventful, and Univision.
The company was started by Russell Klein and two former colleagues, Markus Mullarkey and Tom Santosusso, who met while they were working on the business side at Cnet Networks. Before starting SendMe, Klein handled corporate development at Hands-On Mobile, a maker of mobile games and entertainment, where he went on a spree acquiring media companies in Europe, Asia, and North America. Jon Callahan of True Ventures says far from being flashy, the group sets itself apart through hard work and attention to detail. “They’re more than a little anal-retentive,” Callahan says.
Consider their focus on price transparency. Klein says some mobile-content businesses lure subscribers through bait-and-switch tactics—say getting kids to sign up for software their parents would later have to pay for. SendMe is up-front about fees, requiring users to opt-in more than once to subscribe. It also staffs a 24-hour customer-service team in San Francisco that will cut refund checks if someone didn’t mean to make the purchase.
Twitter Isn’t Making Money
But the real gem of the business is SendMe’s approach to tracking data such as customer usage patterns to improve how it attracts new users and how it markets new services to existing subscribers. Klein won’t delve into the details, but says the company has “found a series of very interesting correlations between profitability of a (group of customers), vs. customer usage and engagement at very specific points in their tenure as a paying customer.”
One notable investor is Bijan Sabet of Spark Capital. He’s also on the board of Twitter. (Heard of it?) Twitter is, in some ways, also a mobile app that pulls its strength from an ability to run on any phone. But the two couldn’t be more different. Twitter is a huge fad that even celebrities fawn over that’s so far making no money; SendMeMobile is something only your 12-year-old would know, and boasts one of the better revenue streams among a startup.
I’d bet that Twitter will become the bigger company, not to mention continue to be the bigger brand. But with nine-figure revenues after just three years, profitability, and no need to raise more capital ever again, SendMeMobile is for now looking like the no-brainer investment.
Innovation Calls For I-Shaped People
July 13th, 2009 | Posted by innovIt has become almost a cliché to say that cross-disciplinary teams are a key component for successful innovation. If certain problems are beyond the scope of any individual—and most of them are—the way to address them is with a team with complementary skills and a common language in which they can all communicate. So far so good. But useful guidance starts to dry up rather quickly beyond that. Since there is no reliable secret formula that can be used by a hiring manager or someone trying to build up appropriate skill sets, I thought that I would share a way of thinking that I have found really useful.
There may be no “I” in team, but every team needs to be made up of “I-shaped” people.
First of all, I should acknowledge the influence of my friend, the co-founder of IDEO, Bill Moggridge. He came up with the wonderful formulation of “T-shaped people”. The vertical aspect of the T represents depth, and the horizontal bar is breadth. So a T-shaped person has basic literacy in a relatively broad domain of relevant knowledge along with real depth of competence in a much narrower domain.
When you slide multiple Ts together, their cross bars all overlap, indicating that the various Ts have a common language, and, ideally, their combined base can be broad enough to cover the domain of the problem that you are addressing. At Microsoft (MSFT), we try to make sure that in looking at new product or services ideas, we have at least three Ts, which we call BXT, reflecting equal levels of competence and creativity in three domains: business, experience (in design), and technology. These are three interdependent and interwoven pillars we see as the foundation for what we do.
But while I love Bill’s notion of T-shaped people, things are just not that simple. So as both compliment and complement, I propose I-shaped people. These have their feet firmly planted in the mud of the practical world, and yet stretch far enough to stick their head in the clouds when they need to. Furthermore, they simultaneously span all of the space in between.
This idea was crystallized in my mind thanks to another Englishman, one of the early pioneers of human-centered design, Brian Shackel. I once asked him if he had noticed any particular attributes that distinguished the students that went on to do remarkable things compared with the rest.
His answer was as immediate as it was insightful. He said: “The outstanding students all had an outstanding capacity for abstract thinking, yet they also had a really strong grounding in physical materials and tools.” By this, he meant that they could rise above the specifics of a particular problem to think about them in a more abstract, and in some ways, more general way.
At the same time, as they were growing up, all had been deeply involved in things such as fixing bicycles or cars. In fact, it didn’t matter how this was manifest. What was important that they had a “can do” and “have done” competence in some aspect of the messy, dirty, and fascinating world of physical materials and tools. In short, they were firmly grounded in reality.
These attributes have been at the core of all of the best teams that I have ever had the pleasure to work with.
Is this all there is to know about staffing for innovation? Of course not. But to summarize and synthesise, let me leave you with a few rules of thumb for building a cross-disciplinary team:
• The last thing a team needs is someone else like you. You already have the best in the world: you. What you need is people who fill in the gaps that you left in your own skill set as you built up competence in your specialty.
That goes for everyone else on the team. (The only exceptions might be when you are staffing another team, or the problem that you are working on is sufficiently hairy that you need to divide in order to conquer.)
• Know the difference between solid breadth of literacy and deep competence, and test for both in considering candidates. You do not need jacks-of-all-trades.
• If you think you know the core competencies needed for a team, list them on a bunch of Post-it notes, and have each person on the team write the name of the “go-to” person on the team who has the most depth in that area. If you do not have strong consistency in the responses, Houston, you probably have a problem.
• T-shaped is highly desired, but not sufficient. In staffing up teams, interview and test for I-shapedness. I don’t care how good someone is either at the pragmatic or abstract level, there is someone out there who is equally good and who has strength at both ends. Find that person. If you doubt such people exist, just look at the profile of a reasonable sample of Nobel Prize winners. What I suggest you will find —based on having done so myself—is that a very high number share these combined T and I attributes.
• Hire people who do not require predictability and stability in order to be effective. Typically, each problem that confronts you is going to be different and will require different skills. Hence, teams will be constantly reconfigured to meet the demands in front of them.
• Hire people with strong interpersonal skills. Remember, I come from the computer industry and have seen my fair share of brilliant software engineers who have the social skills of an oyster. All that I can say is that I have also seen those with the same skills that know how to communicate, back down, listen, question, and compromise. A Renaissance team of T and I-shaped thinkers is a potentially volatile cocktail. Its value is too precious to be put at risk by even a single individual, regardless of how otherwise talented.
With that, all that I can leave you with is the imperative that you should always cross your Ts, but never dot your Is.
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