How to Grow

Alan Kay Quote

No Risk, No Return

“It’s important that we start experimenting.  We’ll do any experiment that can guarantee a 20% return on investment.”

That’s what a senior manager said to my Phd student Paul Newbury.  We laughed about it when he told me, but…. I actually hear this far too often.

Any idiot can say yes to a project with a guaranteed 20% return.  That’s not an experiment.

Experiments are things where we don’t know the answer in advance.  Jeff Bezos said this about experiments:

“If you only do things where you know the answer in advance, your company goes away.”

And then there’s this from Alan Kay:

Alan Kay Quote

“If you don’t fail at least 90% of the time, you’re not aiming high enough.”

It’s a topic that for some reason has been following me around for the past week.  It illustrates a core innovation problem: if we don’t take a risk, we can’t innovate.  If don’t innovate, we don’t grow.  But we hate risk, so we avoid them.

Avoiding Small Problems Creates Big Ones

Last week I was talking to Cassandra Kelly and Nigel Lake.  They are co-CEOs of Pottinger, and they’re doing absolutely fascinating and important work there.  Cassandra was talking about how consultants often operate – they identify a problem and then they use further engagements to try to eliminate all possible risk for their clients.  When she said this, I blurted out “But that’s like trying to raise germ-free kids.”

The problem with raising kids in a germ-free environment is that decreasing their exposure to germs and illness early in life greatly increases their chances of contracting much more serious illnesses as an adult.

Similarly, if you live in a region prone to drought, you need to have regular small fires.  If you don’t have lots of small fires, then the fuel load builds up so much that you eventually have a devastating big fire.

When we try to avoid the risk of small problems, perversely, we increase the risk of having bigger ones.

With genuine experiments, we don’t know the answer in advance. That means we risk small losses if the experiment doesn’t work.  But if we avoid those small losses, we increase the risk of having the company go away.

We Grow by Messing Up, and Learning

We learn to ride a bike by crashing a lot.  We minimise the damage by going slowly, and using training wheels.  But you can’t learn to ride a bike without trial and error.  We build this new skill by failing, but then learning from it.

Seth Godin says that if we try to avoid risk, we’re putting ourselves in a prison:

“…we’re losing our ability to engage with situations that might not have outcomes shiny enough or risk-free enough to belong in the palace. By insulating ourselves from perceived risk, from people and places that might not like us, appreciate us or guarantee us a smooth ride, we spend our day in a prison we’ve built for ourself.

Growth is messy and dangerous. Life is messy and dangerous. When we insist on a guarantee, an ever-increasing standard in everything we measure and a Hollywood ending, we get none of those.”

And Julien Smith says that scars are a sign that you’ve lived and learned:

“A life that has been wasted leaves a body intact and pristine– but a life that has been properly used leaves scars.

Scars tell stories. They are what’s left by mistakes we’ve made. They’re what remind us of the places we’ve been and the people we’ve known.”

If we want to grow as people, we have to mess up.  That only works if we learn, but that is how we build new skills and attitudes.

If we want our organisations to grow, it’s the same deal.  We have to try stuff, do more of the things that work, and learn from the things that don’t work.  These are at the core of building your innovation capability.

If the world ran like clockwork, then we could only do those experiments that guaranteed a 20% ROI.  But the world isn’t a machine – it’s a complex system.

In a complex system, the way to think about the future is this:

  • We can’t predict the future.
  • But we can learn about the patterns from which the future will emerge.
  • In fact, while we can’t control the future, we can influence it.
  • The best way to influence the future is by innovating through experiments.

That’s how to grow.  Innovate through experiments.  Take some risks, get some scars, learn.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

7 thoughts on “How to Grow

  1. I think the fear of disruption through innovation is pretty pervasive…I certainly include myself in that cohort. My business (SAT preparation) is running quite smoothly right now, so when Google invited me to be a beta-tester/early adopter of their world-flattening helpouts business (coming soon to the whole world), my initial reaction was no. Not “no” because I’d weighed the pros and cons and decided against it, but “no” because it was change and change was icky.

    I have forced myself to overcome that part of my lizard brain. So while I see pitfalls, I also see the future, so I’m forcing myself to get ahead of the curve. But it’s not natural, at least not for me.

    • Thanks for the comment Peter. It’s interesting, because I know that over the years you have done a fair bit of experimenting with franchising and other business structure ideas, and I’ll bet you’re not teaching things in exactly the same way now that you were when you started either. Getting ahead of the curve isn’t natural at all, which is why I end up writing a different version of this post once a year or so!

  2. Thanks for the comment Alistair. Experimenting is particularly important in mission-critical professions like these – the key part is to get the scale right. Doctors fail a lot – but they do it on cadavers and in simulations. I wouldn’t want a doctor that hadn’t had training like that. And medical research breakthroughs are predicated on often many years of failed ideas – The Emperor of All Maladies is a fantastic account of how that process has worked in cancer research over the years.

    As for finance, Nassim Nicholas Taleb has consistently made the argument for taking small losses that lead to long-term gains. I talked about that and failure for pilots (another popular counter-example) here:

    In your profile you say you’re an avid photographer. Did you get good by only taking pictures that you knew would be perfect, or did you take a lot of pictures?

  3. Tim, somewhat related to this whole issue of trying/taking risks…I do wonder about how we are raising children…the leaders of the future. I don’t know what others find in schools but at what point can we dispense with the need that every child is a winner? Everyone gets a ribbon. My son came home the other day and said so excitedly as he handed me his ribbon: “Mum, I came 21st in cross country”. I am all for participation and having a go but I also think that we need to have a more honest conversation with our children so they don’t grow up thinking that they are good at everything or that success will come without making a real effort. It seems all to be linked. If my son is told 21st is just great, I understand how some might argue it is good for his self esteem, but how will he know when he needs to try harder or practice or if he comes first, will that feel much different than coming twenty first?

    • It’s a real issue Cassandra. I’m not at all sure how kids will build resilience when there are no setbacks. That’s why I really like that Julien Smith quote – I agree with him that it’s good to have some scars.

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