Webinar: The Innovator's Hypothesis by Michael Schrage

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The Innovator’s Hypothesis

WHY CHEAP EXPERIMENTS ARE WORTH MORE THAN ‘GOOD IDEAS’

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The Content of the Audience

is more important than

The Content of the Talk

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I explore…

‘Behavioral Economics’ of Enterprise

Experimentation, Innovation & Network EffectsVia their Models, Prototypes & Simulations

How Much Does It Weigh? 162

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How Much Does The Paint Cost?

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‘Unit of Analysis’

‘Don’t Pick The Wrong One(s)’

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My Advisory/Consulting Work

i help organizations design fast, frugal and

high-impact business experiments that make innovation

simpler, safer and scalable…

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What is this quick webinar really about?

‘Investing’ in Innovation

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Innovation:

The Conversion of ‘Novelty’ into ‘Value’

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Crucial Strategic Observation

Innovation is a Means to an End

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‘Experiments’ as Means, Medium & Mechanism

For New Value Discovery & Creation

-What Kind of ‘Investment’ Is It?

More Explicitly…..

Experiment in Science is a Search for ‘Truth’

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Experiment in Business is a Search for….

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The Challenge

Organizationally, Operationally and Culturally,

Is Your Enterprise ‘Appropriately’ Investing In

Experiments & Experimentation?

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Call To Action/Takeaway

Simply, Quickly and Frugally Explores

‘Experimenting with Experimenting’

-- What Kinds of ‘Innovation Conversations’ Do You Want to Create?

--What ‘Innovation Experimentation’ Should You Encourage?

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Our Structure

• Experiments as ‘Investments’

• Experimentation as a ‘Discipline’

• Experimentation as a ‘Future’

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A Goal: To Transform How You Perceive

Innovation Risk Management

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Value Investing: Buying a $ for 50 cents

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Value Innovating: Innovation for 50 cents on the $

The ‘Fundamental’ Challenge

(How) Can We Make a $5,000 Experiment Worth

$100,000 In Fewer Than 100 Days?

- (How) Can a Portfolio of $5K Experiments Unlock $10 Million of Value in a Year?

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‘Adding Up’ the Exponential Impact

X = ?Moore’s Law Metcalfe’s Law

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Exponential Economics

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‘Price’ Is What You Pay;

‘Value’ Is What You Get

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Innovation Economics

The “80/20/20 Vision”

What Business Hypotheses Might We Test – What Experiments Can We Run – That Might Give us

• 80% of the “Essential” Information/Insight in

• 20% of the Time; with but

•20% of the Resources

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Experiments (Can) Help Manager Risk

Risk Comes From Not Knowing

What You’re Doing

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Experiments as Media to….

‘Derisk’Innovation

--not ‘Optimization’ but ‘Loss Aversion’

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A New Metric?

RAROE

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Innovation Myths:

Good Ideas

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Why Does This Upset People So?

‘Good Ideas’ are Bad;

‘Testable Hypotheses’ are Good!

Jeff Bezos

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Amazon Recommendation Engine

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Amazon Recommendation Engine [Greg Linden]

I I I I hacked up a prototype. On a test site, I modified the Amazon.com

shopping cart page to recommend other items you might enjoy

adding to your cart. Looked pretty good to me. I started showing it

around…

At this point, I was told I was forbidden to work on this any further. I was

told Amazon was not ready to launch this feature. It should have

stopped there. Instead, I prepared the feature for an online test. I

believed in shopping cart recommendations. I wanted to measure

the sales impact….

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Remember Them….?

Shameful Schadenfreude

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What’s the nature of the

Resistance

‘We can’t do that because…’

‘Resistance’

is by far the clearest window into understanding

Your Organization’s Innovation Culture

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The Greatest Innovation Frustrations Now Are Organizational & Cultural NOT Technical or Financial

ideology:

Do you experiment to extend your values

or to challenge them?

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What Culture Has For Lunch…..

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So what ‘Innovation’ Business are We now in?

The

Experiments

Business

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You will be the

CEO

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You don’t have to be the CEO to be the

Chief

Experiments

Officer

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Business Hypothesis

A Statement About the Real or Potential Value

of the Business Framed as a Causal Relationship

If We Do ‘X’…Then The [Likely] Result is ‘Y’

Consider Taking Rutherford Seriously….

‘If your experiments need statistics, you

you ought to have done a better experiment‘

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Consider Taking Rutherford Seriously….

‘An Experiment is not complete until it has been

expressed in simple and correct English.’

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Key Takeaways/Heuristics

• Analyze Less; Experiment More

• Privilege ‘Testable Hypotheses’ Over ‘Good Ideas’

• Celebrate ‘Creative Constraints’

• Make ‘Experiment’ Social

• Do The Experiments That Matter Most

• Insights First, ‘Solutions’ Later

• Track The ‘Hypothesis Trajectory’

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We’re not ‘smarter’ or ‘better’ but...

The reason why we are on a higher imaginative level is not because we have finer imaginations, but because we have better instruments.

In science, the most important thing that has happened over the last forty years is the advance in instrumental design.…A fresh instrument serves the same purpose as foreign

travel, it shows things in unusual combinations…

The gain is more than a mere addition; it is a transformation.

A.N. Whitehead

An Enquiry Concerning the Principles of Natural Knowledge

Cambridge University Press 1925

Webinar: The Innovator's Hypothesis by Michael Schrage

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Transcript of Webinar: The Innovator's Hypothesis by Michael Schrage