Lessons from innovation's front lines:

An interview with IDEO's CEO Tim Brown, whose company specializes in innovation, distills the lessons of his career.
NOVEMBER 2008 • Lenny T. Mendonca and Hayagreeva Rao
http://www.mckinseyquarterly.com/Lessons_from_innovations_front_lines_An_interview_with_IDEOs_CEO_2185

IDEO is a fascinating company that we feature in our classes. The following is an excerpt from an interview from the McKinsey Quarterly. Go to the original site for the full text. They talk about some real pertinent issues. Remember, we use the term innovation a lot but we are really talking about growth.
I would like to wish our American audience a very Happy Thanksgiving; our Indian members a rapid return to peace; and a wish to all a return to “normalcy” whatever that is!

Many companies claim to be innovative, but few can claim innovation as their raison d’être. One such innovation machine is IDEO—a designer of products, services, and experiences ranging from Apple’s first mass-market computer mouse to aspects of Prada’s store in New York City to the patient-care delivery model at SSM DePaul Health Center, in St. Louis, Missouri.
IDEO’s single-minded focus makes it an intriguing port of call for executives seeking insights on innovation. The company’s deep experience collaborating with other businesses and with nonprofits and government agencies gives it valuable perspectives on what distinguishes winning from losing innovation efforts. Yet as CEO Tim Brown is quick to point out, what works at IDEO won’t work everywhere.

Brown has worked at IDEO since its formation, in 1991, when three established design firms came together. He became CEO in 2000, after stints heading IDEO Europe and the company’s San Francisco office. Over the years, Brown has stood for the development of ideas through action—observing customers, prototyping, testing, refining—rather than abstract thought.1
In this interview with McKinsey’s Lenny Mendonca and Stanford professor Hayagreeva Rao at IDEO’s offices in Palo Alto, California, Brown provides his perspective on innovation at IDEO and at other organizations. He focuses not on a philosophy of design but on the role of leadership in stimulating creativity, the barriers that sometimes inhibit it, and the incentives that really help to generate new ideas. He also discusses opportunities to innovate in public services and the promise of user-generated online content.

The Quarterly: You’ve written and spoken extensively about IDEO’s design philosophy and its potential relevance for other companies. What lessons does IDEO, as an organization, hold for others?

Tim Brown: …………..
So we talk a lot about managing tensions. On one end of the spectrum is running a business well. On the other end is having the most creative culture you can. You’ve got to have both. And you can’t just pick a spot on the spectrum. You’ve got to move around. It doesn’t worry me to do that. But it drives some people completely crazy.(You need to be ambidextrous!!)

The Quarterly: Presumably, those tensions also exist in other organizations trying to innovate. What approaches can help resolve them?

Tim Brown: Even though companies want everyone to be thinking about innovation all the time, the reality is that everybody’s got other roles to play. So innovation is not a continuous activity; it’s a project-based activity. If you don’t have a process for choosing projects, starting projects, doing projects, and ending projects, you will never get very good at innovation. Projects need some form—you call them something; you run them in a certain way; you fund them in a certain way. That sounds simple, but, actually, a good process for getting projects going and done is often not obvious to companies.

The Quarterly: What’s the role of leadership in stimulating creativity and innovation?

Tim Brown: You really notice a difference in organizations where the senior leadership immerses itself in innovation. I don’t mean that it runs projects. I don’t mean that it does the innovation itself. But it immerses itself by, for example, playing an active role in reviewing the innovation that’s going on at various levels in the organization in order to give people permission to take risks. Or by playing a really active role in deciding who gets to do innovation, making sure project leaders pick people who are naturally comfortable taking risks.
(Systemic innovation/growth cannot happen without the active involvement of leadership, period!!)

In some cases, leading innovation means standing up for ideas when they get to the point where they need to be sold throughout the organization. Most of the extinctions that happen in the innovation ecosystem happen inside the organization—long before the ideas get to market—not in the marketplace. The antibodies that organizations naturally have to fight new ideas win out. It’s often the role of senior leadership to defend new ideas until they’re actually out in the marketplace and able to stand up for themselves.

The Quarterly: What gets in the way of innovation?

Tim Brown: The biggest barrier is needing to know the answer before you get started. This often manifests itself as a desire to have proof that your idea is worthwhile before you actually start the project: “show me the business proof that this is going to be a good idea.” You can understand this, of course, because it’s an attempt to mitigate risk. But wanting to know whether you’ve got the right idea—or the assumption that you’ve got to have a business case—before beginning to explore something kills a lot of innovation.

Now, if you want to do some incremental innovation in a market, with products you understand well, then there’s a reasonable argument that you should have a pretty good business case. But not if your ambition is “to create the next iPod.” Steve Jobs didn’t know what the business case was going to be for the iPod before he started. (This huge. In our discussions we often talk of needing to be an ambitexrious company. You need to match the approach and appropriate tools aginst the goals of any particular project. Projects that extend or defend an existing business should have a pretty sound business case. But, if you are reinventing or making a significant change to you business design, you cannot possibly have a solid business case at the outset. This is when we deploy tools such as Options Management and Discovery Driven Planning that are designed to manage the uncertainty/assumptions until a firm business plan can be developed.)

The innovation process is a series of divergent and then convergent activities—a very simple concept, but one that a lot of leaders used to managing efficient processes in their businesses struggle with. By “divergence,” I mean a willingness to explore things that seem far away from where you think your business is today. The discomfort that a lot of business leaders have with innovation is with divergence. They think that it’s divergent forever and that they’ll never be able to focus on something that makes business sense. I think that’s where some business leaders, historically, have had a bit of a problem with their internal innovation units: the leaders have a sense that these units are endlessly divergent. If you understand that convergence follows divergence, and that it’s really hard to converge without first diverging, maybe that’s a bit comforting.

The Quarterly: What role do you see for user-generated online content—which often seems pretty divergent—in stimulating innovation?

Tim Brown: It’s better to have a bigger ecosystem for innovation than a smaller one. You’re going to get more ideas and increase the likelihood of better ideas. The more people, all other things being equal, the better for innovation. So there’s definitely a role for user-generated content.
But it’s really early. ………

The Quarterly: Thus far, we haven’t talked much about incentives. What’s their role in creating a culture where innovation flourishes?

Tim Brown: I think organizations have a hugely unfair advantage when it comes to innovation and incentives: people want to put things out in the world to leave their mark; they want to be creative. I think it’s a basic trait of human nature—if you give people the chance to do things that have an impact in the world, that is inherently motivating to them. Time and time again, I hear people say that putting something out in the world that didn’t exist before was a life-changing experience.

This means that if you want to be an effective innovation organization, to motivate your people as innovators, you’ve got to be prepared to measure yourself by the impact you have on the world—not just your sales or your margins, which are important, of course………….

The Quarterly: If translating innovation into impact is critical to motivate people, how, in practical terms, do you do that—both organizationally and for individuals—in ways that matter to them?

Tim Brown: At IDEO, we try to do this on three levels. Everybody has a portfolio of all the things they do. We’re now rolling out a software platform for knowledge sharing. Everybody has a page on that, which is basically their personal portfolio. One of the things in it is the impact of the work they’ve done—on their colleagues, on their teams, or on the outside world.
Then we’ve always encouraged project teams, at the end of a project, to share the impact they’ve had.. ………..

The Quarterly: Why are you doing that?

Tim Brown: People want to work on things they believe in. I don’t mean that every project we do is in the social-impact space, of course. But we get more pushback now than we ever did about whether a project is something that people want to work on……….

P&G Changes Its Game
How Procter & Gamble is using design thinking to crack difficult business problems
By Jeneanne Rae
July 28, 2008, 2:42PM EST text size: TT
http://www.businessweek.com/innovate/content/jul2008/id20080728_623527.htm?chan=innovation_innovation+%2B+design_innovation+strategy

This emerging thought process is intriguing but potentially difficult to incorporate broadly. We will keep you abreast of progress as it evolves.

"Design thinking" may seem like just another new buzzword in the lexicon of innovation, but Procter & Gamble (PG) is using the approach to change its culture. Leadership is listening, learning, and deploying; cross-functional teams are cracking vexing problems across its business landscape; and visualization, prototyping, and iteration are facilitating communication internally and with customers like never before. Here's a look inside one of the most intriguing change management efforts going on in Corporate America today.

"It has been transformative for our leadership teams," says Cindy Tripp, marketing director at P&G Global Design, as she describes her work rolling out the company's Design Thinking Initiative. With a cadre of 100 internal facilitators, more than 40 design thinking workshops have been held in P&G business units across the globe during the past year. The design thinking facilitation team comes from every function at P&G (such as marketing, research and development, info tech, and product supply as well as design). Perhaps most important, half of the workshops focused on something other than new product initiatives to include other types of pressing business issues such as strategy, retail relationship building, and matters of operational excellence. "We want people to use these techniques daily in their work—using broad insights; learning faster; failing faster. Design thinking can be applied everywhere, every day," says Tripp.

This attitude signifies an extreme shift for the $81.5 billion global consumer-product giant, whose long-tenured design managers describe P&G's former attitude about design as "the last decoration station on the way to market."

Reframing Is the Key

"Once business leaders see they can use design thinking to reframe problems, they are transformed," says Tripp. "The analytical process we typically use to do our work—understand the problem and alternatives; develop several ideas; and do a final external check with the customer—gets flipped. Instead, design thinking methods instruct: There's an opportunity somewhere in this neighborhood; use a broader consumer context to inform the opportunity; brainstorm a large quantity of fresh ideas; and co-create and iterate using low-resolution prototypes with that consumer."

In his new book, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation, P&G CEO A.G. Lafley explains the difference between the two methods: "Business schools tend to focus on inductive thinking (based on directly observable facts) and deductive thinking (logic and analysis, typically based on past evidence)," he writes. "Design schools emphasize abductive thinking—imagining what could be possible. This new thinking approach helps us challenge assumed constraints and add to ideas, versus discouraging them."

Mass-Market Offerings Reconceived

An excellent example of this type of reframing can be experienced by going to http://www.olayforyou.com/. As a female consumer, I'll be the first to tell you that Olay products are frustrating to shop for. There are too many, you can't zone in easily on what's right for you, and it seems like you ought to feel a little better about shelling out $29 for a tube of goo to try to keep yourself looking good. Apparently I'm not the only woman feeling this way. Through the insights into these frustrations gleaned at a design thinking workshop, Olay marketers came up with the Olayforyou.com Web site, a streamlined way to connect with consumers online.

With her soothing voice, the site's narrator walks you through a series of engaging questions about your skin. What are your habits and goals? What problems are of concern? The experience is simple yet conveys a deep understanding of the myriad factors that make up your specialized needs. Analyzing your responses, the system quickly assembles a tailored set of recommendations for a regime that is designed to meet your age and stated desires. I found myself wishing that all retail encounters could be this easy and fulfilling.
Olayforyou.com provides a calming, easy way to receive a credible consultative experience without ever leaving your own home. P&G now offers a beauty service. Through menu choices that indicate your interests and skin issues, Olay marketers are able to start a new type of dialogue while collecting important data on users that can be more informative than expensive market research. Consumers can opt to have Olayforyou.com send a personalized skin-care regime profile by e-mail.

Dan Hamilton, brand manager for Olayforyou.com, said: "The most important result is that people are finding the right solutions and sticking with them. They describe increased satisfaction and a better experience. As a result we are seeing an increase in our equity scores and better loyalty to the brand."

Witness in this example the underpinnings of business model innovation. With this seemingly small enhancement, Olay will also differentiate itself in a highly complex, competitive market; speed up the time in which it understands and can build new solutions for its target prospects; and build a database that will enable P&G to reach out directly to its customers on a personal basis (which is a rarity for consumer-product companies).

The innovations through design thinking continue to come: Herbal Essences' brand transformation (BusinessWeek.com, 6/17/08), a Tide media breakthrough, and new business and organizational development strategies represent how design thinking is changing the game at P&G.

A Hard Problem Requiring a Creative Solution

The Design Thinking initiative was the brainchild of Vice-President for Design Claudia Kotchka, who got the task from Lafley, to "get design into the DNA of the company" when she took on her position seven years ago. In a process-laden place like P&G, this is no easy task, especially because there is no way that design could take hold if perceived as tangential to P&G's existing set of operating models. Kotchka drew together the "deans of design thinking": Roger Martin, dean of the Rotman School of Management at the University of Toronto; David Kelley, founder of Stanford's D.School; and Patrick Whitney, dean of the Institute of Design at Illinois Institute of Technology. "How do we teach people what design thinking is and how to use it in a way that it could scale across a company with 130,000 employees? How could we engage more functions within the organization?" says Kotchka. "If we could get this right, then the prospect of fulfilling A.G. Lafley's vision had hope."

The first prototype workshop with the hair-care business in London in November 2005 yielded mixed results. "Somehow it didn't quite deliver—people didn't take action; the lessons didn't have staying power," said Tripp. The workshop agenda was redesigned with more emphasis on business. "There was too much academic stuff—philosophy and theory of design. We got rid of all the theory and settled on a completely experiential approach. To effect a major transformation in the way a problem is viewed through design thinking, the team must engage completely," Tripp continues. "Our business people wanted to get on with it. We will always engage when working on a problem in our business; but not necessarily engage when working on theoretical problems. From then on we were very selective to find worthy problems and assemble the right types of stimuli to get to the crux of the matter."

Nondesigners Design

The resulting design thinking workshop structure became more of a fast-paced immersive experience that ends with a serious reflection point about what's different using this methodology. Says Tripp: "Most of our workshop reflections suggest that the power of doing design thinking rather than just reacting to design thinking shifted many standoffish leaders into real partners for design. Once they get it, they can't get enough of it."

"Participants get scared using such rough prototypes to elicit consumer feedback at the beginning, but they are won over when they see the benefits of co-creation," says Kotchka. "We have found that the more finished a prototype is, the less feedback people will give you. When you give prospective users something half-finished, they think you don't know the answer. They know you need their help—and really open up."

(Test early, quickly, and cheaply!)

Having facilitated so many workshops over the past year, Tripp reflected on the impact the initiative has had on her personally. "I get goose bumps at the high level of dialogue and caliber of discussion that happens. Design thinking activates both sides of the brain—it makes participants more creative, more empathetic toward the human condition P&G consumers face. (this would work for B to B situations as well) Our managers don't leave their analytical minds at home; instead they are able to operate with their whole brain, not just the left hemisphere."

Kotchka, who recently announced her retirement from P&G after 31 years, said: "Design is going to continue to grow and prosper at P&G. That was my goal when I took this position. Our senior leaders are really engaged in design now; we have amazing global design talent, and design thinking gets all the other disciplines engaged. We have a wait list of people from every function in the company that want to become facilitators in design thinking."

Time will tell, of course, whether design will get into P&G's DNA as Lafley has envisioned. At any rate, the efforts of Kotchka and her team to change P&G's game with design will go down in business history as one of the most challenging cultural transformation efforts undertaken by a major global corporation.

The Challenges of Innovation
Indifference, hostility, and isolation are among the major obstacles to a healthy innovation environment
by Irving Wladawsky-Berger
August 22, 2008, 2:57PM EST
http://www.businessweek.com/innovate/content/aug2008/id20080822_832405.htm

This is a fabulous article that really sums up how management/leadership can help or hinder innovation and growth.

In most companies, just about all the cards are stacked against the nurturing of innovation, especially the kinds of new ideas and disruptive innovations that generally lead to major changes in the marketplace and within the business.
Following are some of the behaviors I have observed in companies throughout the years that have convinced me how difficult it is to create an environment in which innovation can flourish.

Indifference

While just about every CEO and senior executive of a company pays lip service to innovation, many do not really mean it. They mouth the words—it would be politically incorrect not to embrace innovation—but they do little beyond that.

That's not because they are not good, smart, and highly competent people. It's just that innovation is not a part of their DNA. The majority of executives make it to top positions by being very good operational managers: meeting sales objectives, improving products and services to keep up with competitors, supporting existing customers and acquiring new ones, managing mergers and acquisitions, achieving the required financial results quarter after quarter, and so on. (This often leads to what we call a Congealed Leadership Mindset that is a huge barrier to growth) These management jobs are very tough and getting tougher, given our rapidly changing, fiercely competitive, global business environment. Being a good manager takes very hard work, attention to detail, and organizational discipline.

But as executives rise up in the organization, other skills become increasingly important. They need to transition from being a manager to being a leader.

Management is about business results and processes. Leadership is about people. The key quality you need in good leadership is passion—the urgency to attack and solve the complex problems that all organizations face. To do so, you need to be surrounded by highly talented people, and you need to find a way to transmit your passion to them, so they will buy into your vision of the future, perform at the highest possible levels, and come up with innovative solutions to the challenges of achieving the vision.

When skies are blue, a company might be able to cruise along with top managers who are indifferent leaders. Such managers are typically executing tactical, incremental strategies where the critical ingredients are good, disciplined management as well as operational excellence. But once the skies begin to darken, (they are very dark today)as they inevitably do, such managers will get into deep trouble, and often end up taking a business down with them. Their most talented innovators and strategists, those whose skills are now badly needed to help set the business on the proper course, have either long departed or become so disenchanted that they have nothing left to give.

Hostility

In general, managers who do not actively encourage new ideas and innovations in their organizations do so because of indifference. They will typically listen politely to your new idea, provide some encouragement, and offer good advice. If they are being honest, they will tell you they barely have the time, energy, and budget to help much beyond a pat on the back now and then.

But some managers go beyond indifference. Their initial reaction to any new idea is negative, if not downright hostile. This is particularly true if the idea comes from someone outside their own organization.

Some of them also exhibit characteristics that many of us would associate with being a bully. Typically, the corporate bullies I have met have achieved their high management positions because, despite their poor interpersonal skills, they are very good at other parts of the job. Sometimes, they are excellent innovators themselves, but given their autocratic tendencies, innovation for them is a one-man or one-woman show. They tend to be poor team players: Collaborative innovation is not for them.

Such hostile behavior is hugely detrimental to a healthy innovation environment. People championing new ideas, especially if they are potentially disruptive new ideas, are going against the grain of what the business is currently doing. Rejection is painful, especially coming from people in positions of authority. Senior managers can nurture those new ideas through positive words and actions, or they can stop them on their tracks by being overly negative and combative.

Isolation

I strongly believe innovation is a team sport. The 2004 National Innovation Initiative report observed that innovation "is multidisciplinary and technologically complex. It arises from the intersections of different fields or spheres of activity." That is why it often takes a group of people who are not only highly talented but who bring together diverse skills and points of view in order to successfully tackle the kinds of complex problems we face in the 21st century.

But perhaps even more important, a collaborative approach to innovation helps provide the energy and emotional support that new ideas need in their very early stages. New ideas are almost always rough and ill-formed at first. In my experience, nothing works better than bouncing ideas off other, supportive people. This back-and-forth dialog is crucial in helping to shape the idea into something more concrete, understandable, and actionable. Then it is more ready to face the tougher challenges and criticisms from line management and others in the organization.

That is why isolating people in organizational silos is one of the biggest obstacles to innovation. Companies that are serious about innovation do everything possible to break down silos and encourage communication and collaboration across the organization and beyond. (We have found this to be one of the biggest barriers to growth within companies. Most companies are not organized around customer needs or outcomes. They are organized around functions, technologies, product lines, brands, major customers, etc.. Thus, when trying to innovate to bring new outcomes to customers, innovation requires leveraging the skill base across the silos as well as going outside the company.)

Fostering innovation is very hard, especially if the innovation is disruptive in nature. A spirit of innovation and collaboration does not come naturally to an organization. For such a spirit to take hold, it must become an integral part of the company's culture. None of this is easy, but it is what a company must do if it truly wants to create a healthy environment in which innovation can flourish.

Irving Wladawsky-Berger retired from IBM last year after a 37-year career at the company. He is presently working on technology and innovation with IBM and Citigroup, and is a visiting professor at MIT and Imperial College.

It’s No Time to Forget About Innovation

James Yang
By JANET RAE-DUPREE
Published: November 1, 2008, NYT

This is a very thought provoking article that was referred to me by both Professor James Conley from The Kellogg Sch00l and Denise Fletcher from Affiliated Computer Services. I highly suggest you go back to two earlier postings that discuss efficiency issues for innovation.

"Ambidextrous" companies can handle incremental change and bold initiatives
http://marketdrivengrowth.blogspot.com/2007/06/have-it-both-ways-ambidextrous.html
At 3M, A Struggle Between Efficiency And Creativity
http://marketdrivengrowth.blogspot.com/2007/07/at-3m-struggle-between-efficiency-and.html

A key message is that although these are VERY difficult times, do not sacrifice the future for once you hit the “stall point” of stagnation, all the data suggests it is VERY difficult to breakout of it.As you will see below, I do not agree with all the comments. I invite your thoughts.

BY its very nature, innovation is inefficient. (I am not sure I like this characterization. Innovation is riskier and more uncertain than initiatives targeted to extend or defend the current business but, because of this, they must be managed differently to be efficient—“Manage the cost of failure, not the rate of failure”. The above two posting deal with this in more detail) While blockbusters do emerge, few of the new products or processes that evolve from innovative thinking ultimately survive the test of time. During periods of economic growth, such inefficiencies are chalked up as part of the price of forging into the future.

But these aren’t such times. Wild market gyrations, frozen credit markets and an overall sour economy herald a new round of corporate belt-tightening. Foremost on the target list is anything inefficient. That’s bad news for corporate innovation, and it could spell trouble for years to come, even after the economy turns around.(This just emphasizes the importance of using the right processes for managing uncertainty)

“To be honest, we had a problem with innovation even before the economic crisis. That’s the reason I wrote my book,” says Judy Estrin, former chief technology officer at Cisco Systems and author of “Closing the Innovation Gap.” “We’re focusing on the short term and we’re not planting the seeds for the future.”
In tough times, of course, many companies have to scale back. But, she says: “To quote Obama, you don’t use a hatchet. You use a scalpel. Leaders need to pick and choose with great care.”
There are important things managers can do to ensure that creative forward-thinking doesn’t go out the door with each round of layoffs. Fostering a companywide atmosphere of innovation — encouraging everyone to take risks and to think about novel solutions, from receptionists to corner-suite executives — helps ensure that the loss of any particular set of minds needn’t spell trouble for the entire company. (I do not necessarily agree with this simplistic statement. There are many models that companies are experimenting with to drive innovation. Secondly, there are many functions within a company that demands processes like Six Sigma where you do not necessarily want these folks taking risks.Refer to the "Ambidextrous" companies can handle incremental change and bold initiatives" posting)

She suggests instilling five core values to entrench innovation in the corporate mind-set: questioning, risk-taking, openness, patience and trust. All five must be used together — risk-taking without questioning leads to recklessness, she says, while patience without trust sets up an every-man-for-himself mentality.

In an era of Six Sigma black belts and brown belts, Ms. Estrin urges setting aside certain efficiency measures in favor of what she calls “green-thumb leadership” — a future-oriented management style that understands, and even encourages, taking risks. Let efficiency measures govern the existing “factory farm,” she says, but create greenhouses and experimental gardens along the sides of the farm to nurture the risky investments that likely will take a number of years to bear fruit. (Refer back to the postings highlighted above)

“I’m not suggesting you only cut from today’s stuff and keep the future part untouched,” she says. “You have to balance it.” (This is critical. Although easier said than done, leaders must try to maintain their business renewal efforts while meeting their current requirements. Look at taking “the scalpel” carefully, not just pruning initiatives that may not bear fruit immediately but are required for renewal. Try to prioritize within each category – defending the base, extending it, and renewal.)

Yet even that approach has its drawbacks. Companies that create silos of innovation by designating one group as the “big thinkers” while making others handle day-to-day concerns risk losing their innovative edge if any of the big thinkers leave the company or ultimately must be laid off.

“Innovation has to be embedded in the daily operation, in the entire work force,” says Jon Fisher, a business professor, serial entrepreneur, and author of “Strategic Entrepreneurism,” which advocates building a start-up’s business from the beginning with an eye toward selling the company. “A large acquirer’s interest in a start-up or smaller company is binary in nature: They either want you or they don’t, based on the innovation you have to offer. The best way to foster innovation is to create something, put it to the test, build a good company and then get it under the umbrella of a world-renowned company to move it forward.”
David Thompson, chief executive and co-founder of Genius.com Inc., based in San Mateo, Calif., says that innovation “has a bad name in down times” but that “bad times focus the mind and the best-focused minds in the down times are looking for the opportunities.”

“You do have to batten down the hatches and reduce expenses, but you can’t do it at the expense of the big picture,” Mr. Thompson adds. “You always have to keep in mind the bigger picture that’s coming down the road in two or three years.

“The last thing you want to do with innovation is just throw money at it. It’s a very tricky balance.” (refer to the blog postings from above)

In fact, hard times can be the source of innovative inspiration, says Chris Shipley, a technology analyst and executive producer of the DEMO conferences, where new ideas make their debuts. “Some of the best products and services come out of some of the worst times,” she says. In the early 1990s, tens of millions of dollars had gone down the drain in a futile effort to develop “pen computing” — an early phase of mobile computing — and a recession was shriveling the economic outlook.

Yet the tiny Palm Computing managed to revitalize the entire industry in a matter of months by transforming itself overnight from a software maker into a hardware company.

“Our biggest challenge right now is fear,” she says. “The worst thing that a company can do right now is go into hibernation, into duck-and-cover. If you just sit on your backside and wait for things to get better, they’re not going to. They’re going to get better for somebody, but not necessarily for you.”

HOWARD LIEBERMAN, also a serial entrepreneur and founder of the Silicon Valley Innovation Institute, says innovation breeds effectiveness. It’s not about efficiency, he argues. “Efficiency is for bean counters,” he says. “It’s not for C.E.O.’s or inventors or founders.”(I would counter this comment a bit. There are VERY efficient tools to manage projects that are highly uncertain. The key, as discussed in the early blog postings noted above is choosing the right process. We cannot afford to do innovation inefficiently)
The current economic downturn comes as no surprise to him, he says, because it mirrors the downturn at the time of the dot-com bust. Then and now, the companies that survive are those that keep creativity and innovation foremost.
“Creativity doesn’t care about economic downturns,” Mr. Lieberman says. “In the middle of the 1970s, when we were having a big economic downturn, both Apple and Microsoft were founded. Creative people don’t care about the time or the season or the state of the economy; they just go out and do their thing.”