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Several weeks ago I attended the Open Innovation Summit in Orlando, Florida. You can read a transcript of live Twitter coverage from that conference here, and two very good wrap-up posts from Braden Kelley at Blogging Innovation here and here.

While at that conference I got the chance to meet and speak with Ric Merrifield, business architect at Microsoft and author of Re-Think: A Business Manifesto for Cutting Costs and Boosting Innovation. I had interviewed Ric by phone back in the summer when the book came out, and meeting him reminded me to dust off the interview and publish it. He has a lot of interesting things to say to innovators, particularly about questioning assumptions. Here's the interview:

Q. Tell me about Re-Think.

A. The unifying principle of Rethink is the fairly simple notion that companies are so attached to “how” they go about doing everything from day-to-day activities to work that it can be very difficult for them to see really obvious opportunities for changing something, whether it’s innovation or cost-cutting or what have you. So, for example, they associate the route they take to their favorite restaurant – how they get there – with the outcome of arriving on time. So much so, that when somebody drives a different way, they say well, why are we going this way? But it usually doesn’t matter how you get there as long as you get there on time.

So framing it that way is a totally human condition. If you walk up to somebody at the fax machine and ask them what they’re doing, they’ll probably look at you a little funny and say “Well, I’m sending a fax.” And if you use conventional productivity tools and analysis you’ll often say, “Is sending a fax part of a necessary workflow or step in your job that you have to do to accomplish whatever it is you’re trying to accomplish,” and they’ll probably say yes. So if you’re doing a business requirements document, you’ll write down that sending a fax is a necessary step for whatever function that person does.

Whereas, I would go in and, not knowing anything about the industry, I can say definitively that sending a fax is not the requirement. The requirement is going to be more like “communicating the status of something” or “confirming an order.” If you then go back and say, “OK. What you’re doing is either communicating a status or confirming an order, or something along those lines,” and have a discussion about exactly THAT what, and note that HOW the person is doing it today is with a fax machine. The person will say “oh, OK, that makes sense.”

And what you’ve done there is disentangle this “what” from the “how” in a way that’s very non-threatening to the end user. I don’t know anything about their business, but I’ve led them to open up this opportunity to separate the “what” from the “how,” and then asked the question, “Is it really relevant to use the fax machine? Could you use email, could you automate it, could you outsource it?” All of those “how” questions could then emerge, and from there we can get into more value discussions, such as, “what would be the value to you of doing this differently? Is one of our competitors doing this so differently from us that maybe we should think about innovating in it?” And it goes from there.

Q: So I want to go back to the part where you get the people to focus on the “what” rather than the “how.” You did that by essentially asking them what they were trying to do. Does that work?

A. It does, as long as you can get to the “what” discussion quickly. It’s more important to start to get into the value and performance discussions, so you can find out where it makes sense to ask cost-cutting questions, outsourcing questions, innovation questions, which will also obviously inform strategy. “How” verbs have a very common thread to them, like faxing, emailing, phone, truck, all those things are what I call “trap” verbs. The “untrap” verbs, which are more like communicate, confirm, are lighter weight and don’t have any of the “how” baggage.

Another example: checking in at the airport is really encumbered with some language that doesn’t add any value in the sense that you’re talking about airlines and airports. The three “whats” really going on there are confirming an order, completing a survey, and doing some logistics if you’ve got luggage. When you sort of open that up, you go, wow, if we’re really looking at reservation surveys and logistics, you can look across a whole range of industries for best practices and best process steps and different technology opportunities, whereas you get a much, much narrower focus if you start by saying, let’s look within the airline industry for best practices. Which is not necessarily going to give you bad answers, but it can be really limiting. If something like innovation is what you need to do, a lot of the best innovations come from other industries and seemingly improbable places. Stripping this “how” language away makes it a lot more obvious.

Q. Can you say more about using this approach to innovate?

A. A lot of people don’t have a definition of innovation, but just throw the word around like everybody knows what it means. Innovation to me is changing something so radically that it doesn’t resemble what it was before. So, Netflix has an innovative marketing model for renting videos. They don’t have a store, anymore. The videos come through the mail, there are no late fees, all kinds of really innovative ways for people to have the video rental experience. Innovation can happen at the operating model level, in the case of Netflix, or at the very tactical level, like outsourcing the bank teller in the case of the ATM. That was really innovative. That’s a pretty tactical thing in the retail banking world. Same thing is true of airport check-in.

Nobody has something like continuous improvement on their to-do list in a given day. It’s not something you can check off. Innovation’s different in the sense that every time you evaluate a piece of work you should say, let’s look at it. What is the problem or opportunity? Is it too expensive, do we need to cut costs, and if so maybe innovation is a way to do that. I think a lot of people make the mistake of seeing cost-cutting and innovation as mutually exclusive. That’s a huge mistake because a lot of the biggest opportunities for cost-cutting *are* innovation. Again, it’s the “how are we going to get there?” discussion. If it’s innovation, what does that mean to us and how different does it need to be to accomplish the outcome that we need to get to? Either from competitive pressure, a response to competition, or acting on an opportunity that’s untapped at this point.

Q. So you’re looking at creating efficiencies, but you’re also looking at spotting opportunities.

A. Right. It’s “what outcome do we want to achieve overall?” And, does that require a minor modification in day-to-day operations to get to that, or does it require a radical shift in the work that will be innovative that would be so different than what was there before that we won’t recognize it? I talk about ING Direct in the book as having some great innovations. The fact that they eliminate the ability to write paper checks eliminates the entire department that handles bad checks. So that whole cost is gone in their model.

Q. So nowadays people are primarily focused on cost-cutting it seems, and your Rethink method is a definite way to do that. Where do people go wrong when they start cutting costs?

A. Especially today they’re going wrong in some big ways. One I’ve mentioned already is they think about cost-cutting and innovation as mutually exclusive, which is a big mistake. A second is that so many people have been in growth mode for so long that the muscles we’ve built up have been in keeping up with the growth of the business and we’ve sort of here and there done some cost-cutting, but have been too busy chopping wood to stop and sharpen our axe. We’ve allowed or been tolerant of a certain amount of fat and inefficiency to grow in our models just because we’re so busy keeping up we can’t also do this cost-cutting. When people go into it now they think, oh we can do some nip-and-tuck sort of cutting. But there’s so much fat that’s grown in organizations. Twenty to 40 percent of the operating budget is fat, either from unnecessarily repetitive and redundant processes or just unnecessary work. I tell people to expect to find that level of cost-cutting as an opportunity. If they’re not then they’re probably looking at it the wrong way.

The other piece that in this specific situation as we see organizations retracting and seeing flat growth at best, what that means is that instead of being in this growth mode where you’re trying to attract as many different segments of customers as you can, and you’re sort of trying to be all things to all people, organizations have to decide who is and is not their most valuable customer. And to do that you have to turn your back on some customers. That really means the management team has to sit down and say, who are we, what is our brand and identity, and how are we going to Lego-block that to a specific set of customers.
 

 During my week of conferences a couple of weeks ago, I attended one day of the two-day BIF-5 conference put on by the Business Innovation Factory in Providence. BIF conferences are much like the famed TED conference – each presenter or “storyteller” gets 15 minutes to tell their story, and they are encouraged to tell a story rather than simply making a presentation.

Reviewing my notes and others’ notes (from blogs and Twitter) from this conference, I see that a theme from this conference might be “fostering serendipity.” I talked to a couple of people about this at the conference and via Twitter, where one exchange with a fellow conference attendee went like this:

If we're treating innovation as a discipline, where does "fostering serendipity" fit in?

A way to foster serendipity is to avoid coming to closure. Leave options open for serendipity to happen.

The theme played itself out through a number of the second-day BIF5 talks Science writer Jonah Lehrer, author of How We Decide, described neurobiological research that proves that the mind needs to be quiet and in a state of relaxation to produce insights. In a crisis, he said, “your fear won't save you. You should learn to relax and hear quiet voice of creativity in face of fear.” His research has shown that insights come from the right hemisphere, and you can drown them out by too much focused, by the very attention you pay to the analytical act of problem solving.

Bill Buxton, principal scientist for Microsoft Research, said that creativity and invention are always context-critical and therefore social. We must be able to observe what’s going on around us to be able to create insights. He makes note not just of new ideas he gets, but of the circumstances in which he got them, so he can more easily replicate them. He also said that an applied approach to research rather than a curiosity-driven approach actually reduces productivity. Another reason why curiosity rules, he said, is that innovation doesn’t have a long tail, but rather a long nose. “Any technology that is going to have significant impact over the next 10 years is already at least 10 years old,” he said. The first prototype of a computer mouse appeared in the early 1960s. Success at innovation will be had by those who are able to spot good ideas and develop and nurture them.

Fast Company founder Alan Webber, now author of Rules of Thumb: 52 Truths for Winning at Business Without Losing Yourself, suggested that serendipity can be fostered by paying attention. Keep two lists, he said, one of the things that get you up in the morning, and one with the things that keep you up at night. Pay attention to these things and pay attention to people as well. The key to “making things happen and creating value is to pay attention to other people. There are teachers – and, presumably – lessons everywhere.

Babson College President Leonard Schlesinger talked of the need for all of us to become more “intellectually ambidextrous” and proficient at the moving from “knowing” to “doing” – the hallmark of the entrepreneur “What if we took seriously the notion that we're all entrepreneurs?” he asked. He didn’t mean we are all going to go out and start businesses, but rather we are all in control of our ideas and what we choose to do with them, how and whether we choose to develop them and act on them. He talked about co-creation, which often requires a bit of serendipity to pull off. His very career – moving back and forth between academics and business – if not his talk at BIF5, was a testament to taking ideas from one context and seeing how well they might work and how they change when you apply them in a different context. That’s a lesson in serendipity as well – can you create the conditions of possibility for serendipity to happen by consciously looking at things from different angles?

One of the things we at Innosight often tell clients is that in order to innovate it’s important to question assumptions. Once you start questioning assumptions, that fosters serendipity as well. Former George Washington University president Stephen Trachtenberg discussed that very thing when he talked about innovating the university calendar. Why the agrarian model of summer off? Why four years, or three years for law school? If you start questioning those assumptions, what new ideas can you uncover about how to innovate the university?

I’ve only focused on a few of the talks from a very full day at BIF-5 here. Many of the talks were also about innovating to change the world for good. All in all, BIF conferences provide a very inspiring experience that you can share as well – like TED, all the talks are captured on video and will be posted on the BIF Innovation Story Studio site in the weeks to come.

One of the most enjoyable sessions I saw at the World Business Forum was an interview with filmmaker George Lucas. Quite striking was the degree to which both serendipity and fate were intertwined in his education and early career. Also striking was seeing film clips of one after another scene showing a way in which Lucas has innovated.

And beyond the obvious – that he’s an extraordinarily creative filmmaker – Lucas has innovated the very business of filmmaking in a variety of ways:

• Lucas was among the first to insist on getting merchandising and sequel rights. He then created the kind of move-related merchandising we know today, and created the sequel-as-franchise idea with Star Wars
• Rather than limit himself to contractual obligation as a way of keeping control, Lucas simply formed his own studio
• Lucas saw digital moviemaking coming and started Industrial Light and Magic to experiment with digital filmmaking techniques that pioneered an industry.
• Lucas innovated the very sound of movies when he created THX Sound, paving the way for a day when enhanced sound became part of every entertainment experience from car stereo to mp3 player earbuds to video games with surround sound and a DVD player in your living room.

While Lucas has made his mark pushing the technological envelope, he described himself as not particularly technologically oriented. He writes in longhand and when developing filmmaking technologies often seems to cast himself almost in a “lead user” role, directing others as they do the technological work of creating the user interface. He focuses on the goal and lets others actually do the work.

Lucas seems to be unusually adept at spotting the overall direction indicated by trends, and is unusually fearless and clear-thinking as he goes about inventing ways to capitalize on new trends and technological innovations without regarding to protecting what he already has. This is a trait shown by almost no incumbent whose businesses and products are under attack from potential disruptors.

For example, although Lucas said he “never imagined people would go through Star Wars frame by frame, and tweet their friends about its cinematic tricks,” he embraced DVD technology when it came out. He has embraced every type of medium, and said during his World Business Forum interview that not only has he made films for all kinds of screens, he’s now focused on learning to make films for mobile phones.

Yet he also seemed quite humble, acknowledging others’ innovations and at one point saying that he had thought that due to its complexity the Lord of the Rings saga couldn’t be made into movies, and that he thought Peter Jackson had done a great job at that.

Running as a theme throughout Lucas’ story was that you should keep trying, keep experimenting, move on when the experiments don’t work, and build on them when they do. He quoted one of his most famous characters, Yoda, saying “be careful what you hate – you may become it,” which is one way of saying don’t focus on negativity and failures. Another Lucas aphorism appropriate for innovators: “Nothing is a lost cause, unless you give up.”

Over the course of two days at the World Business Forum we heard from four speakers who particularly focused on the economy: David Rubinstein, co-founder and managing director of private-equity firm The Carlyle Group; economist Jeffrey Sachs, New York Times columnist and 2008 Nobel Economics Prize recipient Paul Krugman, and former President Bill Clinton (pictured).

Rubinstein started by teeing up a list of all the problems and challenges facing us: “debt, deficit, inflation, taxes, unemployment, Social Security, Medicare, Medicaid, the dollar, savings, interest rates, and energy.” Not on this list was perhaps the biggest challenge of all – complex and rapidly shifting global politics that mark a shift from a world in which the United States was the biggest power to a “multipolar world not organized around any one particular power.”

Sachs continued the bad news while focusing his comments on the enormous challenged of climate change and the potential it brings for loss of economic growth.

Krugman discussed the economic politics underlying the financial crisis we are now in. None of these speakers highlighted the opportunities to innovate hidden in the descriptions of the challenges we are facing. Opportunities await innovators who can navigate the new multipolar political world and who can bring new ideas to the table for positive change in areas like healthcare and energy, while still successfully doing business in the post-Lehman, credit-tightened economy.

A sense of optimism about the future came from former President Clinton, who was the conference’s last speaker. His vision of how we can pull out of the financial mess and solve problems involves helping the poor, particularly in developing countries. If we reach out to help those less fortunate then we are, he said, we will create a rising tide that will lift our boats along with theirs. Further, helping others is not just right but brings security. “You can't run away from consequences of things that happen a long way from you -- inequality, instability, unsustainability,” he said.

Another point Clinton made is that there is no such thing as a solution without an unintended consequence, which I believe makes a good point for an experimental, test-and-learn strategy. Experiments are good at exposing unintended consequences.

Ultimately, Clinton issued a challenge that should resonate with innovators: How do you make the most of whatever it is that you propose to do? 

This past week I attended the World Business Forum in New York as one of a group of bloggers. My real-time comments were posted to Twitter and can be found at search.twitter.com/wbf09. Here’s a longer post synthesizing some of the learnings from the first day.

Bill George, former Medtronic CEO and currently a Harvard Business School professor, opened with a dynamite talk on “Leadership in Times of Crisis” taken from his book, 7 Lessons for Leading in a Crisis. You can’t deal with any problem by putting Band-Aids on it, he said. You must deal with root cause of problem In crisis, set aside financial plans made before, and think about getting it right for the long term.

By looking at root causes in the current financial crisis, he said, we can find the universal lessons that are common to all crises. Some of these included: CEOs should admit their own mistakes because that gives others permission to see their mistakes and increases integrity; develop personal habits such as jogging and meditation that give you resilience; dig deep for the root cause because it allows you to question assumptions that may now be wrong; get ready for the long haul; never waste a good crisis (which he noted should not be attributed to Rahm Emanuel, as it has been lately, but to Machiavelli); be ready to take the leadership role and step up to the real problem; withstand the pressure to be someone you’re not and stay true to yourself; and don’t play defense, play offense -- execute rigorously so you will be ready to go when the time comes.

What will be your legacy? George asked. “Never doubt the power you have as an individual to make a difference. I hope you have the passion to see this crisis as an opportunity to change the world.”

Former GE executive Bill Conaty then spoke about talent, explaining the four critical elements in developing and nurturing leaders: Attract, develop, assess, retain. His pint: the majority of companies put most of their effort into attracting, when they should pay more attention to the latter elements, especially to developing and retaining leaders.

Patrick Lencioni, author of Five Dysfunctions of a Team, knocked us out with a very engaging and entertaining talk on teamwork, amply illustrated with anecdotes from his life as a father to four boys.

Most notable to me about what Lencioni presented were his comments on trust. Trust is huge problem is organizations, he said. When there’s no trust there’s no feedback. And instead of the organization being able to capitalize on people’s individuality, that individuality gets lost and brings no value.

Trust, he said, is also a key to handling conflict, which is very important: “Conflict without trust is politics. Conflict with trust is a search for the truth.”

People need to be able to disagree with ideas, because if they can’t, they will then begin to disagree with each other personally. Conflict then ferments around people and destroys relationships, and of course also destroys effectiveness and destroys innovation.

Said Lencioni: Consensus is a 4-letter word. But when people weigh in they buy in. They need to have the ability to disagree and then still commit. Great relationships built on ability to disagree, as anyone who's ever been married knows. People passively sabotage an idea or a plan when they don’t have a voice.

Lencioni offered an interesting idea: When he assembles a team to work on a problem, he gets them to share this information first: Where did you grow up, how were many in your family, what was your biggest challenge growing up? This gets people to open up and gets them to understand each other as people, so that they’ll focus on disagreeing with the ideas and not each other, avoiding the fundamental error of attributing other people’s negative behaviors to their characters, while attributing our own negative behavior to environmental issues (such as being stressed).

Blog posts on the conferences I am attending this week will be coming soon. Meanwhile, my live notes on the past two days of the World Business Forum and today's Business Innovation Factory BIF5 an be found at www.twitter.com/renee_innosight. Go to http://search.twitter.com and enter the search term (hashtag) #wbf09 to read notes from everyone who was tweeting at the conference. BIF5 tweets are at the hashtag #BIF5. Tweetchat and Tweetgrid are also good ways to view Twitter search streams, but require a Twitter account to access.

I'll be blogging live from the World Business Forum conference in New York the next couple of days, part of a group of bloggers whose aggregated coverage can be found here. You can also follow us using the hashtag #wbf09 on Twitter. With speakers ranging from Bill George to Patrick Lencioni to Gary Hamel to President Bill Clinton, just to name a few, I'll be able to share many insights that will be of interest to innovators. Stay tuned!