Sunday, August 24, 2008

Rule of 16 - Thinking versus Doing


Smart and creative groups of individuals will generate ideas 16 times as fast as they can even organize to execute on them, let alone actually execute on them.

Or put differently...

Your ambitions will always exceed your ability to execute given the available level of resources.

Innovation pass thru rates varies greatly by firm, type of business, business maturity, competitive situation, size of business, resources available, and absorptive capacity of the organization.

If you lack disciplined execution and are not delivering results then perhaps you have “passed through” too many innovations without putting the functional underpinnings in place to realize those innovations.


Simply put, it is easier to think of stuff, than it is to actually do the stuff required to make it real. As the business moves further into the execution space as opposed to the idea space there are fewer and fewer concepts that can be worked on given the available level of resources. At some point all resources are already assigned to previous “passed through” innovations. Sure, you could hire more people but somebody has to onboard these people and well, you never stopped innovating, correct. The filter keeps getting chock full of more ideas. Take any person or group temporarily out the “doing” mode and have them brainstorm new stuff and you are sure to come up with even more concepts.

Successful serial intrapreneurs/entrepreneurs realize over time that they get many more ideas than they even attempt to execute on. Established innovation engines in businesses of all sizes should be no different. After all, they are still made up of people, process, and technology and don't have any special exlusions to reality based execution.



The best businesses have extreme discipline in this translation from the idea space to the execution space. One best practice to emulate is being more ambidextrous, treating “next curve” innovation separately than extensions of products/services on “this curve”. That way you get the best disciplined execution for both worlds.

If you think you might be trying to break the Rule of 16 you might get a reality check by reading Innovation Checklist - 10 Questions for a 15 minute Checkup

Monday, August 11, 2008

The Reasonable Investor Test


This is the notion that you should be able to justify your actions e.g. spend, decision, execution path, etc. to a collection of 16 reasonably minded investors. This is meant to be a self test by somebody about to make a decision, spend money, etc. in a company that is funded by investors (public or private). This is important given the fact that the person closest and most sensitive to the investor (CEO, CFO, or Investor Relations) is not able to be present in an organization at all levels and at all times to safeguard decision quality.


The Reasonable Investor Test was coined for the group of people that I worked with at my software company where I often challenged potential abuses from staff and leadership at all levels of the company that unchecked would fail this test. As I explained to my colleagues, imagine yourself presenting your decision to a collection of 16 investors that politely assembled to hear your story. If you can look them in the eye and justify the decision or expenditure then it passes the test. If you would not be willing to do this then you probably should not make the decision or take the action you are considering.


Hmmm, I wonder where we’d all be if Enron and other hosts to corporate scandals had a reasonable investor test?