Product Global

Mattel: a Model for Offshore Manufacturing and Quality (unless you jump out of a bathtub naked onto a toy horse named "Blaze")

Amidst the flurry of news stories going on right now about product quality and China, the NY Times recently ran an article (free registration maybe required) about the world's biggest toy maker, Mattel, as an exemplary model for offshore manufacturing and product quality.  Hats off to Dan Harris of Chinalawblog for writing up a post about the article.  I sent the blog post and article to Roger Rambeau, a partner at Global Sourcing Specialists, this morning and we chatted about the "old days" when he worked his way up from the production line with Mattel to become a Vice President of manufacturing.  Roger managed and worked with Mattel's manufacturing plants and offices both at home and in several countries, including Mexico, Taiwan, China, Hong Kong, Singapore, and others.  Throughout his career, he was responsible for Mattel's quality and manufacturing.  The NY Times article quoted M. Eric Johnson, a management professor at the Tuck School of Business at Dartmouth, who has visited numerous factories in China, including some of Mattel’s as saying

“Mattel was in China before China was cool, and they learned to do business there in a good way. They understood the importance of protecting their brand, and they invested.”

I chatted with Roger, who first went over to China with Mattel in 1971 (well before China was "cool"), about the article this morning, and he concurred:

Mattel was a leader--out there in front of everyone else.  Their practices stemmed from the core principles of the company and we acted accordingly whether at home or abroad.  We took the initiative to work quite a bit with the US Government's Consumer Product Safety Commission and had a lot to do with the development of ASTM (an international product standards organization).  Well before they brought in S. Prakash Sethi, (cited by the NY Times article as a critic of worker mistreatment and hired by Mattel to independently monitor Mattel's factories and vendors' plants), Mattel hired a guy by the name of Chuck Williams, who was instrumental in developing quality and safety standards in the company and industry.  You've got to remember that this was very early on and manufacturing processes overseas could be very rudimentary.  When we first went over to Taiwan, female workers would come into the plant on their bicycles and take home die cut material to sew at home, and then bring it back as a finished piece. 

Mattel would measure and pretest products against the ASTM standards and then send them to an outside laboratory for testing.  If the product involved flammability issues, we did flammability testing.  Small parts issues--we did drop testing and choke testing.  Mattel was behind putting a material in marbles so that if a kid swallowed a marble, it could be seen in an X-Ray, rather than invisible.

Now, consumers and the media have become wise that a lot of companies sourcing product in China and overseas in general aren't paying nearly enough attention to their operations there.  But, even for industry leaders like Mattel, problems arise.  The NY Times article and Mattel's own executives point out that Mattel hasn't been completely free of their own problems in this respect either.  It's not easy and it's never going to be a perfect process--at home or abroad.   Roger regaled me with a few stories this morning which illustrate that not everything can be accounted for:

Sometimes problems are the result of design oversights.  A few years ago, a child got their tongue stuck in a product in a way that the Mattel design team hadn't even considered possible when they designed the product.  In another instance, a plastic toy horse named "Blaze" that a child could sit on and play was being sold.  The horse was made of two parts--front and back--with a seam in the middle where the saddle was.  One little boy, exuberant about his horse, was taking a bath and jumped out of the bath naked and ran over to his horse and jumped into the saddle.  The force of the boy coming down on the horse caused the seam in the saddle to open, catch his member, and shut tight.

The boy lived, but was not ok, if you know what I mean.  After hearing that story, I wasn't ok for about 5 minutes.   Even an industry leader couldn't see that one coming...

Alibaba Open Sesame Event: Is it Really Luggage-Free Sourcing?

Luggage-free sourcing?  I had to see for myself.  I recently attended Alibaba.com's first Open Sesame Event in Oakland, California, a week or so ago.  I know Alibaba.com well, but I had no idea what to expect, who would attend, and what would take place.  For those new to this website with a strange name, Alibaba.com describes itself as "the world's largest online import-export marketplace", and boasts of 3.1 million members in over 200 countries.   It's an impressive website.

Our company, Global Sourcing Specialists, will use Alibaba.com to occasionally track down a factory or two if we don't have one in our network that will suit the needs of a project.  On other blogs and in conversation, I've always praised Alibaba as a tremendous catalyst for connecting buyers and sellers.  But, I've also noted that many companies and people using the website were generally remiss when it came to taking all the appropriate due diligence and business steps that remain necessary after one has established contact.  I don't think Alibaba can be held responsible for making the sourcing process seem deceptively easy (although the term "luggage-free" is a stretch), but it's quite obvious that users are in serious need of education when it comes to sourcing and Alibaba.  When it comes to doing business in China, or Asia in general, and the notion of quality, it can be hard to wrap one's mind around just how different the approach and perspective on quality is.  See this post by Chinalawblog for some great anecdotes depicting the sobering reality.   Dan Harris speaks the truth when he says:

If you are going to source product from China, you must recognize and account for the differences from sourcing product in the United States or in Western Europe.

My hunches on the lack of education in the Alibaba community were confirmed when I attended the Open Sesame event.  I was surprised to find that the preponderance of the audience did not consist of CEOs and purchasing managers of mid to small-size companies, and service providers like myself, doing business overseas.   Instead, I would guess that 95% of the audience were complete newcomers to sourcing, offshore manufacturing, and the import-export industry.  I met many who were considering a new career as a "trader" or "sourcing agent" in addition to their daytime jobs.  Many of these folks often had family or connections in a given country and hoped to capitalize on this.  And, although the event focused on creating a community of Alibaba's users offline (I think this is a good move on their part), and demonstrating the capabilities of the site, it became evident that people wanted to know how to verify business partners' legitimacy, inspect factories, inspect quality, ship goods, and about all the other major issues involved with sourcing products offshore.  But, these questions and issues were largely outside of Alibaba's realm. 

The most fruitful and interesting event of the evening was an icebreaker game, during which the audience competed to exchange the most business cards in a one minute period.  I got 7 cards.   The winner collected 13.  Much like the service and value offered through the website, it was a brief exchange of general business information from one person or company to another, with the chance to learn more and possibly do business.   But just because Mr. Y gave me his business card in person, doesn't mean I'm going to trust everything he says and am ready to send $US 50,000 to his company in Asia to commence tooling for a product.  Just read these stories at Complaintsboard.com, or here at Alibaba-scam.info, by scammed users, and you can quickly get a feel for those that followed this approach. 

Alibaba.com and matchmaker/trading websites like it are here to stay.  They are part of the technology that is helping to break down barriers to a more free Global Economy and intertwine our economies and lives. But their user community is in serious need of education and services beyond a connection through email--services that require people on the ground.  When I first entered this business, I previously worried that Global Sourcing Specialists' services would be eclipsed by the internet.  In fact, several consultants who were very senior in age to me, bluntly told me that the internet was all that was needed now--and I should look elsewhere in business.  Now, I realize the opposite is occurring.  If anything, because of the internet, there are more companies and people out there than ever, that need education and help with doing business, manufacturing, and trading overseas.  "Luggage-Free Sourcing"?  Only if it's my luggage in the place of your's.

Business Planning: Keeping it All on Track Offshore and at Home

Great interview posted at Guy Kawasaki's How to Change the World blog.  Guy interviewed Tim Berry, President of Palo Alto Software, creator of Business Plan Pro, and the blogger behind Planning, Startups, Stories.  The interview was a great reminder that the business plan is not just a formality in business, but a tool used to push our critical thinking in terms of how we are going to accomplish what we are setting out to do.   It's not something you do at the beginning and leave alone.  Consistent revision for established businesses is just as important. 

The entire interview, including many of the posts from Berry's blog, are worth reading.  I've noted a few key points from the interview that struck me and offer my humble observations as they relate to manufacturing products offshore and business in general:

• Planning isn’t about the document; it’s about controlling your destiny, running your business better, setting goals and tracking progress, and keeping your eyes on the horizon while not tripping over potholes in front of you.

AU:  I often witness, when we begin stretching a business' or startup's operations offshore, many companies get tripped up by the unforeseen challenges.  That's because things come up that we've never even needed to think about when we do business in the States.  It's key to keep the overall goal in mind, and realize that the path to get there will probably not follow as clearly as was envisioned beforehand.  Take it from Gary Erickson, it's an adventure.      

• First, a plan should set priorities with the understanding that you can’t do everything. After all the buzzwords and analysis, strategy is focus. What can you do better than anyone else? What’s your core competence?

AU:  Strategy is often something that becomes sidelined when a company begins looking at all the details of getting their product manufactured offshore and shipped here.  There are a lot of details to account for.  Generally, it's natural for us to want everything.  We want the lowest cost with the highest quality with the speediest delivery.  Chances are--you aren't going to get all three.  There are always tradeoffs.  So decide what you need to support your overall strategy (e.g. lowest cost, most durable product, or quickest turnaround), and focus on getting that. 

• What’s most important with this order of execution (the order in which we go about constructing the plan) is to understand that it will never be sequential. In whichever order you do it, you will always be doubling back. I’ve done it in every conceivable order, but I’ve never done a plan from step one to step N. Fleshing out the second step will almost always bring up reasons to revise what you did in the first step, and the third step will make you rethink the first two.

AU:  How I wish when I finished something relating to the planning behind my company, I never had to return to it.  Given that I learn something new everyday, some things that I did yesterday are important enough that I go back and apply my new knowledge and rework them so that they help me more tomorrow.    

• The worst (mistake in a business plan) by far is focusing on the plan instead of planning. This generates the idea that you create a plan as a document, and the related misunderstanding that the plan is for somebody else. You don’t postpone life while you’re developing a plan; you’re always developing the plan. In the meantime, “Get going.” Here are some other common mistakes:

• Blue-sky blurry: lots of strategic thinking without any hard facts. Planning requires specifics: dates, deadlines, responsibility assignments.
• Trying to do everything. I use the rule of displacement: everything you do rules out something else.
• Thinking that being the lowest price option is important. It isn’t. The price and volume thing they talk about in economics classes is for 200-year-old lumps of coal, not your business. Use price as a statement of quality. Leave the low-price strategies for Walmart and Costco.

AU: It's hard to balance the "get going" with the "let me stop and critically think about how I can plan and execute this in the manner to most effectively achieve our goals".  It's not an "either/or"--it's a "get going" and "step back and think critically".  You may not balance it perfectly--but a valid attempt will get you much farther than none at all.  Planning for both will help.

Patenting, Prototyping, and Manufacturing Your Product: What to do When?

I recently had a very interesting conversation with Andrew Krauss, President of the Inventors Alliance and co-founder of InventRight, about the vast number of entrepreneurs and inventors who use the same, ineffective methodology to get their businesses and products going.  We shared a number of observations.  First, many starting out are convinced that they must apply for a full patent immediately before speaking a word to anyone about their product.  Thus, they find a patent attorney who will take them through the patent search and application process for a mere $3,000 to $20,000 dollars, so that after months of time and money spent, the entrepreneur or inventor can then begin to explore how they will actually make money off of their product.  I think Andrew and I arrived at the same conclusion that the question isn't whether patent attorney's fees are a good investment--but the question is when to invest?  The same question could be asked of prototyping as well as when to approach manufacturers?

Stephen Key of InventRight (Andrew's partner) is one of the most successful inventors you will find.  He has developed and licensed products to companies like Disney, Nestle, and Coca-Cola, as well as manufactured and sold his own products.  Andrew and Stephen formed InventRight to teach inventors how to license their products.  Whether you are licensing or building a business around your product, their advice in these areas holds true. 

In a post on the InventRight Blog, Stephen answers a few questions regarding the issues of patenting, prototyping, and marketing.  This post regarded the question of obtaining a provisional patent versus a full patent.  Stephen comments: 

I’m not an attorney and can’t offer you legal advice. I will tell you what I use the Provisional Patent for.

 

Simply put, the Provisional Patent gives you one year to fish off that pier and see if a manufacturer is interested in your idea. It’s super cheap and I can file it myself due to it’s much less demanding requirements.

 

If it’s a statistical fact that 97% of all patents don’t make any more money than the inventor spent on the patent, why would you want to go out and spend 6 grand or more on a patent. I’m not saying you shouldn’t file patents, what I’m saying is that you should get some interest from a manufacturer before you do.

In another post, he addresses the decision of when to pursue a prototype.  He responds to a reader's question on this issue:

A better question to ask yourself is what is your plan once you have a prototype. I talk to many, many inventors that spend a bunch of money on a prototype and a patent before they even have a plan as to how they plan on selling their idea. You need to understand the process of selling an idea before you spend money on patents or prototypes.

One of the biggest and most important challenges in building your business around a product is selling your product.  Selling is hard.  Most aren't comfortable with the rejection, numerous phone calls, time spent, and hard work involved in getting people and companies interested in your product enough to lay down their cold, hard cash for it.  Before you can even do this, you need to figure out the game plan on how you are going to sell your product. 

Before splurging on a prototype, you can file a provisional patent yourself, undertake some preliminary market research, and begin to formulate your gameplan.  How big is your market?  Who are the competitors?  Where are they selling?  How much are they selling for?  And, what messages are they driving at their customers?  Who will you need to contact to get your product out there?  Retailers?  QVC?  PR agencies?  Names?  Phone numbers?  Your sell sheet?  How does the whole puzzle fit together step-by-step? 

During this time, you may want to consider fiddling around with a home-made prototype on the kitchen table if you can.  But there is certainly no need to go out and spend $5,000-$15,000 dollars on the best prototype money can buy at this point.  If you're going to approach a manufacturer and build and sell the product yourself, a simple, looks-like/works-like prototype will suffice in getting the ball-rolling.  They should be able to provide ballpark costing, or walk you through a few steps to get you to the point where they can provide information like this.   The general point to take away is to investigate, as much as you can, whether you will get a worthy financial return on your time and money spent before committing a large amount of your time and money. 

Offshore Manufacturing is an Adventure: Interview with Gary Erickson

Gary Erickson, founder and principal of Garik Enterprises (a manufacturing and facilities consulting firm), has stories.  He's got great stories from countries all over the world--working with farmers in Ireland; sacred trees of the Druids; trying to get factories built in countries while rioters take to the streets and governments wrap him up in red tape.  They are wildly entertaining.   

On a more formal note, Gary's work includes 35 years in solid manufacturing, facilities, and retailing experience in industry, holding key executive positions of Vice President of Operations, Director of Industrial Engineering, Director of Facilities, Director of Materials, District Manager (5-Retail Stores) etc. with Fortune 500 corporations as well as fledgling start-up companies. These accomplishments have taken place both domestically and internationally for Atari, Xerox, Honeywell, Qume, and XO Industries to name a few. 

I've had the good fortune of meeting with Gary a few times in the last couple months.  Recently, he kindly sat down with me for a quick interview regarding his  experiences and advice in manufacturing and facilities development. 

AU:  Gary, thanks so much for your time.  One of the topics I've been blogging on a little bit recently is the concept of Low Cost Country Sourcing--and you mentioned some of your experiences and the challenges of dealing with running business operations in places where these lower costs are found.  The challenges can run the gamut, and sometimes have nothing to do with manufacturing at all, such as your run in with  rioters in the streets of Ireland.

Gary: Yes.  There were a few instances when I was working in Ireland and we had to be careful of the areas where rioters were running amuck.   During our project, we had young men and women coming in from farms who were going to work in the factory.   They had no training.  How do you fill a factory with employees when no one in the area even has training to do what you need to be done? 

The government offered incentives for hiring local people, but the university didn't have courses that taught people to do what we needed them to do.  I had to go to the local university and get the U.S. company to bring over some engineers to establish and teach courses there to these folks so we could train them to become technicians and engineers.  The university specialized in agriculture and farming, because that was the predominant industry in the area.   High-tech courses?  No way.  Once they completed the classes we set up and became technicians, then they could sit down and we could train them to do specific tasks.  But we needed to give them the basics in the first place.  For instance, how to use a volt meter.  They didn't even have that basic of a skill set.  So you couldn't even make a technician out of them until you trained them how to use these basic testing tools.

AU:  They'd probably never seen a volt meter before.  These people were farmers for hundreds of years.  You were starting from scratch.   

Gary:  We had to go from scratch to building electronic games.  It probably took 1 to 1 1/2 years just to get that underway.  But that's why checking out the university was one of the first things I did when I got over there to do a site search.   In a site search, you need to find out whether the infrastructure is going to be there to support what you need to do.   This includes potential locations, the skill sets of your labor pool, utility infrastructure--for instance if you have a large, bulky product that requires very high voltages and you need a lot of power capacity to test it, as opposed to small electronics products, they each have different voltage requirements. 

AU:  The utility infrastructure needs to support your need to draw certain levels of power off of it.

Gary:  Absolutely.  When I was in Puerto Rico, I had to actually pay the local electrical company to run power from a local hospital, which was two miles away, to the site where I was building the factory.  I also had to put in a backup generator because the first week I was there, the power was going out every day.  They told me, "oh no, this isn't a problem".  So I went to the director of the facilities at the hospital, and he gave me a different answer.  He said "that's why we have a backup generator because we can't be in the middle of an operation and have all the power go off--and that happens everyday".  And they had riots as well, in which the rioters would take chains and throw them up into the power lines and short out the entire district's power supply.  This kind of stuff happened all the time down there.  I hadn't even put up the fence yet to secure all the building materials we were going to build the factory with, when someone ran off with the fence.  That told me real quick what kind of environment I was going to be working in.  At one point, the company had an entire 40' container of electronic video games stolen, which was probably worth $3 million. 

AU:  How's that for low cost, huh?  So how long did it take the company to finally get up and running?  Did they make it that far?

Gary:  They did.  But I had to overcome a lot of hurdles.  Government regulations was another issue for us.  They had it set up so that everyone on the island was allowed to bid on projects.  And the rule was, I had to choose the lowest bidder.  So for a contract job to paint the exterior of the 150,000 sq. ft.  building, guess who shows up?  One guy with a 3-inch brush who had every intention of painting this massive building.  It would have taken him 10 years to paint the building.  So I had to go work with the government again and get them to compromise on their regulations.  I told them I was never going to be able to actually go into production, so therefore, I can't train and hire the local people until we do that. 

AU: This happens in rural regions in China.  Local governments are trying to attract foreign capital and businesses, thus they offer tax incentives and other rewards, but a lot of stipulations come tied to those.

Gary:  You'll have to hire X number of employees.  You have to guarantee that they'll be employed for a certain amount of time--whatever you can negotiate with the government.  And each instance is different.  Each country and region have their own incentives, so to speak.  Occasionally, you can make some great arrangements.  For instance, in Ireland, I was able to get the government to give us money for every worker we trained, and our company used that money to fly over engineers to train them.  So it didn't come out of the company's wallet. 

AU:  In your experience, when companies come to you, do they typically ask you to go out and pick a country to locate their factory in?  Or, do they generally have the location worked out, and just want to make it happen?

Gary:  It happens both ways.  Either the CEO or someone high up in the company has some previous experience with a country or they golf with someone who does, and it becomes a "me too" thing.  They hear their buddy has a factory in country X and their buddy raves about how successful it's been.  But the truth is, you don't hear about all the challenges that guy had to deal with to get it to the point that it's at. And if you're looking at different areas or different countries--the issues can be wildly different.  You might deal with excessive rain, or sunken foundations, or even local superstitions.  In Ireland, there was an area of trees inhabited by druids hundreds of years ago and you cannot touch them.  They are sacred.  But someone unwittingly might buy the property without having any idea about that. 

AU:  When you go into a factory in China, Malaysia, or Puerto Rico, what are the things you look at?

Gary:  First, I look at the safety of the working conditions for the employees.  So I look at the electrical distribution system.  On a job in Taiwan, I saw a very powerful electrical component completely exposed.  Anyone who accidentally touched it--say "goodbye".  So I start with stuff like that.  Why?  One: the safety of people.  Two: is because liability in these cases can become a problem.  Not just for safety, but for product quality as well.  You don't want to be guessing in these areas.  It may look good on the surface, but a little use might breakdown your product.  You need to specify your requirements and control the quality of not just your product, but the materials and components as well. 

AU:  Companies are going over to China, for instance, but they're not prepared to deal with these things.

Gary:  It's the "me too" thing.  They go over and they get the nice tour of the facilities and get taken out to a nice dinner and think everything is great.  Then, a few months after the product launch, they start getting reports from customers of your product falling apart.  Once you degrade the quality of your brand, it's near next to impossible to get it back.

AU:  Although China is slowly starting to get better in terms of their quality, it's still in its infancy in this capacity, and the variance between factories and quality can be dramatic.

Gary:  Yes.  They are improving but you really need to look at what you're getting.
You need to get over there and really look at their capabilities and see if they can support the quality that you need. 

Timely advice!

Product Liability and China

If my dog was killed because he ate pet food from China that had toxic chemicals in it, because of poor quality control or lack of production oversight, I would be extremely upset.  If I brushed my teeth tomorrow morning and my teeth began to glow green, because chemicals typically found in antifreeze, made their way into the toothpaste manufacturing line in a chinese factory, I'd look funny.  But I'd also be pretty concerned and possibly very sick (nobody's teeth have actually been reported to glow green). 

The media is going nuts with all of the product liability issues being raised with Chinese imports.  The Wall Street Journal recently published the article Made in China: Sued in the USA.   See the article for just a sampling of the recent spats arising from these issues. 

The media coverage is both a good and a bad thing.  It's bad, because a number of protectionists in Congress and other industries are using it to voice and push an anti-China agenda in addition to using China as a scapegoat for a number of America's economic woes. 

For more on this, take a look at a recent Economist article published in May, entitled America's Fear of China, the main points of which can be read here.  The article makes some great points in terms of what might be valid and invalid in terms of America's agenda with China. 

Detractors aside, the media coverage of these issues is a good thing because American consumers, and particularly retailers, need to become more aware of where their goods are coming from and in what conditions they are being produced--not in a hysterical and frenzied fashion as some might like us to behave.  But we need to raise awareness of these issues and investigate them more thoroughly. 

Having personally visited at least 75 factories in China in the last year, I can tell you that factories in China come as varied as food retailers in the United States.  You've got Mom-n-Pop stores, farmers markets, vending machines, regional grocery chains, roach coaches, national grocery chains, and more.  Their setups, services, products, sizes, operations, management styles, locations, and customers come in every variation under the sun.  So do factories in China. 

Consider the following as an example of the complexity of working with the right Chinese suppliers.  Two factories may exist in the city of Chanzhou, China.  They both are exactly the same--same number of workers, size of factories, types of machines, and products produced.  Let's say they both produce shirts and jackets--garments.  Factory A has a very professional-looking website, someone who speaks decent English with customers, and has purchased a counterfeit ISO 9001 certification to validate their quality systems with customers even though their quality systems are not up to par with U.S. standards.  In addition, Factory A does not have a sewing needle detection machine or needle tracking program in place.

A needle detection machine, featured in the picture, is used by passing garment pieces over it to determine if any needles or pieces of needles are stuck in the garment.  A needle tracking program provides that every worker must sign in and sign out needles.  If a needle is broken during use, it must be taken back to the needle-person and exchanged for a new one. 

Factory B does not have a website in English.  They do have staff that speaks an intermediate level of English.  They do not present any international certifications, but they have been working successfully with foreign customers for over 7 years.  They have and use their needle detection system as well as a needle tracking program.  A U.S. company emails both factories looking for a supplier.  They choose Factory A because Factory A displays the trappings of a good organization and they believe that such a factory would have good quality and safety control.  They purchase 10,000 kids jackets, for ages 3 to 5 years, from the factory and sell them in the U.S. market .  Eleven of the jackets sold contain sharp needle points.  Nine of them don't cause any harm.  One of them pierces a 3 year-old's neck and the child gets an infection.  Another needle gets stuck under the skin of a little boy's arm and both require hospital attention.  The angry parents find Lawyer X, who agrees to help them go after the US company for its negligence and make them pay dearly for the harm done to these children.

Before the media blitz and all of the recent stories about Chinese product liability, my own little hypothetical story here may have seemed a little dramatic and far-fetched.  Now, not so much.  It doesn't take much to strike up a conversation with a Chinese vendor these days and send them money to make your product.  Spare yourself from becoming a cautionary tale of Chinese product liability in the WallStreet Journal--do your homework and keep on top of quality.  Investigate what safety standards your product must live up to.  Understand how your products will be inspected: according to what criteria and when.  And, for backup protection, carry a product liability insurance policy.  This goes for suppliers in China or any low-cost country for that matter.  As one client cleverly put it to me in an email, just because Paris Hilton got all the publicity for going to jail, doesn't mean that she's the only Hollywood, teenie-starlet out there bending the rules.         

Is the Innovation Reaper Coming for You?!!!

Innovate or die!  I still remember seeing this sprawled across the cover of an issue of Businessweek magazine in a bookstore in 2003.  I generally don't remember magazine cover titles 3 months prior.  But this one is pretty scary, right?  After reading this title, I went right home and stared at a blank wall for an hour and muttered to myself about new products I could develop.  Thankfully, I've staved off the Innovation Reaper that Businessweek warns of, so far...   

Many folks have different ideas about how innovation takes place.  Generally, it's perceived to be an "aha" moment or epiphany-like moment.  As if, one day three years ago, Steve Jobs was digging through his closet for his old Hari Krisna  shrouds, when a pile of old records, some photos of he and Wozniak playing freeze tag, and an old rotary phone fell off the shelves into one pile on his foot and he screamed in pain "Aye! ...phone."   True story.

Guy Kawasaki recently interviewed Scott Berkun, author of The Myths of Innovation.  Berkun's innovation resume includes working on the Internet Explorer team at Microsoft back in the 90's, as well as writing the best-selling book, The Art of Project Management.  What I like about Berkun's points regarding innovation, is the theme that innovation, like many other things, is generally the result of a string of small improvements and consistent effort.  In addition, innovation is not just a challenge of conceiving of things never thought of before, but it's just as much a challenge of convincing others of the worth of your ideas or products. Edison knew both of these things.  Berkun explains:   

1. Question: How long does it take in the real world—as opposed to the world of retroactive journalism—for an “epiphany” to occur?

   Answer: An epiphany is the tip of the creative iceberg, and all epiphanies are grounded in work. If you take any magic moment of discovery from history and wander backwards in time you’ll find dozens of smaller observations, inquiries, mistakes, and comedies that occured to make the epiphany possible. All the great inventors knew this—and typically they downplayed the magic moments. But we all love exciting stories—Newton getting hit by an apple or people with chocolate and peanut butter colliding in hallways—are just more fun to think about. A movie called “watch Einstein stare at his chalkboard for 90 minutes” wouldn’t go over well with most people.

2. Question: Is progress towards innovation made in a straight line? For example, transistor to chip to personal computer to web to MySpace.

   Answer: Most people want history to explain how we got here, not to teach them how to change the future. To serve that end, popular histories are told in heroic, logical narratives: they made a transistor, which led to the chip, which create the possibility for the PC, and on it goes forever. But of course if you asked William Shockey (transistor) or Steve Wozniak (PC) how obvious their ideas and successes were, you’ll hear very different stories about chaos, uncertainty and feeling the odds were against them.

   If we believe things are uncertain for innovators in the present, we have to remember things were just as uncertain for people in the past. That’s a big goal of the book: to use amazing tales of innovation history as tools for those trying to do it now.

3. Question: Are innovators born or made?

   Answer: Both. Take Mozart. Yes, he had an amazing capacity for musical composition, but he also was born in a country at the center of the music world, had a father who was a music teacher, and was forced to practice for hours every day before he started the equivalent of kindergarten. I researched the history of many geniuses and creators and always find a wide range of factors, some under their control and some not, that made their achievements possible.

4. Question: What the toughest challenge that an innovator faces?

   Answer: It’s different for every innovator, but the one that crushes many is how bored the rest of the world was by their ideas. Finding support, whether emotional, financial, or intellectual, for a big new idea is very hard and depends on skills that have nothing to do with intellectual prowess or creative ability. That’s a killer for many would-be geniuses: they have to spend way more time persuading and convincing others as they do inventing, and they don’t have the skills or emotional endurance for it.

5. Question: Where do inventors and innovators get their ideas?

   Answer: I teach a creative thinking course at the University of Washington, and the foundation is that ideas are combinations of other ideas. People who earn the label “creative” are really just people who come up with more combinations of ideas, find interesting ones faster, and are willing to try them out. The problem is most schools and organizations train us out of the habits.

6. Question: Why do innovators face such rejection and negativity?

   Answer: It’s human nature—we protect ourselves from change. We like to think we’re progressive, but every wave of innovation has been much slower than we’re told. The telegraph, the telephone, the PC, and the internet all took decades to develop from ideas into things ordinary people used. As a species we’re threatened by change and it takes a long time to convince people to change their behavior, or part with their money.

7. Question: How do you know if you have a seemingly stupid idea according to the “experts” that will succeed or a stupid idea that is truly stupid?

   Answer: Don’t shoot me, but the answer is we can’t know. Not for certain. That’s where all the fun and misery comes in. Many stupid ideas have been successful and many great ideas have died on the vine and that’s because success hinges on factors outside of our control.

   The best bet is to be an experimenter, a tinkerer—to learn to try out ideas cheaply and quickly and to get out there with people instead of fantasizing in ivory towers. Experience with real people trumps expert analysis much of the time. Innovation is a practice—a set of habits—and it involves making lots of mistakes and being willing to learn from them.

8. Question: If you were a venture capitalist, what would your investment thesis be?

   Answer: Two parts: neither is original, but they borne out by history. One is portfolio. Invest knowing most ventures, even good ones, fail, and distribute risk on some spectrum (e.g. 1/3 very high risk, 1/3 high risk, 1/3 moderate risk). Sometimes seemingly small, low risk/reward innovations have big impacts and it’s a mistake to only make big bets.

   The other idea is people: I’d invest in people more than ideas or business plans—though those are important of course. A great entrepreneur who won’t give up and will keep growing and learning is gold. It’s a tiny percentage of entrepreneurs who have any real success the first few times out—3M, Ford, Flickr were all second or third efforts. I’d also give millions of dollars to authors of recent books on innovation with the word Myth in the title. The future is really in their hands.

9. Question: What are the primary determinants of the speed of adoption of innovation?

   Answer: The classic research on the topic is Diffusion of Innovation by Rogers, which defines factors that hold up well today. The surprise to us is that they’re all sociological: based on people’s perception of value and their fear of risks—which often has little to do with our view of how amazing a particular technology is. Smarter innovators know this and pay attention from day one to who they are designing for and how to design the website or product in a way that supports their feelings and beliefs.

10. Question: What’s more important: problem definition or problem solving?

    Answer: Problem definition is definitely under-rated, but they’re both important. New ideas often come from asking new questions and being a creative question asker. We fixate on solutions and popular literature focuses on creative people as being solvers, but often the creativity is in reformulating a problem so that it’s easier to solve. Einstein and Edison were notorious problem definers: they defined the problem differently than everyone else and that’s what led to their success.

11. Question: Why don’t the best ideas win?

    Answer: One reason is because the best idea doesn’t exist. Depending on your point of view, there’s a different best idea or best choice for a particular problem. I’m certain that they guys who made telegraphs didn’t think the telephone was all that good an idea, but it ended their livelihood. So many stories of progress gone wrong are about arrogance of perception: what one person thinks is the right path—often the path most profitable to them— isn’t what another, more influential group of people thought.

12. Question: Is innovation more likely to come from young people or old people? Or is age simply not a factor?

    Answer: Innovation is difficult, risky work, and the older you are, the greater the odds you’ll realize this is the case. That explanation works best. Beethoven didn’t write his nineth symphony until late in his life, so we know many creatives stay creative no matter how old they are. But their willingness to endure all the stresses and challenges of bringing an idea to the world diminishes. They understand the costs better from the life experience. The young don’t know what there is to fear, have stronger urges to prove themselves, and have fewer commitments—for example, children and mortgages. These factors that make it easier to try crazy things.