Do you think you could pick the eventual winner of the X-factor out of 14,000 contestants upfront? Do you think an expert like Gordon, one of the Dutch jury members, can pick the winner upfront? And lastly, would you put money on his ability to pick the winner upfront? Personally, I wouldn’t bet much money on his ability to pick the right one out of the more than 14,000 candidates. The funny thing is, that a lot of companies take these low-chance-of-success-bets in regards to their innovation processes. The X-factor program however, has a very efficient innovation process.

In a lot of companies, two or three ideas are selected out of all the ideas that exist within the company. The other ideas do not get a chance of growing or showcasing progress. The ‘innovation’ budget is divided among these two or three ideas and these ideas are developed until launch. If you would be able to pick the two or three right ideas at the start, you would be one of the worlds best predictors and you could make a lot of money at the bookies with that gift. But personally I don’t believe that anybody is that good. Apparently, The makers of X-factor don’t trust Gordon to be that good either. They have set up a process to select the winning idea/singer.

Would you put your money on this contestant, in Britain’s got talent
(the English version of X-factor), after only seeing her?

Innovation process at the X-factor
The 14,000 candidates go through a first screening phase in which a large portion falls off. But also quite a large number of contestants progress from this first phase and they start a continual process of training and showcasing progress. Each time the best ones are selected to progress to the next round. This process goes on until the best candidates reach the finals and in the last episode the ultimate winner is chosen. In the final steps of the process, public voting by text-messages is introduced next to the judgement of the jury.

Organise innovation the X-factor way
The process described above reflects the way an innovation process at a company should be as well. At the first stage of the innovation funnel, very liberal selection criteria should be in place. In that way you will not dispose a ‘rough diamond’ idea, which does not look like a good idea at the beginning, but might potentially evolve into a killer idea. In the next steps, the continuous learning process of evolving the ideas throughout the innovation funnel ensures that ideas will develop to their full potential. The lessons learned from ideas that do not make it along the process, fuel the further development of ideas that are still in the process. The public voting done at the X-factor show translates to asking your customers for input on the ideas in development. If companies organise innovation in the X-factor way, they will become more efficient in their innovation process.

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Google 20% rule
The 20% rule stimulates the entrepreneurial level of the employees, since they can openly work on side projects. Also, people tend to be productive when they work on things they see as important or have invented, or are working on something they are passionate about. Probably a company even attracts more entrepreneurial-minded employees. When employees can only work on their side projects at home you run the risk that an idea will either fail from a lack of resources or succeeds to the point that they quit to pursue it full time. So Google gives them the freedom to spend one day a week on an idea they are passionate about without having to worry whether the idea fits into the company or even if money could be made with it.

A lot of people think that the first company to introduce the 20% rule was Google, but it has a famous predecessor. Many years before Google even existed, 3M decided to stimulate innovation by directing its engineers to spend 15% of their paid time on projects of their own choosing. Among other things, this extra time yielded the idea for Post-it Notes.

The real innovation stimulus
Sure, the 20% stimulus is a good way to get more ideas out of your employees, and therefore stimulates bottom-up innovation. However, the real bottleneck we see at a lot of companies is not generating ideas, but effectively selecting and developing the right ideas. This is the point were the culture and work philosophy of truly innovative companies like Google comes into play; as written in the book The Google Story, “People talk over lunch about the things they are playing with, it is like they are the CEO of their own little company. Once an idea matures a little bit, they tend to talk about it in a more public forum. One way of circulating word about what they are doing is through bulletin boards on Google’s internal computer network, but the company also sets aside time for peer reviews where engineers can receive feedback on their budding ideas.” Positive feedback implies other people are willing to work with you, and you have the prerequisite for a project. In the end some ideas will get funded and management makes sure that the project sees the daylight. The strength in this approach lies in the fact that employees actually work as entrepreneurs within the company; when they need marketing information, they go to a marketing specialist, when they need technical feedback, they simply get it. All this cross-functional feedback and collaboration comes without hierarchical constraints, another innovation enabler.

Google News
The innovation process of Google is nicely described in the book by the development of Google News. Initially it was the idea and little project of a guy named Krishna Bharat, at the time a 31-year-old software engineer. By late 2001 he was working with two other Googlers to build a working demo, which was released within the company to gauge reaction from others. He already new it was popular, since he got a lot of feedback from engineers, but then suddenly Eric Schmidt (the CEO) walked into his office and said he was really interested and wanted to make it happen. Then, subsequently he spoke to Larry Page and Sergey Brin (the founders of Google), and they were also very interested. Bharat’s 20-percent-time project turned into a full-time endeavor; it received the resources necessary to take the demo and built it into a real product.

Innovation funnel
At Google many ideas are generated through the 20 percent time but because it is not possible to take al the ideas and make them products, an innovation funnel is in place. The culture in which this process takes place, is well described by a remark of one of the employees: “The intrapersonal environment at Google is very energizing. When someone comes up with a new idea, the most common response is excitement and a brainstorming session. Politics and who owns what rarely enter into it.” Just check the number of successful new product launches of Google when you question whether they do a good job innovating.

Other companies
The next question is of course: Can we copy this Google approach to other companies? It is possible, but it is far from easy; it is not simply a case of introducing the 20% rule. As I mentioned earlier, the culture and work philosophy are crucial. Create and foster an environment where people can easily walk into the office of other employees for feedback and advice and definitely use online tools that enable this process too. Involve top management in this process as well. Bring the innovation funnel in practice within your company. In the end, employees should be working like entrepreneurs within your company. Not everybody has the attitude to work like that, so stimulate entrepreneurship by training your employees.

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“Innovation follows a power law: for every 1,000 oddball ideas, only 100 will be worth experimenting with; out of those, no more than 10 will merit a significant investment, and only two or three will ultimately produce a bonanza. Venture capitalists understand this arithmetic. In a given year, a typical VC firm will review thousands of business plans, meet with hundreds of would-be entrepreneurs, invest in a dozen or so companies, and then hope that one or two of them will become the next Google, Cisco, or Amgen. Few managers, though, seem eager to acknowledge the inescapable arithmetic of innovation.”

Innovation Funnel
This actually means that venture capitalists understand how to utilise the innovation funnel. In a structured innovation process, a lot of ideas need to go into the innovation funnel and along the different stages of the funnel the quantity of ideas goes down and the quality of the ideas goes up. In this way, the innovation funnel provides organisations with a staged process for innovation. To use the same amount of ideas that Hamel mentioned: out of the 1000 ideas that are brought in, the 100 best ideas are selected and get a little time and funding to be developed a little further; at the next stage, these 100 ideas are rated at stricter criteria so that the best 10 ideas will go into the following stage. At the end the one or two best ideas will be developed into actual products or services and all the other ideas and knowledge gathered along the process are stored. In any case it is important not to bet on one horse from the start. Diversification of the ideas is needed. As Hamel puts it:

“Executives, like VC’s, must invest in a portfolio of strategic options, and must resist the temptation to prematurely focus their resources on one or two ’surefire’ ideas. It’s a numbers game. While the median return on a VC’s portfolio may be close to zero (many, if not most, ventures will ultimately fail), the average return can be eye-popping — thanks to the disproportionate effect of one or two runaway successes. The lesson is clear: to build an adaptable company, managers need to worry less about weeding out low-probability ideas, and more about building a diverse portfolio of nonincremental strategic options.”

Innovation Chimney
Our experience shows us that a lot of companies do not follow the stage gates in the intended way. A lot of companies do still collect a large number of ideas. But after the idea collection phase, higher management selects a couple of ideas that get full funding. What you see in such a process is that people responsible for a project/idea more or less connect their career to the project. As a result ideas do not get killed, because that has a very negative connotation. A lot of projects end up floating around. My colleague Jaap Linssen recently wrote an interesting blogpost about the terminology used in the decision to stop a project/idea. For an effective idea management process it is critical that the attitude in organisations towards stopping projects/ideas changes. Although the project might get stopped, still a lot of lessons are learned along the process that can help other projects.

Idea management VC style
To optimise the idea management process in an organisation, it should be implemented in the ‘VC way’. Let ideas actually evolve through the innovation funnel and as part of that process organisations should change their attitude on stopping projects.

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