Experience is getting a bad rap these days. No, I’m not talking about the election campaign. The February 2008 issue of the Harvard Business Review has an article called “The Experience Trap.” Two professors at INSEAD (France), using a simulation tool, tested how senior software project managers actually manage projects. They found that “managers with experience did not produce high-caliber outcomes“. In the simulation (which the participants rated as being very life-like), project managers did not revise estimates despite new data becoming available; they did not anticipate problems despite having handled similar projects many times before. The authors call this the “experience trap”.

However, the discussion points more to problems with learning: the managers had seen these same problems in the past, but acted as if they were seeing the problems for the first time. The researchers argue that it is a lack of learning that leads to these problems.

So, as I see it, this research finding translates to the project managers lacking “intelligence”: the ability to respond to new situations and to learn from them. More specifically, these project managers lack Operational ISmarts, and need to be trained to develop this aspect of innovational intelligence.

So , Starbucks will close for 3 hours today for Barista training. With fast food chains poised to steam into the espresso world, Starbucks had better do something to pick itself up. I’ve always admired the genius of the understated Howard Schultz. This is one step in the long process of recovery. But Starbucks should recognize that what will differentiate it from the competition is that it is in the service industry. As Schultz has obviously recognized, stores such as the one in LaGuardia airport offer anything but a “third place.” As far as I am concerned, that is the last place I want to be.

As I have argued in my many years of studying the service industry, customer service folks (in Starbucks’ case, the baristas) are the ones who need to be tremendously innovative and display everyday leadership: customer requests are as varied as they come and operational crises happen all the time. Some want room for milk, some what whipped cream. Some want it hot, some want it “ready to gulp.” The milk spoiled in the fridge, a kid spilled hot chocolate on another customer.

Baristas have to demonstrate everyday leadership. What does that mean? It means that the baristas must be able to handle unexpected circumstances with aplomb. They must make winning situations of what could be store-shutting crises. How can they do it? They must be trained to identify, develop, and apply the five leadership intelligences of the LSmarts framework–the analytical, operational, inventive, communicative, and ethical leadership intelligences.

What is the barista training doing today? Schultz says:

He wants baristas to share their passion for making espresso, or as he says, “to pull the perfect shot, steam milk to order and customize their favorite beverage.”

In other words, he wants them to be trained in”operational intelligence” (the key word is “customize”–customization cannot happen without intelligence).

But I hope Schultz is paying heed to training Starbucks employees in all the five leadership intelligences–such training will definitely perk Starbucks up.

Following my previous post, I have been considering the question of how hope and innovation are connected. The National Innovation Initiative has this interesting statement in its report:

America, in the end, is all about hope. And innovation is the societal and economic manifestation of hope.

I agree. But what is it that makes the manifestation possible? I believe that the change-agent is ISmarts. Different persons may have the same hope, but the hope will manifest itself in different innovations because of the different kinds of intelligence-driven innovational capabilities that we discuss in the ISmarts framework.

So one can say, ISmarts transforms Hope into Innovation.

One cannot escape all the talk of hope, reality, and change in the election climate. Barack Obama talks about hope, Hillary Clinton talks about reality, and both talk about change. Which leads to the question: Which of the two–hope or reality-orientedness–is more important for change and innovation?

The mistake we make often is to overemphasize the negative aspects of both hope and reality-mindedness. In its negative version, hope is an empty desire, an unattainable dream. Reality-mindedness in its negative version, implies a rootedness in the past, an inability to change.

But really speaking, both hope and reality-orientedness are necessary for innovation. While hope points to the “can be”, reality-orientedness indicates the “is”. Hope is the engine that drives new ideas, reality-orientedness is what makes the rubber meet the road. Hope dreams up the innovation, and reality-orientedness makes the innovation practical. Without hope, there can be no dream; without reality-orientedness, innovation will remain a dream.

In the ISmarts framework, hope would be more in the “Inventive” aspect, while reality-orientedness would be more in the “Operational” aspect.

Design-driven innovation is suddenly in the news these days. Following last week’s article in BusinessWeek, today’s newsletter from the Harvard Business School in my mailbox describes a research paper that discusses the merits of design-driven innovation.

The claim of design-driven innovation is that it is spontaneous, radical, and does not pay attention to customer needs. Most importantly, it relies on a clear division between the “outside” of the firm and the “inside.” It is claimed that companies that engage in design-driven innovation create radical innovation because they do not “listen” to customers.

This is however a myopic view–a knee-jerk reaction to the market survey-driven innovation that companies overemphasized in the past. In reality, it is not wise to eschew one approach and embrace another. Good innovators let good thoughts and good ideas come from all sides.

There are two points that I’d like to make here. First, ideas always occur at interfaces. No change, no innovation, no invention happens in isolation. Humans are triggered into new thoughts because of our interactions with the world outside us–with other humans, with systems, with nature, and so on. Design-driven innovation also relies on ideas that come from an interface–between the designer(s) as designer(s) and the designer(s) as customer(s). To claim that design-driven innovation does not listen to customers is not true. Like the cook who dips his finger in the broth to taste it, at the point of design, the designer is also a customer. It just happens that design-driven innovation has only one customer in mind–the designer.

The second point is this: The best mousetrap will not succeed unless the market is ready for it. Credit cards–a fantastic financial innovation–were introduced in the 1930s. They did not take-off during the depression (surprise for design-driven innovation!). They were revived in the 1950s by Diner’s Club, and in the 1960s by the Visa conglomerate. But credit-cards had to wait for the 1980s to see real wide-spread acceptance. As I have done in some of my academic work at Wharton, from a microeconomics point of view, we can explain this phenomenon of slow growth on the basis of network effects–the credit card is a product whose success depends on the size of the network of users. But that’s the whole point–it is the customers who ultimately call the shots on “successful innovation”. A singular emphasis on design-innovation to drive all innovation blurs the difference between invention and innovation. From the definition we use at Vivekin Group, an innovation is a new idea or invention that is of value to a society. An invention that comes out of a design-driven approach may or may not have such value immediately. How often have we heard of inventions “before their time.”

In sum, I do think that being design-driven is important for innovation, but it is not all-important. To paraphrase the Hindu Upanishads, “Let good ideas come to us from all sides.”

In a recent post titled Innovation at Risk on the innovation blog at Business Week, Lara Lee points out that in hard economic times, companies do not innovate and that innovation happens when the times are good. However, as I see it, there seems to be hardly any correlation between economic good times and innovation. I am thinking back to research that was done at Harvard in the 1980s. This study by Jaikumar et al about the use of new technology in the auto industry found that in the late 1970s and early 1980s, Flexible Manufacturing technology was being embraced by the Japanese auto firms, but Detroit was rejecting it as unnecessary given that they had such large market shares. Well, we now know the results of such innovation lethargy. Thus, for many companies, when the belly is full, it is time to nap. Complacency kills innovation.

On the flip side, does necessity foster innovation? The jury is out on that question too. Some companies foolishly think that innovation is “fluff” that does not contribute to the bottom line and in knee-jerk reactions, in hard times, they shut down innovation when it is needed most. On the other hand, there are numerous examples when companies have used innovation to work themselves out of hard times. So, it is difficult to make a good connection between economic climates and a company’s investment in innovation.

So what is it that drives innovation? To generalize, innovation stems from (a) the recognition of a need and (b) an impulse to fill that need.

Sometimes, the recognition of a need is thrust upon us (especially in hard times) and sometimes, it is spontaneous. Similarly, the impulse to innovate to fill a need is sometimes forced upon us and sometimes seems to have a life of its own. Good companies hedge bets by innovating constantly.

From a personal perspective, I find it thrilling to work on understanding innovation, which I consider one of the most complex and fascinating responses that we humans make to the environments in which we operate.

Ideas are at the root of innovation. But how many does a company need to be called innovative? In an innovative company, how many ideas does each employee generate on an average?

This weekend, for lack of better things to do, I did some lazy back-of-the envelope computations. Take the case of Toyota. It implements 1 million ideas every year. A British study found that only 6% of all ideas make it into a product, which means that 16 out of 17 ideas fail. So, Toyota generates roughly 17 million ideas every year of which 1 million succeed and 16 million fail.

Toyota has approximately 300,000 employees world over (To be precise, that number was 264, 096 in 2003). This means that each employee generates 57 ideas every year, or in other words, 1 idea every week. Of course, of these 57 ideas only 3 or 4 make it to the market. What is important though is the churn–every employee generates an idea a week! So at least at Toyota, for every employee, an idea a week keeps innovation at play….

Ketzel Levine blogs at NPR’s Talking Plants and she had a piece on Morning Edition on NPR today. Levine talked about a small, but intrepid woman, Rosario Costa Cabral, who has learned to regrow Amazonian forests that had been rendered bereft by indiscriminate logging and abandoned. But this little farmer does more than regrow forests. Levine writes

In addition to collecting and replanting seedlings of the few old-growth trees that had, miraculously, escaped logging, this fifty-something woman is known among her peers for her uncanny ability to grow crops that should not tolerate river flooding even once, let alone twice a day.

As Levine describes the rich papayas, the cacao, the hot chilli peppers, one wonders how Rosario is able to grow these in an area that sees the land submerged every so often under several feet of flood waters from the river. There are some good lessons that this path-breaking (I use the term both literally and metaphorically) woman teaches us about innovation:

1. Create a community by providing something that is essential, and give that stuff away for free

Rosario started not by growing some exotic plant, but by planting a staple food: cassava, whose edible roots are a rich source of carbohydrates in the tropical areas. The cassava she grew produced huge roots and became a local attaction. People asked for seeds, and she gave them to everybody for free. (Think Google, search engine, and free).

2. Experiment and observe over several years before you bring an innovation to market

The cassava grew such big roots because Rosario had handpicked the seeds from certain cassava that had shown tremendous resilience over many years to environmental changes.

3. Learn to time your innovation

Rosario picked a “magic month” to plant her cassava: November. That is the month when the tides from the flood are at their lowest level, and this gave the cassava time to acclimatize before the tides rose in later months. In innovation, timing is all.

4. Watch the markets carefully to spot strengths and weaknesses and contextualize innovation accordingly

Before she planted her cassava, Rosario watched the land carefully to see where the flood waters went and how deep the waters ran. Then she experimented to learn how much flooding each plant-type could tolerate. She found that cassava could tolerate up to 2 feet of flooding, lemon trees up to 4 feet, and chilli peppers up to 1.5 feet. She planted her forest garden according to this tolerance. Contextualize innovation (more on “contexts of innovation” in an article that will be available on Vivekin Group’s website later in February.)

Janet Rae-Dupree has an article in the NY Times today that talks about the creative process. According to Rae-Dupree:

Epiphany has little to do with either creativity or innovation. Instead, innovation is a slow process of accretion, building small insight upon interesting fact upon tried-and-true process.

I cannot agree more, having argued consistently for such a conceptualization of the “innovation process.” In some of my seminars and writing, I have pointed out how well the model proposed by the Harvard paleontologist, the late Stephen Jay Gould, portrays the innovation process. Jay Gould argued that evolution follows a pattern that he termed “punctuated equilibrium”–there are long periods of incremental evolutionary activity, and suddenly evey once in while, a new species emerges.

What is interesting for me is how this conceptualization of innovation as comprising both incremental and radical change affects processes of innovation management and measurement. What do we mean by a culture of innovation and how do we develop it? What kinds of metrics do we use for measuring innovation within an organization? I believe strongly that the ISmarts method (which adopts a similar view of innovation) offers tremendous insights into such questions, and can be applied very fruitfully as we are seeing with our clients worldwide.