We spend a lot of time talking about how to innovate with a capital I these days. But maybe there is no fixed formula for innovation. Maybe instead of big R&D departments chasing big-bet innovations, we should be doing lots of little experiments throughout our companies and seeing what comes of them.
That’s what Peter Sims thinks, and in the excerpt below, he describes how Bill Hewlett and David Packard drove their company’s success by flouting the conventions of innovation. The secret of their success was intuition — informed by a closeness to users and an ability to sense their unmet and unarticulated needs — and passionate experimentation. This intuition and passion gave them the confidence to place small bets, even in the face of professional naysayers.
In those days, up-and-comers were routinely advised to steer clear of high-risk development projects, lest they be associated with a failure. But a rising star of today cannot hide from risky projects — they are the only surefire way to distinguish oneself. Just ask Steve Jobs. Would-be innovators can lower the risks, according to Sims, if they cultivate a yen for learning and challenging assumptions and a willingness to test and refine new ideas and take calculated risks. Anyone who does those things can have a go at this most delicate and fulfilling human endeavor.
— Robert B. Tucker
An excerpt from Chapter 1 of Little Bets: How Breakthrough Ideas Emerge from Small Discoveries
[Ned] Barnholt is the former CEO of Agilent Technologies, but these days he’s one of the more respected executives in Silicon Valley, kind of a senior business statesperson whom people trust. Now in his late sixties, he’s a board member at eBay, KLA Tencor, and Adobe. A number of Silicon Valley CEOs consider him a mentor. You wouldn’t guess all of this if you met him. Barnholt is a gentle man: genuine, calm, and even tempered. He comes across as grandfatherly.
Before Agilent, the measurement company that was spun off from Hewlett-Packard in 1999, Barnholt worked at Hewlett-Packard for more than thirty years, during which he witnessed and helped build one of the most innovative companies ever. The company had had a remarkable history, averaging 18 percent annual growth from 1939 to 1999 but, by the mid 1990s, the challenges mounted. HP had grown so large, to about $30 billion in sales, that Barnholt and other senior managers felt pinched to reach their double-digit growth goals. The research on innovation identifies this as a common problem for managers as companies grow. Barnholt calls it the tyranny of large numbers, explaining that “there’s a natural tendency to think in terms of bigger bets as you get to be bigger.”
To launch these big new businesses, the company’s managers took rigorously logical steps. They worked on numerous initiatives in large, growing markets that were adjacent to or somewhat related to HP’s existing business. However, they only looked at opportunities that were already billion dollar markets. Barnholt recalls, “Around that time, people said, ‘We don’t even want to look at opportunities unless it was going to be a billion dollar business.’ A billion dollars kind of became a mantra.” They then researched and analyzed the markets, segmented them, and developed products. If the idea got far enough, they developed marketing campaigns, sales strategies, and launched them. As Barnholt recalls, “It was very much a deductive, analytical process to identify a grand set of opportunities.” Possibilities included areas like flat screen displays, uninterruptable power supplies, or smart utility monitoring of homes. “We had all these ideas. And they were all big,” Barnholt recalls, “but they all failed!”