What Makes Teams Smart

An interesting paper in Science extends the concept of intelligence to teams and defines Collective Intelligence. Based on study of 699 people working in small teams of 2-5 people, the study found that team intelligence is driven by three factors:

Social sensitivity of team members increases team intelligence. More sensitive the team members are about social cues such as facial expression, the better the team performs
Teams where everyone participated in the discussion were more intelligent. If few people dominated the discussion, the collective intelligence went down. This is something R&D managers should keep in mind. It is very easy for managers to dominate team discussions.
Teams with women members were more intelligence than others. This is likely because women tend to have higher social sensitivity than men.

Equally interesting is the list of factors that does not drive team intelligence. (via MIT Sloan Review and
What Makes Teams Smart):

Interestingly, the researchers found that collective intelligence wasn’t strongly correlated with the average intelligence of the individuals in the group — or with the intelligence of the smartest person in the group. They also found, as they wrote in Science, ”that many of the factors one might have expected to predict group performance — such as group cohesion, motivation, and satisfaction — did not.”

So what can you do about improving team performance? Check out the article How to Keep Your Team Loose. Or this one on where to focus on driving performance.

Hotbeds of Innovation

The Strategy + Business article Hotbeds of Innovation has some useful benchmarking information about how large corporations are accessing innovation from outside. We have talked about Intel and others in the past. Here are some more:

Called “ecosystem investing” by some innovation executives, it refers to the increasingly complex network of suppliers and innovators supporting large companies.
In this model, well-established U.S. companies are creating strategic partnerships with startups and small companies whose technologies and skills can help the large companies expand their own capabilities.

The idea is to gain access to the technology through strategic partnerships and alliances:

The goal of the incumbents is to systematically target emerging technologies and “harvest” ideas without having to take on the risk of acquiring the smaller companies. Sometimes the large company takes an equity stake, and its top executives may sit on the small company’s board or mentor its top management. Alternatively, it may seek to license the small company’s technology or buy its products and distribute them to global markets.

Here are a couple of results. First from J&J:

Ortho-McNeil Inc., a J&J division, invested the modest sum of US$40 million in Metabolex Inc., a privately held biopharmaceutical company based in Hayward, Calif., so the two companies could collaborate on the development of compounds used to treat type 2 diabetes. …
In June 2010, Ortho-McNeil received an exclusive worldwide license to commercialize several Metabolex drugs, including the diabetes compound, for about $330 million. That’s far less than the $1 billion a pharmaceutical company typically spends to develop drugs internally, and far more than Metabolex could have expected to bring in on its own.

Second from Intel:

Intel was able to dramatically increase the clout of its ecosystem investment strategy recently when it teamed up with 24 other venture capital (VC) firms as part of the company’s “Invest in America” alliance, Intel’s commitment to promote U.S. competitiveness by supporting technology development and creating jobs for college graduates. Intel put up a mere $200 million of its own money, but the VC firms pledged to match that investment, for a total of $3.5 billion over several years.

Some best practice info about R&D and innovation

The post Six Myths of Corporate R&D at Corporate Executive Boards has a convenient list of best practices for encouraging innovation as opposed to incremental improvements. I have arranged them in three categories and my comments are in parenthesis:

Encourage learning

Organize R&D functions to encourage learning instead of alignment with corporate strategy (I am not sure both are mutually exclusive.)
Encourage R&D staff to form informal networks inside and outside the corporation. (Good point, but difficult to do.IP Control will need to be a constant focus).

Take more risks with investments

Increase investment on breakthrough ideas as opposed to product improvements (The real answer is a balanced portfolio of investment. The right balance depends on the the type of business and competitive environment).

Be more flexible with early stage opportunities

Be flexible with metrics, such as return on investment, for early stage opportunities (Clearly, it is difficult to estimate the value of breakthrough ideas. However, it is also very difficult to identify which ideas are breakthrough…)
Be flexible with project reviews of early stage opportunities. Focus instead on customer value and related scenarios. Review early stage opportunities as a portfolio and mitigate risks at a portfolio level.
Be flexible with project management and related processes.

More proof that innovation is a buzz word

The article How to Develop a Social Innovation Network, in my opinion, teaches you how not to purse innovation.

“Customers already use social technologies to wrest power away from large corporations. Now employees are adapting social technologies in pursuit of innovations to support these empowered customers; Forrester calls these employees HEROes (highly empowered and resourceful operatives)”

Innovation is not about buzz words (HEROes!) and definitely not about social networking. We talked about innovative masses yesterday and realized that even if there are many end-users out there with some interesting ideas, filtering them for quality and adapting them to satisfy mass market quality is not normally cost effective.

Furthermore, sorting through ideas of varying maturity (from social media such as facebook) to identify innovation difficult at best and a complete waste of time at worst. I remember holding an innovation challenge for employees of a large technology company. Employees could win a prize by describe their innovative ideas in two or there sentences. One employee suggested the company should turn trash into oil. I asked how does one do that? The employee said she was only going to give ideas, how to make them work was the company’s problem! 🙂

Tapping the Innovative Masses

MIT’s Technology Review has some interesting survey results in the article Tapping the Innovative Masses:

“We found that 6.2 percent—representing 2.9 million people, or two orders of magnitude more than are employed as product developers in the U.K.—created or modified consumer products over the past three years and spent 2.3 billion pounds per year, more than double what the U.K. firms spent on consumer-product R&D.”

A lot of this tinkering was quite sophisticated, such as adding new spin cycles to washing machines etc. The question is how to tap into this huge volume of product ideas – some of them innovative. In many cases, even if the ideas are not innovative, they can significantly cut down on development time. However, the volume of ideas generated by such a process is so large, most companies will have trouble keeping up with them. Also, since most tinkerers do not have quality control processes, building products on their developments is quite difficult as well. Finally, as we have discussed in the past, collaborations with customers often tend to not be as value added as they could be.

Fortuitously, NY Times shares Microsoft’s approach to accessing innovations from the masses in the article Microsoft’s Effort to Build Apps and Reward Engineers:

“Because the platform is new, developers have to learn its ways before writing many of those apps. So to add them quickly, Microsoft has taken an unusual step. It has relaxed a strict rule and will let employees moonlight in their spare time and keep the resulting intellectual property and most of the revenue, as long as that second job is writing apps for Windows Phone 7-based devices.”

Clearly, Microsoft has not tapped the mass of people out there, but they are encouraging their employees to innovate and keep a larger fraction of the economic value they generate. Their approach is quite attractive because:

Innovations are coming from employees, hence, Microsoft can have some confidence in the quality
Apps are separate from Microsoft products (Windows Phone 7), Microsoft has an easier time separating intellectual property and brand image
Revenues from the apps can be tracked separately, it is possible for Microsoft to compute economic value (MS offers 70% to employees and keeps 30%)
App development will help employees identify useful updates and upgrades to the OS, and guide innovation

However, some key concerns remain. First is to maintain employee focus on jobs as opposed to moonlighting:

“Engineers work all hours; they don’t punch a 9-to-5 clock,” Professor Cusumano said. “Normally, you want your employees to pour their passions into their jobs. If they do something else on the side, you don’t cheer them on.”

The second being bandwidth. If employees are developing the OS full-time as part of the job and then developing apps during their free time, will they have enough energy left to be creative and innovative? How much work load is too much?

Necessity is the mother of Innovation (Continued)

A quick post about the article Can Medical Innovation in Developing Countries Disrupt the U.S. Healthcare System?:

While American and European healthcare are characterized by high costs and government regulations, the industry in Asia is booming and producing cost-effective equipment to serve millions.

Western firms have become somewhat complacent in their operating models:

Many U.S. companies have become comfortable operating in a system in which top-of-the-line technologies are reimbursed at premium prices and patients are accustomed to [receiving] “the best,” regardless of price,” the firm notes in its report, ‘Smaller, Faster, Cheaper: The Future of Medical Technology.’

The markets in developing countries are becoming large enough to support innovation:

According to The Economist, medical technology sales in China should reach US$43 billion by 2019, and over US$10 billion in India. And according to a report on global healthcare innovation by PricewaterhouseCoopers (PwC), China has shown the strongest improvement in innovative capacity in the last five years, and its healthcare industry will nearly reach parity with Europe by the end of the decade.

Once they develop low cost innovative products, new players are likely to target western markets and compete for the business.

There is actually enormous amount of innovation at the bottom of the market,” Christensen says. The challenge that lies ahead is whether companies in developing countries can scale up their products to meet global demands.

Firms in developing nations have to be innovative out of necessity. As we have discussed in the past (here and here), necessity is the mother of innovation. Western R&D managers should be thinking about new challenges they can pose for their R&D teams so that they can also become innovative.

Some interesting examples of innovation in the paper…

Performance Management

A couple of articles (Handling the Underperformer on Your Team, & The Dirty Secret of Effective Sales Coaching) have good pointers on how to improve team efficiency:

One of the challenges that today’s busy managers struggle with is how to divvy up their precious people management time. Not everyone is a star performer so you should focus your limited bandwidth on the people who are doing the most for the organization, right? Unfortunately, high performers usually demand little time. They are self-sufficient, self-motivated, and often produce great work regardless of how much interaction they have with their manager.

Nor should the worst performers need a lot of attention. In fact, focusing on the tails is the wrong thing to do:

Left to their own devices, sales managers often skew their coaching efforts dramatically toward the ‘tails’ — the very best and the very worst reps on their team. They engage with poor reps because they feel they must in order to meet territory goals, and they work with their best reps because, well, it’s fun. Few managers can resist the lure of reliving their glory days by passing along their wisdom to the one or two reps who remind them most of their younger selves. To combat managers’ tendency to coach just laggards and leaders, companies implement elaborate systems to allocate coaching equally across the sales force. They imagine that ‘all boats will rise’ as a result.

The recommendation is to focus on the middle 60% (Not the top or bottom 20%)

The real payoff from good coaching lies among the middle 60% — your core performers. For this group, the best-quality coaching can improve performance up to 19%.* In fact, even moderate improvement in coaching quality — simply from below to above average — can mean a six to eight percent increase in performance across 50% of your sales force. Often as not, that makes the difference between hitting or missing goals.

And how do you provide constructive feedback to improve performance: Provide detailed and constructive feedback. Here are the four steps (pretty intuitive)

Diagnose the issue. Understand what can improve performance: lack of motivation, skill deficiency, misalignment with goals, personal conflicts, or home/ family issues.
Share what you are seeing. Discuss with the employee, Be specific and use examples. Ask for the employee’s perspective
Specify necessary changes. Decide what needs to change and how he should go about changing. It’s critical to set up processes by which the performance can be improved. Set clear goals and timelines. If you’re not sure how to support him, ask for help from an HR partner or an external coach.
Evaluate and take action. If the performance improves, congratulations. If not, take action.

Here are some important factors to consider if the employee is a perennial under-performer and you want to take action:

Reflect on the person’s value to the organization. He may be invaluable in one arena but underperforming in another. Can you change his job description so that it better plays to his strengths? Or can you find another position in the organization that’s better suited for his skills? If the answer is no, you may need to terminate. Of course, making a firing decision shouldn’t be taken lightly. Whatever you decide, don’t leave it up to them as to whether they leave. That’s a surefire way to create deadweight and hurt the morale of your team.

Here are related posts that you might find relevant: Mentoring, Performance Reviews, & Team Performance.

Asking Yourself the Hard Questions

Industry Week article Asking Yourself the Hard Questions has some interesting points about R&D strategy and planning:

Truth can’t be the first casualty when businesses are making major strategic decisions

The article suggests that leaders need to be more open and sincerely request feedback on strategy and plan. They need to encourage subordinates to ask tough questions:

Of course, asking tough questions won’t do you much good if you’re only talking to yourself. Good leaders need to be able to create an atmosphere in which employees can honestly say what they think. This can be particularly tricky if an executive is known to fall in love with his own ideas. Why risk the boss’s wrath, employees quickly figure out, if their views won’t be heard anyway? In situations where employees can speak freely, this is not a license to be disrespectful, nor is it an invitation to chaos. Think of it more as preventive medicine. It will almost always be cheaper and easier to prevent a problem, or to minimize a problem, than it will to fix it after months or years of denying there is a problem.

I think this approach of asking tough questions is absolutely critical while setting up R&D plans and technology roadmaps. Since most technology plans are developed by experts and there are not too many people who can question them without repercussions, it is important to institute a culture of constructive skepticism. Furthermore, most organizations have many myths surrounding R&D planning and a tough questioning is important to finding the right strategy. In fact, one can even consider having a well balanced checklist to ensure that the tough questions are asked and addressed in strategy formulation.
One thing not to do is form a tiger team or a commission tasked to study strategies.

In Washington, of course, politicians have developed a clever method for avoiding the hard questions. They appoint a commission to study difficult issues and then release a report. Washington is awash in commission reports, which is a barometer of how divisive and difficult our politics are now. These reports lay out the hard facts and suggested remedies and then, time and again, their remedies are ignored because — that’s right — the remedies require politicians to make tough choices.

A Quirky Way of Innovating

I have often written about accessing innovation from outside the organization (open innovation, borderless innovation, etc). HBR article A Quirky Way of Innovating describes an innovation model that takes things one step further:

Enter Quirky. Quirky’s mission is to crowd-source innovation and product design. They create consumer products by first setting up a competition for solicited but fairly rudimentary product ideas. People evaluate these and some are selected to obtain further refinement. Individuals suggest different features, designs and then even the product name and marketing slogans. Then, if enough people look like they actually want to buy the product, Quirky manufactures and sells it. All along the way, people earn ‘influence points.’ It is not just coming up with the initial idea that wins you points — offering other idea components and playing an active role in voting for different suggestions also contribute — and depending on how many points you have, you may be entitled to a share of the earnings.

The Quirky business model is applicable to not very complex products with direct applicability to end users. However, the idea of incentivizing people to become part of innovation is quite interesting for all R&D managers. May be need a way to source innovation across R&D teams of strategic partners? For example, all companies involved in developing a cell phone together can set up a similar system to invigorate engineering teams? Key concerns here are going to be IP ownership and ability to extract economic value from the innovation. This might be difficult, but it should be possible, at least in theory, to pre-negotiate IP rights with strategic suppliers. Furthermore, there is clear evidence that quality of innovation improves when suppliers are included.

Microsoft vs. Apple – a lesson in IP protection

The Computer World blog had an interesting post “Microsoft dominates Apple in patents, so why does it lag in innovation?”

Just-released information shows that Microsoft was granted the third most U.S. patents of all companies in 2010, with Apple way down the list at number 46. Why, then, does Microsoft lag so far behind Apple when it comes to developing innovative products?

Let us get rid of one point of contention – patents DO NOT signify innovation. Patents are one approach to protect inventions. There are many others with different advantages (trade secrets, copyrights, trademarks etc.). Hence, the rest of this post is about what is the best approach to protect inventions or results or R&D in general. I lean towards keeping inventions secret as long as possible and choosing patent ONLY if:

The invention is fundamental and disruptive
The invention is easily visible and can not be kept a secret
The invention has a long life. Hence if and when the patent issues (six years), the patent will be still valuable
If some one were to infringe a patent on the invention, it would be easy to detect said infringement. For example, an algorithm to detect movement in video is not easily detectable as there are many possible alternates.
There are no simple workarounds. Even if the patented approach has value, people might just find an alternate way to achieve the same result (and hence the patent would be worthless).
There is a clear business case for patenting (it can cost tens or hundreds of thousands of dollars depending on coverage)

Here some BAD reasons to file for patents:

Patents to reward inventors: It might be better to give a cash award instead
Patents to protect near-term markets: By the time the patent issues, it might be completely irrelevant
Patents for incremental inventions: May not justify the investments

Here are my my suggestions for IP protection:

Innovate quickly: This what Apple does. If you are moving through technology quickly, there is no need to bother about other people copying some of your ideas (especially with some of the concepts below)
Use trade secrets: If you can keep your invention secret, you have to spend no money on protecting it. It also lasts indefinitely (as long as you can keep it a secret) as opposed to patent that expire.
Build a software-hardware ecosystem: The iPhone-iOS-iTunes market ecosystem protects each invention much better than any patents or individual invention protection could.
Use innovative barriers to entry: Even though Goolge gives away Android source code for free, the Android Market is a great way for Google to control IP. Only “authorized” devices are able to access Android market place. This helps Goolge control the IP AND make money from app sales!

In summary, Patents are not a measure of innovation, they are not a measure of how well a company is performing on R&D and they are not always the best way to protect IP.