21 Dec Re-discover the “Right Stuff” in Innovation

Chuck Yeager risked his life as a WWII ace fighter pilot and then a test pilot. As a test pilot, he and the Bell XS-1 rocket-powered aircraft broke the sound barrier, opening minds to the possibility that man-made materials could survive space travel.

Tom Wolfe, fascinated by what motivated the pioneers of the US Space program in “The Right Stuff,” describes Yeager as “the most righteous of all the possessors of the right stuff.”

Ironically, in the 1980’s, the next book Wolfe worked on was “Bonfire of the Vanities,” the story about Sherman McCoy, a successful bond trader in New York City who fatally injures a black kid in the Bronx in a hit and run accident.

Sure, both Yeager and McCoy are motivated by a “ceaseless concern for his own standing in comparison to other men,” as Wolfe calls it. But Yeager learned first, then risked his own life to “run into the fire.” McCoy faked it, risked others’ lives, and ran away. That’s the difference between the “right stuff” and “vanity.”

Yeager’s legacy is discovery and contribution to our “DNA” of “know-how.” Unfortunately, “DNA” is invisible, so it isn’t obvious how to account for contributions to it. “Know-how” is expected, so we don’t appreciate that it takes practice and patience to learn the nature of it – what it really is, why it works and doesn’t.

Maybe that’s why forty years later, innovation is dominated by fewer Yeagers and more McCoys. Charles Cuhigg in the New Yorker article, “How Venture Capitalists are Deforming Capitalism” writes about VCs who raise money to force a success story by destroying competitors – innovators, not just incumbents – who have invested their own “skin in the game” – financial and know-how.

Replacing “know-how” with money to “force” success is the story behind many significant VC failures, like WeWork. As I write this, the founders of another failure, Theranos, an “at home” blood test, are being tried for fraud. Although speculating what “might have been” is questionable, few would doubt that the Theranos scandal suppressed legitimate alternative at-home tests which would have saved lives during today’s Covid crisis.

Understanding Force in Innovation

Replacing “know-how” with money demonstrates a lack of understanding of the use of “force” in the history of innovation.

The “force” it takes to defy gravity creates a lot of risk. That’s why Yeager and his peers took the time to understand how it works.

Wolfe describes how the pilots would listen to the inflight recordings of colleagues who had died in air accidents – those last seconds as the plane dived and they were shouting ‘for one last hopeless crumb of information’ that might rectify the situation.

This probably inspired the anonymous, largely no-fault, reporting system to the FAA on “near misses” and other design and operational defects for airlines or aircraft.  This system has made aircraft and commercial airline safety incredibly good, and has given a much larger part of the population the willingness to access commercial air travel.  This is probably a very good investment for all airlines and aircraft manufacturers, even though all of them have to provide proprietary data to a government investigator.

Reporting problems is one thing; handling them is something many managers would rather avoid. When Jim took over a large operation he was impressed to hear from his admin that everyone in the organization was encouraged to submit a “jeopardy report.” But when asked what she did with the report, he learned that it was filed, until the account cancellation report arrived, when they were stapled together! The process he developed for addressing jeopardy reports improved client retention and overall profitability.

Typical corporate innovation case studies studied in business schools don’t share the failures and the secrets of overcoming them that led to success. Often written retrospectively to make the source look prescient and responsible for the success, they rarely share the near misses and turn arounds. And they ignore the many contributors, including the quality of the relationships with partners in the supply chain and channels of distribution to “force” new ideas into the market.

When I started my innovation career, the Leo Burnett New Product Model aggregated data from many client new product launches to analyze performance based on the “force” of advertising investment. But the more valued resource was the New Product Model Workbook which revealed what was behind the data: why the same investment produced a range of results –  i.e., questions that helped to draw attention to the factors affecting low vs. above average performance.

“Force” has its limits.

As corporations “forced” more and more “new and improved” products through the value chain, the differences were less remarkable, corporate innovation success rates eroded, and partners less receptive.

To continue to grow, the focus of US corporations shifted from adding new products to expand the US market to expanding to other markets, globally. That’s when corporate mindset and culture changed 180° – from valuing originality to valuing replicability.

Replicating what’s been done before is easier to manage, hire and train people to do, and predict results. In some organizations, “Innovation” has been re-defined to mean reverse engineer what others do. That may be a productive way to operate a large de-centralized organization. But it is harder to recruit and keep the best and the brightest motivated by discovery and contributing to the DNA of “know-how.”

Illusions of Grandeur Burns both Financial and Human Capital

When a plane takes off from the ground, one’s aware of how much power it takes to thrust through turbulence and reach altitude. Once airborne, looking down on the rest of the world is so exhilarating we can forget how expensive it is to stay there. A 747 consumes 5 gallons of fuel per mile.

It turns out that just because you can “force” a plane to defy gravity faster than the speed of sound, doesn’t mean you should. The commercial supersonic jet, The Concorde, priced at $12,000 roundtrip was not sustainable.

Venture Capitalists attract young people whose aspirations to discover new frontiers don’t fit the corporate “replicability” culture. VCs take advantage of their motivation, by promising to force their vision to scale and give them equity and control. But since the odds of success are so low, most waste their time and creativity.

Without existing supply chain and distribution channel corporate partnerships, VCs have to “force” innovation adoption  by offering discount pricing at scale. Even then, they expect only 1 in many investments to survive (success rates are reportedly as low as 1 in 2000.

Relying on 1 unicorn success to compensate for 100’s or 1,000’s of losses ignores the limits of forcing an outcome. The investor market on Wall Street for Unicorns isn’t based on Main Street Market value, it is based on how much money is raised. The money raised subsidizes operating at a loss on Main Street, commoditizing and shrinking Main Street market value.

When the difference between winning and losing is money instead of “know-how”, people realize they can’t count on what they know. And when you can’t count on what you know, you can’t count on each other.

According to Pew Research reports 79% of Americans believe they have “far too little” or “too little” trust in each other.

To realize the “right stuff” we need a fresh start to reset trust in our “know-how.”

Those who aspire to more Yeagers and fewer McCoys in innovation, will recognize that we need a fresh start. To realize the “right stuff” we need to start with understanding: the importance of partners and the “why” behind the numbers that are easy to measure. The Why or “Know-how” is like “DNA” – invisible, so it isn’t obvious how to account for contributions to it. And once proven,“know-how” is expected, so we don’t incentivize the practice and patience to understand it.

There are a few glimmers of hope. First, more recent space travel innovation capitalizes on what we understand from the natural principles of a glider for Space Shuttle re-entry, without a fuel-powered engine. The outcome is more efficient because it reduces friction or “drag” so the equipment can be used again. Second, the innovative science behind the Covid vaccines which works with our bodies to manufacture the vaccine. We call this new frontier to explore – #WorkingWithNature https://www.comradity.com/whats-next/

A Fresh Start to reset trust in our “know-how” to explore #WorkingWithNature

  1. Starts with willing Corporate partners and employees, stakeholders with know-how,
  2. Like Venture Capital, creates an independent entity to give equity and control to those stakeholders,
  3. Incentivizes understanding, practice and patience.
    • Inclusivity – equity based on time, money, and know-how contributed by willing partners (including investors) and employee stakeholders,
    • Collaborative – one vision for success that works from all perspectives,
    • Resilience – a business model in which the pricing has enough margin for all stakeholders to mutually benefit,
    • Trust but Verify – measure the resilience of all stakeholder “skin in the game” with an Ecosystem Balance Sheet. https://www.comradity.com/resilience-ratings/

We believe this fresh start and measuring the hidden assets of stakeholder “skin in the game” will disrupt the “force” of money over “know-how” in innovation and incentivize the understanding, practice, and patience we need to recover trust among partners and accelerate re-discovering the “right stuff” in innovation.