The Art and Science of Selecting Idea Gems: The Strategic Winnowing Sieve and Innovation Honeymoon Board

EFFECTIVE EXECUTIVE OCT.2009

STAYING ON TOP ALWAYS

The Art and Science of Selecting Idea Gems: The Strategic Winnowing Sieve and Innovation Honeymoon Board

-- Kai-Alexander Schlevogt

Torch-bearers who are eager to capitalize on the innovation honeymoon, the unusually insightful and creative initial period of new employees, must excel in harvesting and winnowing nascent ideas with great potential. Various methods can be used for gathering the successively enriched intellectual crop. Then, innovative gems must be selected through `strategic winnowing'. In essence, this process is like the separation of grain from crushed straw and husks after threshing.

Why can a skilled management consultant without any in-depth industry experience give valuable advice to senior executives who have worked in a business for decades? One reason for this remarkable feat is that most information needed for solving an organization's problem can usually be found inside its boundaries! Excellent consultants work like an aircrash investigator, who knows what to look for and where to find it. Together with client team members, they gather crucial bits and pieces, which are often widely dispersed throughout the organization, to cut the Gordian knot. After aggregating the information, recognizing patterns and drawing logical conclusions, the engagement team can propose fact-based and actionable solutions to the decision-makers of the client company.

Alas, many executives fail to recognize and use the gems that organizational novices uncover or produce during their "innovation honeymoon". This is the special initial period when newcomers are exceptionally insightful and creative.

Harvesting the fruits of the innovation honeymoon

The incumbent leader should use various methods to collect, codify, and spread their produce. During this stage of innovation honeymoon management, all organizational gatekeepers and internal opinion-leaders must keep their minds open and refrain from censorship. They should constantly encourage others to enrich the emerging ideas of the recruits.

Newsletters

A "New Arrivals Newsletters" is one means of giving innovation honeymooners a pride of place and presenting their views. Among other things, it can feature portraits of novices and interviews with them. An "innovation honeymoon questionnaire" can be used to elicit penetrating insights from them (see Exhibit I). After open-ended questions, the interviewer should drill deeper to obtain more detailed explanations and useful examples.

Prompted by intriguing questions, innovation honeymooners may make valuable proposals as to how to reengineer processes. For example, one government organization in Singapore had a long-standing policy that required employees to apply for "official leave" before traveling for business purposes. Prior approval was even required when the trip had been requested by the superior. A newcomer would be quick to spot such bureaucratic excess. In contrast, incumbents often find a customary procedure normal. Even those who dislike a rule may not challenge it, because they are tired of fighting micromanagers.

In the newsletter interview, the innovation honeymooner can also pinpoint the company's true strengths and identify key obstacles impeding progress. Besides, he can help surface the company's real values and beliefs, as well as evaluate whether anyone of them is dysfunctional. His candid assessment of the current organizational climate may be more accurate than the self-reports of veterans, who may be locked into rigid cognitive frames and have vested interests that bias their views.

Magazines and working paper series

There are many other ways of accessing and publishing the innovation honeymooner's insights. For example, newcomers can be entrusted with establishing and editing a full-blown magazine on various topics related to innovation. This compels them to harvest and organize the productive insights of other honeymooners and the incumbents, too.

To leverage the collective intelligence and facilitate concerted error-pruning at an early stage, it is crucial not only to publish finished intellectual products, but also to disseminate work in progress quickly after the inception of ideas. One possible outlet for germinal thoughts is a working paper series. Its editor should constantly request intellectual rejoinders to the published articles, too.

Kai-Alexander Schlevogt is an expert in transformational leadership, with a particular focus on crisis management and innovation. He serves as the first professor of management practice at the National University of Singapore (NUS) Business School. He writes the widely-read column "Prof. Kai on Strategic Leadership" for the Jakarta Post, the leading English-language newspaper in Indonesia. He also serves as columnist for Euro , the largest monthly capital market magazine in Germany. Kai-Alexander has also been invited to become a Member of Duke Corporate Education (CE)'s Global Learning Resource Network, an elite circle of the world's top executive educators. Kai-Alexander was elected Fellow of the McKinsey & Co. Global Institute (MGI), San Francisco and Shanghai. Prior to this, he founded the Schlevogt Business School, the first school in Germany focusing on European-Chinese economic relationships, and served as its President. He was also appointed as the first regular foreign professor in the history of Peking University. Besides, he served as a senior faculty member at the Australian Graduate School of Management (AGSM), a joint venture of the University of New South Wales and the University of Sydney. He was as Visiting Full Professor at the Henley Management College (UK). Besides, he held two appointments at Harvard University, one as Associate at the Harvard Fairbank Center for East Asian Research, Asia Center, another as Visiting Scholar at the Harvard Business School (HBS). Before joining Harvard, he worked as a strategic management consultant for McKinsey & Co. in Greater China, advising the Malaysian Prime Minister on how to develop a Multimedia Supercorridor (MSC). In the former Soviet Union, he served as Country Manager for “Colonia-Victoire” (now: AXA Colonia), a leading German-European inancial services company, and as Representative of the Association of German Insurers, advising the Russian government on insurance legislation. One of his four books, The Art of Chinese Management (Oxford University Press), has been hailed by reviewers as the standard text on the subject. He has published over 200 articles in a broad range of journals, magazines and newspapers. He wrote the widely-read Asia-Column of Manager Magazin.de, a leading German business publication (“Notes from Asia”). Kai-Alexander pursued postdoctoral studies at Harvard University. He holds a PhD in Management Studies from the University of Oxford, Saïd Business School. He speaks fluent Chinese (teaching senior leaders in Mandarin) and seven other world Languages.

Booklets and databases

The insights of initiates may also be published in staff booklets and entered into a central "innovation honeymoon database" that must be accessible to the entire workforce. A concordance can be compiled to index the revelations of newcomers. Together with a directory of innovation honeymooners, which classifies them by their expertise and ideas, it helps others navigate and access the new intellectual capital. Both information sources can be published in hard copy format, and, as soft copies, be included in the innovation honeymoon database. To avoid overspecialization and silo formation, the expertise and knowledge of innovation honeymooners must not be defined too narrowly; interdisciplinary linkages should be highlighted whenever possible.

Special gatherings

Organizations can hold dedicated "honeymoon gatherings" to communicate and, through a process of cross-fertilization, enrich the insights of newcomers. A valuable byproduct is the development of personal networks, which helps breathe life into idea depositories. A large multinational company can benefit particularly from such special events, since their potential impact grows with the diversity of countries, cultures, and businesses. During global honeymoon idea fairs and road shows, novices can set up idea booths, mount poster exhibitions, and give talks on their finds. In the course of these events, colleagues might place recruits on a "newcomer hot seat", grilling them with questions about their creative insights.

Additional gatherings include formal conferences and "brown-bag seminars". The latter format, which is less structured, is particularly useful for the discussion of nascent ideas, which sometimes are only scribbled on a notepad. The informal setting and relaxed atmosphere can be conducive to the free exchange of opinions. Besides, study groups can explore the honeymooners' emerging views or final intellectual products. Participants with longer tenure should explore them in depth but prevent a turkey shooting contest by abstaining from captious inquiries. Further, CEOs can deliver periodical "State of Innovation" addresses to the entire organization, discussing breakthrough thinking from the innovation honeymooners, among other things.

The Board of Directors and entire top management should also be frequently exposed to innovation honeymoon ideas, for example, through presentations given by novices. The high and mighty should consider the insights of a newcomer to be at least as valuable as customer feedback and together with him explore them as thoroughly as market data. According to an old saying, prophets have no honor in their own house. The innovation honeymooner has a greater chance of bringing home his revelations to the residents of his new organizational dwelling than other vaticinators. At least, he is not yet sufficiently well-known to be despised just because of familiarity. But the voices of the newly arrived messengers are faint. Without sensitive microphones, strong amplifiers and powerful loudspeakers, their prophecies thus are likely to remain unnoticed. It is the task of a leader to put in place a set of effective structures, systems and processes for channeling the valuable insights of novices to the rest of the organization. As a result, those who open their ears can actually hear the innovation honeymooners and join the chorus of improvement-seekers!

How strategic winnowing blesses idea farmers

Here is the first beatitude of capitalism: Blessed are those who put ideas to use in a profitable way, for theirs is the kingdom of business.

Alas, history is full of ingenious inventors who did not make a penny from their revolutionary ideas. In many cases, other people managed to create significantly stronger impact than the originator, since they knew how to commercialize the inventions.

Those leaders who successfully completed the initial stages of the innovation honeymoon, harvested a wealth of ideas. But if they do not take the next step of actually capitalizing on the most promising proposals, they would have gained nothing. Worse, they might actually strengthen their competitors, who, unlike the passive originators, may put the great ideas into practice and prosper!

The first step in leveraging the ideas generated, discussed and enriched in the course of the innovation honeymoon and other creative endeavors is identifying innovative gems. Importantly, I conceptualize innovation in very broad terms: I do not only include the creation and commercialization of goods or services, which oftentimes is not sufficient for consistently outperforming competi-tors in a fiercely competitive market. The bundle of innovations also comprises other inventions, such as internal intellectual breakthroughs. One example is a new management model, possibly created in response to a severe crisis.

Innovation leaders in all walks of life should use the art and science of what I call "strategic winnowing" to select ideas with great potential (see Exhibit II). In essence, the process is like the separation of grain from crushed straw and husks after threshing. Idea farmers who intend to sift through the innovation honeymoon crop need a powerful tool for this purpose: the "strategic winnowing sieve". It is named after the manual device, which later was replaced by a machine, used for exposing the threshed grain to an air stream, so that the lighter chaff was blown away, but the heavier kernel was retained; meanwhile, the dirt fell through the riddle.

Using the strategic winnowing sieve, managers can rate and compare a wide array of options in a disciplined fashion. It helps these idea judges adopt a system perspective and recognize various interaction effects, including important synergies. Thus, executives don't need to rely only on gut feeling to complete their weighty task of filtering.

My screening framework contains the following two broad assessment criteria: First, value for the organization, and second, ease of implementation. Ideas can be placed into one of four quadrants, depending on whether they are ranked high or low on these two dimensions. Proposals that at the end of the overall screening exercise received top marks on both dimensions should be accorded the highest implementation priority.

Value for the organization

The first generic criterion comprises both the potential for creating value in general and the possibility that the organization actually appropriates the value. This distinction is absolutely vital; in extreme cases, it can make the difference between corporate survival and bankruptcy.

For example, imagine a commodity producer adds customized services, such as consulting or testing, to its core product offering. These services are likely to create value for customers. But the provider might fail to utilize it, because he may be unable to pass his opportunity costs on to the users. One reason might be the presence of powerful competitors with deep pockets, who offer the same services without charging for them.

Helmsmen should hold brain-storming sessions with a diverse team to customize my screening framework, creating a diverse set of subcriteria under the two broad headings. Creativity, granularity and precision are of key importance during this method design phase. Innovation honey-mooners should be involved in this process, since they are likely to offer fresh perspectives at this critical juncture, too. Besides, they will derive satisfaction from being able to influence the selection of their ideas instead of just handing them over to the great and the good at the top.

As regards the first generic heading, team members have to test the two hypotheses that the set of sub-criteria they suggest create value and that the value can actually be transferred to the organization. To generate an ingenious list of diverse screening criteria, idea farmers should constantly ask: "What do I have to believe for these hypotheses to be true?" Below are some possible granular yardsticks for assessing the value of a new product for the organization. You will see that the framework design can heavily influence the nature of innovation.

If the man in the hot seat is interested in a steady course, the proposed idea's fit with the corporate direction is a necessary, but not sufficient condition for its acceptance. Such an alignment makes it possible to focus scarce resource on stretch aspirations and avoids mere opportunism. Among other things, fit might be measured in terms of conformity with the company's mission, vision and strategy. If, however, the guiding spirit is interested in radical innovation that creates new industries and fundamentally changes the organization, he may not include directional fit in the strategic winnowing sieve.

The team might also add economic measures to the portfolio of sub-criteria. Again, these metrics should reflect not only the creation of value, but also the likelihood that it will be appropriated by the organization. In the case of proposed services that are to be bundled with commodities, it would be necessary to assess the return on invested capital, among other things, and compare it to the cost of capital.

Interestingly, the addition of other assessment criteria might make it possible to classify economically unattractive proposals as loss leaders and thus still justify them. For example, service offerings may help attract new customers, to whom subsequently high-margin products could be cross-sold.

Other granular yardsticks are the effect of the idea on the organization's reputation, learning opportunities, as well as the likelihood that the proposal will inspire and energize the workforce.

Ease of implementation

As regards the ease of implementation, the team might include sub-dimensions such as the quantity and quality of human resources required, capital needs, technological bottlenecks, and crucial networks. Another criterion could be the formal and informal organization, which may either act as a powerful enabler or hinder implementation.

Leaders often focus exclusively on attempts to stimulate creativity, thus ignoring idea selection and impleme-ntation. The good news is this: strategic winnowing will help idea farmers purge their intellectual threshing floor, separating the seed of greatness from the chaff that should be burnt!

Scoring ideas on the innovation honeymoon board

The ancient Chinese philosopher Lao Zi once remarked: "If you winnow chaff, and the dust gets into your eyes, the places of heaven and earth and of the four cardinal points are all changed to you." The sage thus highlighted how easily people can get confused and lose orientation.

In view of this danger, it is of vital importance not to allow anything to blur your mental vision of where you want your organization to move. This requires the careful removal of intellectual chaff from the harvest of the innovation honeymoon and other creative endeavors.

The first step of strategic winnowing, the process of selecting valuable and viable options for breakthroughs, is to design a customized strategic winnowing sieve. This selection framework here is assumed to be a two-by-two matrix, but it could also encompass a number of generic assessment categories that differ from this model.

These major dimensions must then be decomposed into various evaluation sub-criteria. Some of these granular assessment standards may be designated as necessary conditions to be used as knock-out criteria for prescreening ideas. To avoid redundancy, such pivotal yardsticks must not be included in the strategic winnowing sieve. After customizing the selection tool, executives must roll up their sleeves and process the suggestions.

The efficacy of the innovation honeymoon board

An effective practical sorting strategy is to use what I call an "innovation honeymoon board" (see Exhibit III). It can be employed to evaluate a wide variety of items, such as geographical markets, customer groups, products, organizations and their units, people and many other things. This powerful filtering tool is particularly well-suited for the purpose of innovation honeymoon management.

The board can be used by individuals, but it often becomes more effective when employed by a team. The collective intelligence of such a jury, which should also include innovation honeymooners, is likely to improve the entire selection process. Top management consultants have resorted to moon-scoring, too, which evidences its versatility and practical usefulness in different walks of life.

Steps involved in scoring proposals

To prepare the ground for choosing game-changing ideas, executives must master the nuts and bolts of scoring ideas on the innovation honeymoon board. They first have to prescreen all suggestions, eliminating ideas that do not meet the knock-out criteria identified in the tool development stage. Such preselection saves time and efforts, since proposals that do not fulfill the necessary conditions for adoption will not have to be further evaluated.

Afterwards, referees must enter the shortlisted proposals into rows and allocate a "moon point" as the score relating to each of the various assessment sub-criteria, which are arranged in columns. A full moon symbolizes the highest mark, whereas an empty circle denotes the lowest score. You can even use quarter-moon segments to depict finer distinctions. In many cases, dichotomized scoring, using only full moons and empty circles, is preferable though, since often the value added by granularity does not justify the additional costs in terms of higher complexity.

Importantly, the effectiveness of the entire process of scoring and subsequent selection hinges on the judges' constant alertness, sensitivity and creativity. Emphatically, these tasks must never become mechanical and monotonous. As you sift through the proposals and evaluate them, their strengths and weaknesses, both in isolation and in comparison to other options, will begin to surface. If the assessment task is performed by a team, insightful discussions about the proposals are likely to ensue. I urge you to start recording intriguing thoughts during the scoring phase, so that you will be able to recall them.

To arrive at a mark for a certain sub-criterion, you may need to perform some preliminary granular analyses. These can reveal some of the proposal's merits and demerits, which should be documented in an audit trail. For example, a commodity chemical producer that considers offering additional services, such as testing and consulting, in conjunction with their core product would need to calculate the bundle's expected return on invested capital. To do so, executives would have to project total revenues and costs under different scenarios, estimate the probabilities of these outcomes, as well as calculate capital requirements. Ideally, they should triangulate values derived from top-bottom analysis with estimates resulting from bottom-up analysis, and compare those to industry benchmarks. Then, they would need to calculate the cost of capital for the specific project proposal to conclude whether the idea is expected to create economic profit.

At this early stage, the calculation may actually expose difficulties in appropriating the value the company creates for its customers by offering additional services. Managers may assume they will be able to charge a higher price for the bundle, resulting in higher total revenues if demand is price-inelastic. But total costs might actually be projected to increase more rapidly because of the additional high expenses of the new services, making the company worse off than before. Even if profits were expected to rise, calculations may show that the returns will be lower than the cost of the capital required for providing the services, such as sophisticated laboratories. This would mean that the proposal, viewed in isolation, would destroy economic value. In the next step of strategic winnowing, referees have to compute a total score for each generic dimension, such as "value for the organization" and "ease of implementation". To arrive at this aggregate mark, they need to take the average of the individual moon ratings relating to the various sub-criteria, such as the proposal's fit with the organizational direction, its economics, impact on the customer base, learning opportunities, reputational effects, and collective inspiration.

Usually, simple visual inspection suffices for this purpose. For example, if half of the scores are full moons, and the other half are empty circles, the resulting total mark for the generic heading will be a half-moon. If necessary, the moons relating to the sub-criteria may be converted into numbers, which can then be used as input for calculating the average.

After you have completed the assessment of a proposal, you need to use the summary scores for the two generic dimensions to find the corresponding quadrant in the selection grid and enter the proposal accordingly.

When you use your index finger to show the direction of the stars, a little child will gaze at this finger, but not at heaven! In contrast, managers should demonstrate intellectual maturity by employing the innovation honeymoon board as an instrument that helps them to see the light, not as an end in itself. If they use it properly, they will not straddle between incompatible options and instead focus on the few proposals that shift the needle.