Sunday, February 7, 2010

More Than Five and My Head Will Explode (In Praise of Peter Drucker)

Someday soon I’m planning to write a book called More Than Five and My Head Will Explode.  The hypothesis, loosely rendered, is that we are so inundated with choices that we can’t possibly keep more than five things straight in our heads for any reasonable period of time.  Give me six breakfast cereal choices in the supermarket aisle and you've wasted shelf space.  Tell me ten rules of time management and I'll likely remember half.  Show me the 15 rules of good salesmanship, or the 39 rules for CEOs to prosper, or 50 ways to find my piece of cheese, or 1,000 streams I should fly-fish before I die and my head wants to explode.

Thank goodness I don’t have six children.  (Wait--maybe I do have six children.)

My Men’s Health magazine landed this week and, besides the monster biceps it promises me, this issue offers “1,742 Ways to Get Better—At Everything.”  Honest to goodness.  For purposes of sanity, I would accept one way to get better, and be happy.

My More Than Five idea originated as I was pulling articles about “innovation” off my Google reader the other day.  I subscribe to one site in particular that peppers me with posts about how to innovate products and services.  Each article has merit, but the cumulative effect over weeks and months is that I am so confused by all the advice that, as I said, my head threatens to explode.

All I really need is a simple, consistent, logical thought process for innovating.  And keep it to five points or less.

In times like that it’s good to have touchstones, and the one I keep returning to is Peter Drucker’s Innovation and Entrepreneurship.  Published in 1985, it has all the disadvantages of holding the somewhat dusty schema of a prickly egomaniac.  But, it has all the advantages of being thoughtful, straightforward, long on real history but easy-to-shuttle into the future tense, and—in my own limited world—capable of gelling into five logical themes.

Before describing the themes, Drucker says, just make sure you know what innovation is and does.  Its proof “lies not in its novelty, its scientific content, or its cleverness.  It lies in its success in the marketplace.” 

If you’ve never read Drucker, that means creating customers.  Paying customers.  Giving away things for free is not innovation, something we all (once upon a time) used to know.

This simple truth—that innovation creates paying customers--will, I promise you, eliminate an awful lot of reading about what passes today as innovation.

Then, Drucker says, innovation is “organized, systematic, rational work.”  You know all the innovators you read about, the fabulously rich ones now drinking champagne on yachts?  It’s good to remember that most really, truly fine innovators go to work everyday with a lunchbox, worry about their mortgages, and think about a Friday night beer.

Finally as warm-up, Drucker tells us, “Innovation is a specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service.”

That, to me, is a really critical point.  Innovation is more like Finance and Marketing and Operations, more like Investment Management, than it is like being struck by lightning.

Drucker highlights examples such as the modern university and hospital, GE’s use of commercial paper, the shipping container, insurance, the textbook, and McDonald’s creation of a new market as forms of workmanlike innovation that took advantage of inefficiencies in the market.   Drucker goes on to say that so few high-tech entrepreneurs know what they are doing, and lack any methodology, that they violate elementary and well-known rules of innovation.  So, they set their Google reader on several innovation blogs and proceed to lose their minds. 

Drucker's innovation themes are based on the fact that most successful innovation doesn’t create change, it spots and exploits change in an organized, purposeful way.  It’s more like studying the market and placing bets on inefficiencies than building the company that goes public.  Here is Drucker's list, in order of reliability and predictability:

a)      The unexpected success, failure and outside event (i.e.—when TV appeared book-buying unexpectedly soared, leading to new, powerful bookstore chains)
b)      The incongruity between what is and what ought to be (i.e.--a securities firm decided to offer “peace of mind” and not promises of fortunes)
c)      Process need (i.e.—Bell Telephone’s switchboard, linotype)
d)      Changes in industry or market structure (i.e.—FEDEX)
e)      Demographics (i.e.—FDR’s experts in 1938 missed the Baby Boom)
f)        Changes in perception, mood and meaning (i.e.—health magazines, exercise equipment, organic food)
g)      New knowledge, both scientific and non-scientific (i.e.—the “superstar” of innovation—but the longest lead times: chemotherapy, computer, automation, radio, penicillin, etc.)
Notice what Drucker did not list: The Bright Idea.  It is, he says, the riskiest and least successful innovation type of all, cannot be counted on, and “belongs in the appendix” of theory and practice of innovation.
Yet, sometimes that’s all we seem to focus on, all that seems to come off my Google reader.
Anyway, those are Drucker’s seven themes, and my re-jiggered five are: The Unexpected, Process Need, Industry or Market Structure, Demographics, and New Knowledge.  That’s all.  If a bright idea falls in my lap, I count it like my sixth child.  (Speaking of which, I'm going to have to ask my wife about that when I get home.)