A Disciplined Approach to Evaluating Ideas

HBR Blog Network / 
11:37 AM Tuesday January 3, 2012 

BY SCOTT ANTHONY

Scott leads Innosight’s Asian operations. His fourth book on innovation, The Little Black Book of Innovation, will be released in early 2012. Follow him on Twitter at@ScottDAnthony.

"Make sure you ask the right questions at the right time." That's one memorable piece of advice from a leader at a global innovation powerhouse. Unfortunately, it is a piece of advice that is heeded too infrequently inside large companies.

At many companies, the idea evaluation process revolves around detailed Excel spreadsheets, comprehensive PowerPoint documents, and an orchestrated sequence of pre-meetings leading up to a decision meeting. This kind of disciplined approach works very well when companies have knowledge that lets them be precise in their analysis, and executives have the relevant domain experience to make informed decisions.

Applying this same discipline to nascent opportunities in new spaces can be disastrous. People spend days discussing Excel spreadsheets that are nothing more than mathematical relationships between made-up numbers. Managers working on ideas discover that detailed PowerPoint documents are their biggest enemy, because the details act as bait for nit-picking devil's advocates. Endless pre-meetings crowd out action-based learning.

The general way around this problem seems simple enough — have a process by which you evaluate ideas in different ways at different stages of development (most call this a "stage-gate process."). You might have a "front end" process where you rapidly iterate and evaluate lots of ideas and a more detailed "launch" process to optimize the few that make it through the early rounds. This kind of process can help successfully move an idea from a Post-It note to the market.

What does that actually mean in practice? The rest of this post will show how Innosight's venture investing arm sifts through ideas, as a kind of guide. (Next week's post will apply lessons from this approach to large corporations.)

Innosight's venture capital "team" is a two-person shop in Singapore. I sit on the Investment Committee, along with Harvard Professor Clayton Christensen, primarily getting involved when we are getting close to a big decision about a current or potential portfolio company. The core team, Pete Bonee and Piyush Chaplot, scour Singapore to find the best investment opportunities. In the past two years, they have looked at more than 200 potential investments.

The first decision is whether to have a meeting to evaluate a company. Answering this question is pretty simple. Our fund specifically looks to seed businesses that have the potential to disrupt existing markets or create new ones. So, if Pete or Piyush believes that the material they've seen to date (which can be a one-page executive summary, a 20-page pitch document, a rough website, or even an email description) fits our strategy and has some potential, they will proceed with a meeting.

Then, the bar goes up. The next decision is whether to formally investigate the company. We've developed a qualitative screen with about 20 characteristics that blend the theory of disruptive innovation with what we have learned in five years of investment and incubation activities. Based on what we've seen, we evaluate whether the idea is negative, positive, or neutral in each of those characteristics.

There's no "score" an idea has to exceed to make it to the more formal round. In fact, the process is as much educational as it is evaluative. It helps our team understand the areas to probe more deeply during further discussions or detailed due diligence. The process almost always surfaces two or three big issues that, if they can't be addressed, would stop us from consummating an investment.

Ultimately, a team discussion determines what moves forward. We won't proceed unless an individual raises his or her hand to lead the effort, because ultimately that individual will have to spend a day a week or more with the company if we make an investment. If there isn't that individual passion, we won't proceed.

Then, if we're comfortable that we've addressed the critical issues, we decide whether to invest. Along some dimensions, this decision is pretty easy because we have narrowed our focus to a couple of key issues. Data from our investigation either addresses those issues and we proceed, or not.

Because our process involves three distinct decisions — evaluate, investigate, and invest, each with specific criteria and a different level of scrutiny — the final decision ends up being straightforward. Over the past two years, we have evaluated about 60 companies, done detailed investigation of about 10, and invested in five. As you can see, decisions involve a lot of discussions and team judgment.

Distinct differences separate how a corporation and a venture capital fund approach innovation. My next post will show how Innosight Ventures' three-step evaluation process applies inside big companies.

Source: http://blogs.hbr.org/anthony/2012/01/the_different_disciplines_of_g.html

Entrepreneurship in Philanthropy

By Professor J. Gregory Dees, Faculty Director, Duke's Fuqua School of Business Center for the Advancement of Social Entrepreneurship (CASE)

Entrepreneurship occurs in all spheres of productive human endeavor, including philanthropy. It is the major force for progress. In this article, I will address what it means to be an entrepreneur in philanthropy and outline a range of entrepreneurial strategies in philanthropy.

What does it mean to be an entrepreneur in the field of philanthropy?

Entrepreneurship in the field of philanthropy involves finding new and better ways for mobilizing and deploying resources to make the world a better place.

The best place to turn to understand entrepreneurship is to Austrian economist Joseph Schumpeter. In Capitalism, Socialism, & Democracy, he pointed out that the function of entrepreneurs is to “reform or revolutionize the pattern of production” in a given field or market. In his earlier work, The Theory of Economic Development, he referred to this process in more modest terms by saying that entrepreneurs create “new combinations.” Entrepreneurs change the pattern of production by combining elements in new ways. They are, in this sense, innovators.

Of course, changing patterns of production could be a bad thing if the new patterns are not superior to the old patterns, at least for some markets. Successful entrepreneurs not only change the pattern of production, they improve it. They create value, often for themselves, but also for society. As French economist Jean Baptiste Say put it in A Treatise on Political Economy, when successful, the entrepreneur “shifts economic resources out of an area of lower and into an area of higher productivity and yield.” The new pattern of production that an entrepreneur creates should be superior to the old pattern. Thus, put simply, entrepreneurs implement new and better ways of doing things.

So what does it mean to be an entrepreneur in philanthropy? It means successfully implementing new and better ways of engaging in philanthropy. But what is philanthropy? Many of us associate philanthropy with the giving away of money, with its roots in alms-giving to the poor. However, the literal meaning is much broader. The English term comes from the Greek—meaning simply “love of humankind.” Using this definition, any act or expression of this love could be an instance of philanthropy. Yet given the modern understanding of the term, this definition seems too broad. For purposes of this discussion, I propose using a definition that is broader than giving money, but narrower than any expression of love for humankind. Specifically, I suggest we define philanthropy as mobilizing and deploying private resources, including money, time, social capital, and expertise, to improve the world in which we live.

Thus, we can define philanthropic entrepreneurship as the productive efforts of an individual, team, or organization that reform or revolutionize the patterns by which private resources and relationships are mobilized and deployed to effect social change.

What strategies can philanthropic entrepreneurs use?

This definition makes the process sound rather dramatic, but entrepreneurship, even in Schumpeter’s sense, happens all the time. In The Theory of Economic Development, he identifies five ways in which entrepreneurs create new combinations, thus reforming or revolutionizing the pattern of production. These categories are not meant to be mutually exclusive, and many innovations fall into more than one. However, they can help stimulate our thinking about different opportunities for entrepreneurship in philanthropy.

To paraphrase Schumpeter, entrepreneurs make new combinations in the following ways:

1. Introducing a new good or quality of a good. Think of the advent of the cell phone or the introduction of the hybrid automobile. Every product or service to which we are now accustomed was once newly introduced by an entrepreneurial individual, team, or organization. In philanthropy, consider the introduction of “program related investments.” Endowed foundations found that some nonprofit organizations were in a position to benefit from low-interest or no-interest loans and, thus, did not need grants. The foundation decided to make these loans out of their investment corpus to serve the foundation’s philanthropic objectives.
2. Utilizing a new method of production or distribution. The assembly line was a major innovation in production that allowed the entrepreneurs embracing it to lower costs and improve productivity. Cable television represented a new method of distribution for broadcast programming and movies. The rise of “venture philanthropy” exemplifies this kind of innovation. Venture philanthropists adopt methods inspired by venture capitalists in assessing potential grant recipients, making large grants over longer periods of time, and working intensely with a smaller number of grantees than do program officers in more traditional foundations.
3. Taking existing products into new markets. Entrepreneurs often move goods into new geographic or demographic markets. This is one of the engines of globalization as entrepreneurs see the success of a product or service in one market and simply create a similar product or service in a market that is not currently served, providing access to a new group of consumers. It also happens when specialized products migrate to more of a mass market. Personal computers, the Internet, and e-mail services have all been brought to mass markets, at least in developed countries. Of course, serving new markets well may require modifying the product or service for the new market. Regardless, bringing any form of philanthropy into a region or country in which it previously did not exist is an example of this kind of philanthropy. For instance, the Bertelsmann Foundation brought community foundations, a well-established form of philanthropy in the United States, to Germany.
4. Drawing on a new source of supply. Entrepreneurs can create value by tapping into new and better (lower cost or higher quality) sources of labor, capital, land, raw materials, or equipment. For instance, a new airline in the United States, Jet Blue, uses a network of housewives working from their homes in Utah to handle all of its telephone reservations business. Several innovations in philanthropy involve tapping into new or underutilized resource pools. For example, the advent of workplace giving campaigns, such as the United Way, allowed smaller community-based nonprofits to tap into a new source of supply for funding, namely the employees of local corporations.
5. Creating a new form of organization or industry structure. Many strategic alliances, partnerships, or licensing agreements foster new organizational forms and industry structures that are beneficial. The advent of franchising, as a vehicle for expansion of retail businesses that allows local ownership but assures consistent quality and a common brand name, would be an example of this kind of innovation in business. In philanthropy, the rise of the large, professionally managed, endowed foundations, such as Ford and Rockefeller, represents a new organizational form that significantly affected the structure of an industry. Similarly, the community foundation is an organizational innovation that was developed in Cleveland, Ohio in 1914 and has had a major impact on the philanthropic industry structure, particularly in the U.S. More recently, the rise of charitable giving funds managed by financial service companies, such as Fidelity, is another example of this kind of entrepreneurship in philanthropy.

Of course, many business and philanthropic entrepreneurs create new combinations that fall into more than one of these categories. Consider Social Venture Partners (SVP), originally developed in Seattle, Washington, operating in some 23 locations as of February 2005. SVP tapped into a new source of supply, increasingly affluent young professionals with limited experience in philanthropy. It offered them a new product of sorts, an opportunity to work with other young professionals to contribute time, expertise, and money to select local nonprofits while working with other young professionals in the process. SVP developed a distinctive method for assessing and making grants using its “partners” in the process and adopting some of the elements of venture philanthropy. It offered a new product to the grantees that involved access to valuable business expertise as well as money. When viewed as a whole, the SVP model amounts to an organizational innovation similar to the creation of the community foundation.

Conclusion

Entrepreneurship in the field of philanthropy involves finding new and better ways for mobilizing and deploying resources to make the world a better place. As Peter Drucker has argued in Innovation and Entrepreneurship, entrepreneurial innovation can be pursued in a thoughtful, systematic way. Schumpeter’s categories for creating new combinations offer would-be philanthropic entrepreneurs a framework for contemplating a variety of paths for reforming or revolutionizing the pattern of production.

As in any field, it is important to continue to look for innovative solutions, but in the absence of an appropriately aligned form of market discipline, it is particularly important that philanthropic entrepreneurs and their supporters critically and consistently assess these innovations in terms of the new resources attracted, efficiency, and ultimate impact. In closing, I encourage readers to consider the following questions:

• What can we learn from past entrepreneurial efforts in philanthropy?
• What are the most promising current innovations in philanthropy?
• How can we be sure that these innovations are effective and that they are shifting resources from areas of lower to areas of higher productivity?
• Where are the needs for innovation in philanthropy the greatest?
• What are the barriers facing philanthropic entrepreneurs?
• How can we help philanthropic entrepreneurs overcome the barriers?

NOTE: This article by CASE Faculty Director J. Gregory Dees is based on his remarks at the International Foundation Management Symposium sponsored by the Bertelsmann Foundation on March 13-15, 2005.

Recommended Readings:

“Cultivating Change in Philanthropy: A working paper on how to create a better future,” by Katherine Fulton and Andrew Blau, Monitor Institute, 2005.

“The 21st Century Foundation: Building Upon the Past, Creating for the Future,” by Jed Emerson, BlendedValue.org, 2004.

"High-Engagement Philanthropy: A Bridge to a More Effective Social Sector,"published jointly by Venture Philanthropy Partners and Community Wealth Ventures, June 2004.

“Note on Innovations in Philanthropy,” by Karen Jacobson and J. Gregory Dees with Beth Anderson, SI-05, Stanford Graduate School of Business, 2000.

“Virtuous Capital,” by Christine Letts, William Ryan, and Allen Grossman, Harvard Business Review, March-April 1997.

Source: http://caseatduke.org/articles/0805/corner.htm 

Impact Investing and Social Entrepreneurship

New innovations to generate social and environmental impact, with the potential for financial returns

Zurich/Davos,  January 26, 2012

Today at the World Economic Forum in Davos, the Credit Suisse Research Institute, in collaboration with the Schwab Foundation for Social Entrepreneurship, releases the key findings of its report entitled “Investing for Impact: How social entrepreneurship is redefining the meaning of return.” The report provides insight into the major trends shaping Impact Investing today and its ability to tackle some of the world’s most intractable societal problems.

Today, more than ever before, investors and entrepreneurs are proactively investing capital in solutions designed to generate a positive social or environmental impact, as well as the potential for financial returns. In practice, these solutions are emerging in most parts of the world, across nearly all asset classes, and at many different levels of risk and return. And although this field is still at a relatively early stage in its development, recent activities suggest that Impact Investing may be reaching a tipping point, with the potential to channel large-scale private capital for social and environmental benefit.

In this report, the Credit Suisse Research Institute explores the opportunities and complexities of Impact Investing. Primary focus is placed on Social Entrepreneurship. Here, direct investments are made into social enterprises that provide scalable, self-sustaining solutions to address global problems. Examples include access to clean water, improved health care or the provision of clean energy. Such investments create a direct and measurable impact, as well as offer the potential for financial returns. Beyond direct investments into social enterprises, other newly emerging financing innovations available to social entrepreneurs are also discussed.

The report further covers the latest trends shaping the field of Impact Investing, including the promise and risks of scaling growth for social enterprises, the importance of the right mix of financing structures to achieve scale, the development of standardized metrics, and the lessons learned by pioneering Impact Investors. Contributors to the publication include some of the most prominent leaders in the field today - Mark Kramer, the founder of FSG Social Impact Consultants, Rupert Scofield, the founder of FINCA International, and Sir Richard Branson, founder of the Virgin Group.

Giles Keating, Head of Research for Private Banking and Asset Management at Credit Suisse, states: “Increasingly, clients are looking for innovative ways to generate financial return alongside social and environmental impact. Today, many philanthropists and investors view Impact Investing as a viable alternative and perhaps a more effective vehicle to create social change than pure charity.”

Mirjam Schöning, Senior Director of the Schwab Foundation for Social Entrepreneurship, adds: “This report clearly highlights how Impact Investing provides great promise in addressing some of the world’s most pressing social and environmental issues.”

Source: https://www.credit-suisse.com/news/en/media_release.jsp?ns=41934

INSPIRATION FOR INNOVATION

Inspiration for Innovation

Submitted by Blogging Innovation on October 26, 2010 – 12:05 amOne Comment

 

by Robert F. Brands

Inspiration for companies comes from the leaders, so it is the leader’s responsibility to initiate and drive the innovation program. For the program to be taken seriously and incorporated as part of the company’s culture itself, the CEO or designated leader must set a schedule of regular meetings. Regular, in-person meetings are the only way for team members to accepts the serious non -wavering intend, recognize the goals and deadlines of the project, and it ensures that the innovation program will not just fall off the map. It’s easy to instruct team members to be conscientious of Innovation, but new products will not come to fruition unless members feel a sense of accountability and urgency for the NPD process.

At New Product Development meetings, take action steps to ensure progress is made:

• Address issues and concerns.
• Share research and results.
• Recalibrate priorities.
• Make new decisions.
• Set objectives and action items to be completed for the next meeting.
• Request progress reports.

The leader’s inspiration and commitment sets the tone for the rest of the organization. By setting a standard of expectations, others see the NPD process as a priority and an indispensible part of the company corporate culture.

Think about the most innovative companies and you”ll find a charismatic involved hands-on leader, be it Steve Jobs of Apple, Herb Kohler of the Kohler company or any small innovative trendsetting company for that matter.
Here are some inspiration tips from my book to help you get started. There are three key steps to achieve the type of Innovation culture that inspires and creates intra-organization cohesion:

1. Lead by Example: It all starts at the top. Management buy-in and support of innovation and ideation is critical. And by support, I mean both material and emotional. It needs to not only endorse, but proactively push for Innovation. It’s the only way for your team to get the motivation to take time from their “day jobs” to make Innovation happen;
2. Over-Communicate, Under-Promise: Talk up overarching Innovation visions, successes (and failures), without hyperbole or pie-in-the-sky verbiage. Keep it simple. Keep it focused. Keep it real. Internal and external communications enhances group buy-in to Innovation goals. It’s important to articulate your grand vision and provide the compelling case for change.
3. Silo Demolition: Knock down the barriers that keep silos apart by creating cross-functional teams between groups that don’t typically interact. This keeps the flame of cooperation – and Innovation – burning brightly. “Silo-itis” can smother buy-in for innovation.

Fuente: http://www.business-strategy-innovation.com/wordpress/2010/10/inspiration-for-innovation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+business-strategy-innovation+%28Blogging+Innovation%29

Robert Brands is the founder of InnovationCoach.com, and the author of “Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival”, with Martin Kleinman – published Spring 2010 by Wiley (www.robertsrulesofinnovation.com).

DE DONDE VIENEN LAS BUENAS IDEAS

One of our most innovative, popular thinkers takes on-in exhilarating style-one of our key questions: Where do good ideas come from?
With Where Good Ideas Come From, Steven Johnson pairs the insight of his bestselling Everything Bad Is Good for You and the dazzling erudition of The Ghost Map and The Invention of Air to address an urgent and universal question: What sparks the flash of brilliance? How does groundbreaking innovation happen? Answering in his infectious, culturally omnivorous style, using his fluency in fields from neurobiology to popular culture, Johnson provides the complete, exciting, and encouraging story of how we generate the ideas that push our careers, our lives, our society, and our culture forward.

Beginning with Charles Darwin's first encounter with the teeming ecosystem of the coral reef and drawing connections to the intellectual hyperproductivity of modern megacities and to the instant success of YouTube, Johnson shows us that the question we need to ask is, What kind of environment fosters the development of good ideas? His answers are never less than revelatory, convincing, and inspiring as Johnson identifies the seven key principles to the genesis of such ideas, and traces them across time and disciplines.

Most exhilarating is Johnson's conclusion that with today's tools and environment, radical innovation is extraordinarily accessible to those who know how to cultivate it. Where Good Ideas Come From is essential reading for anyone who wants to know how to come up with tomorrow's great ideas.

Fuente: http://www.youtube.com/watch?v=NugRZGDbPFU&feature=player_embedded

AYUDA A TUS HIJOS A SER MÁS CREATIVOS, VIDEO 11:11 MIN.

This animate was adapted from a talk given at the RSA by Sir Ken Robinson, world-renowned education and creativity expert and recipient of the RSA's Benjamin Franklin award.



Fuente: http://www.youtube.com/watch?v=zDZFcDGpL4U

FUENTES DE INNOVACIÓN PARA EMPRENDEDORES Y ENTREPRENEURS

Reseña del artículo de Nunzia Auletta y Raquel Puente: ¿Qué hace a un emprendedor innovador?

La autoras comentan de las fuente de innovación empresarial, haciendo referencia a Peter Ducker. A mi gusto aplican al entorno emprendedor necesario para cualquier negocio o industria en la que nos desempeñamos. Comparto con ustedes mis comentarios, en otro artículo de HackManagement.

1. Acontecimientos inesperados: Acontecimientos fortuitos o incluso errores gerenciales que generan hallazgos que pueden ser desestimados por las industrias y hasta ser motivo d burla por parte de los competidores.
   
   Comentario de Javier Martínez: en las prácticas empresariales tradicionales el olvido de las equivocaciones y la eliminación de todas sus causas y huellas es quizás la práctica que más atenta contra la innovación, debemos aprender de los errores, seguro que enseñan más que los éxitos.
   
2. Incongruencias: Diferencias entre la expectativas y los resultados que no parecen tener una justificación, pero que requieren una revisión profunda de sus causas y posibles soluciones.
   
   Comentario de J.M: es el análisis a profundidad y la comprensión absoluta de estas incongruencias la forma adecuada de evaluar si una acción o estrategia funciona en el mercado o la industria en la que estamos o no. En muchas oportunidades el día a día nos obliga a tomar cambios sin revisar a profundida lo ocurrido, es en esos momentos en los que podemos estar sacrificando futuro por presente. Estrategia vs. Urgencia.
   
3. Necesidad de procesos: Exigencias de los procesos productivos o de entrega al mercado, en busca de mayor eficiencia en costos o eficacia en la consecusión de las metas del negocio.
   
   Comentario de J.M: En el punto en que una empresa, proyecto o emprendimiento genera una ventaja competitiva, es que verdaderamente comienza la carrera, dado que al competidor seguidor le costará mucho menos lograr avances significativos en la misma vía de nuestra ventaja. Es allí que el mejoramiento continuo tiene su peso específico, competir por los espacios de mercado de hoy y construir los bastiones de negocio del mercado del mañana, las 2 son la tarea del presente.
   
4. Cambios de los mercados y la industrias: Modificaciones profundas o mejoras de la organización en el mercado o en una industria determinada.
   
   Comentario de J.M: esas mejoras amplian las barreras de desempeño de las industrias y negocios, proponiendo nuevos atributos que el mercado entiende como higiénicas e indispensables, quien de el salto primero en estos cambios tendrá la posibilidad de demostrar primero al mercado sus ventajas competitivas más diferenciadoras sin comparación posible.
   
5. Cambios demográficos: Alteraciones de las características y los hábitos de la población, que afectan la realidad de los mercados, las necesidades y los procesos de decisión de compra.
   
   Comentario de J.M: Hoy en día las personas consideran mayoritariamente que las marcas, productos y servicios mienten durante sus procesos publicitarios, y están dispuestos a comparar experiencias con sus pares, indagando más sobre las cualidades y las vivencias. Las personas de hoy son compradores más agudos y no les gustan las sorpresas, cómo se hace cargo nuestro negocio de esto?
   
6. Cambios en la percepción: Cambios que no impactan la realidad de los productos y procesos, sino la forma en que el mercado los percibe.
   
   Comentario de J.M: El mercado de hoy piensa distinto de la caza de ballenas o no? y su contribución con la industria cosmética o no? pensamos distinto respecto al ambiente y su cuido o no?, entonces ahora más que nunca, como consumidores, no queremos relacionarnos más con procesos y productos ambientalmente antagónicos o si?
   
7. Nuevo conocimiento: Conocimiento científico, tecnológico o social que en el tiempo introduce cambios relevantes para los procesos de negocios.
   
   Comentario de J.M: actualmente los mercados están más informados, el consumidor conoce más, sabe lo que quiere, sabe hasta dónde pueden llegar las empresas, las tecnologías. Siempre me he preguntado por qué los controles remotos de los TV y de otros aparatos no tiene el mismo localizador de los teléfonos inalámbricos? Hasta cuando estaremos buscando en todos lados esos controles?

Fuente: AULETTA Nunzia, PUENTE Raquel: ¿Que hace a un emprendedor innovador?, Debates IESA, Número2, Volumen XV, Abril-Junio 2010.