E251 | Unleashing the Power of Innovation Tournaments with Dr Christian Terwiesch
How can we generate thousands of ideas in your organisation? Feel overwhelmed just by thinking about it? Our guest on the podcast this week thinks that, if you can’t come up with thousand ideas, you’re unlikely to come up with a winner. That’s why he suggests creating an innovation tournament.
This week on The Melting Pot, we learned from Dr Christian Terwiesch, professor at the Wharton School, University of Pennsylvania, and Chair of Wharton’s Operations Information and Decisions Department. Christian has written numerous business books but, in this episode, we wanted to learn more about his latest work, The Innovation Tournament Handbook. This book is a more practical approach to the theory he laid out in his first book, Innovation Tournaments.
In this episode, Christian explains how to run an innovation process in your business and how to build an innovation tournament so that you’re running one every six months. That means lots of people get involved with loads of ideas emerging, all in a relatively low-cost way. He also talks about the importance of destigmatising failure in innovation and why we need to embrace it as part of the process of innovation.
Download and listen to learn more.
On today’s podcast:
- What is innovation, really
- The Innovation Tournament
- Removing the stigma of failure in the innovation process
- Getting the whole team involved in the innovation process
- The innovation dilemma
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How To Run An Innovation Tournament
Christian Terwiesch is the Andrew M. Heller Professor at the Wharton School of the University of Pennsylvania. He is a Professor in and the chair of Wharton’s Operations, Information, and Decisions department, co-director of Penn’s Mack Institute for Innovation Management, and also holds a faculty appointment In Penn’s Perelman School of Medicine. His research on Operations Management and on Innovation Management appears in many of the leading academic journals ranging from Management Science to The New England Journal of Medicine. He is an award-winning teacher with extensive experience in MBA teaching and executive education.
Professor Terwiesch is the co-author of Matching Supply with Demand, a widely used textbook in Operations Management that is now in its third edition. His first management book, Innovation Tournaments, was published by Harvard Business School Press. The novel, process-based approach to innovation outlined in the book was featured by BusinessWeek, the Financial Times, and the Sloan Management Review and has led to innovation tournaments in organisations around the world. His second book, Connected Strategies, combines his expertise in the fields of operations, innovation, and strategy to help companies take advantage of digital technology leading to new business models. The book has been featured as the cover story of the Harvard Business Review and has been featured by Bloomberg / BusinessWeek as one of the best books in 2020.
In 2023, Wharton published his latest title, The Innovation Tournament Handbook: A Step-By-Step Guide to Finding Exceptional Solutions to Any Challenge, synthesising more than two decades of experience organising innovation tournaments in Silicon Valley and on Wall Street, from Buenos Aires to Kuwait City, Shanghai to Moscow. Professor Terwiesch has researched with and consulted for various organisations. From small start-ups to Fortune 500 companies, he has helped companies become more innovative, often by implementing innovation tournament events and by helping to restructure their innovation portfolio.
Innovation is more than having a good idea
As Alex Osterwalder said last week, for an innovation engine to work in your organisation it’s not enough to have people who have ideas (the entrepreneurs), but you also need to operationalise the system. It’s not enough to give those people time. So, having an operations mindset is absolutely fundamental to creating successful innovation.
For Dr Terwiesch, in the startup world, you might have an idea that carries you far. But, if you’re running a big organisation, innovation has to be a process and a repeated endeavour. If you only have one idea, you may want to make sure it’s a good one.
“And so before you commit, before you go through all that sweat of execution and implementation, I would encourage you to have looked at hundreds, if not thousands of ideas that you’re digging that hole in the right location because that’s the only way that you’re going to find the gold. Make sure that you built a gold mine in a location where there’s gold on the ground.”
What is innovation, really?
The word “innovation” comes from the Latin word “Novus” meaning new. So, although there is a novelty in innovation, that alone is not enough, says Christian. There might be a reason why something has never been built or implemented.
“You need three things. You need a need, an unmet need, and you need a solution to that need. And that solution has to meet the need in some form that value gets created. That value can be money, can be healthy patients, reduction of carbon footprint in the world, world peace.”
Once we have those pieces together, we have an innovation, and now we can think about how do we get there, he adds. The problem is that, at the outset when you put together a solution and a need you don’t know whether you’re going to generate value or not. It’s just a hypothesis. It’s also easy to look backwards and think some innovator had a stupid idea. Dr Terwiesch calls it the luxury of hindsight. We know the problem happens when we go into that matching process we don’t know if it will work. And that means that we have to have many options, and many ideas so that we can build a selection process.
“If you think about how Mother Nature created wonderful things like human beings, the process of evolution is a process of the survival of the fitters. It is the creation of variation and selection that is what drives evolution. And I think the same process of natural selection drives innovation.”
The Innovation Tournament
In Christian’s first book, Innovation Tournaments. Creating and Selecting Exceptional Opportunities, those were important elements: creating and selecting. Often, people who are new to innovation only like to talk about creation because that’s the fun part. But having a list of thousand ideas doesn’t benefit you unless you’re able to select ideally the best one. So creation alone is not enough.
So, where does the idea of the tournament come from? As obvious as it sounds, sports. Imagine England Premier League or Wimbledon, where there is a map of how that tournament is going to play out. Often people talk about an innovation funnel but, from a fluid dynamics everything that you pour into a funnel comes at the bottom. That’s not how Wimbledon works. Not everybody wins, adds Christian. So, the innovation tournaments are based on filters.
“Once we agree on that architecture, on that flow, on that filtration process, we have to make a couple of decisions. One of them is, where do these contestants and these ideas come from? What are the hurdles? What are the rounds of elimination?”
Once you make those decisions, you need to ask about selection. Back to the sports analogy, there is always a referee. In business, it could be an internal referee (e.g. management), or an external referee (e.g. customers, market research). Then, you need to have a filtration ratio. Do you go from 1000 ideas to 100? Or from 1000 to 400? At what speed do you narrow it down?
One of the things that Dr Terwiesch asks groups he works with is, what idea would you be most excited about if it moved forward into the next round? Often, people use criteria, which sound very scientific. The most obvious criterion is there is a need. Does the solution meet the need? And does it create value? The problem is that when you’re doing this tournament at the early stages of our idea becoming an innovation and a success, we have no idea about the ROI. So if we run the tournament and base the filtering and progress of an idea based on that, you will end up in a ‘bullsh*t competition’, adds Christian.
“Everybody’s going to fake the numbers. Nobody has any idea how big the market is, nobody has any idea how much it will cost. And so what’s going to happen is we’re basically going to go into this race of who can tell the biggest lie? If I’m asking you, however, which idea would we as a group be most excited about? That is something as subjective as the question itself is that is something we can objectively measure?”
Removing the stigma of failure
Like in any other tournament, people need to accept that not everyone is going to win. In the innovation tournament, you accept that your idea wasn’t the best one, but you can join the team with the idea that excited you the most. In a way, the sense of failure is lowered. You’ve taken away the stigma of failure, and you’re simply learning and getting better at playing the game.
“So say we have a group of 50 people, we just voted the ten best ideas to make it to the next round, and I say look, 40 of you have not won with their idea. Why don’t you join the ten ideas that you just voted on and you will help these ideas go forward? And so that way the ideas become co-owned by the community, and we are all in that together we can all celebrate the success of those ten ideas. As opposed to having 40 out of 50 people being grumpy that they just lost.”
Getting everyone involved in innovation
When organisations start a tournament, they would ask everyone in the organisation what type of ideas they’ve got. Those ideas need to match the audience. For example, suppose you’re doing a tournament with the British healthcare system, and you’re doing a tournament where you want to improve the patient experience. In that case, you can reach out to everybody working in the healthcare system, but you will get ideas all over the map, from improving waiting experiences, waiting times, to treatment protocols to follow up home care. But if you’re looking for a cure for cancer, probably the frontline nurse that is doing the chemotherapy, will not come up with it. So if you’re looking for a drug, you probably want to do that with the Oxbridge crowd and have the elite university scientists work on that. So that is something that you just have to customise and apply the right tool for the job.
Everybody in any organisation has a stone in their shoe. They’ve got a thing that they think is so obvious to them that they can’t believe the rest of the organisation hasn’t already seen and fixed it. So, the idea of the tournament is to get thousands of ‘stones’ out of everybody’s shoes, create teams to look at the ideas and pick the ones they’re most interested in. And then, they’ll have X amount of time to explore the idea and see whether it can create value.
“You’re casting the net widely for maybe new products and services. So you’re hoping for some significant innovation that either attracts new customers or grows the business. Engaging with your employees for these new ideas, you find out a lot of these little stones that are bothering people. And I think that’s a good thing, that allows you to say that was a good idea. I’m going to fix that problem. And it does two things. It A) fixes a problem, and it B) creates feedback to the employees that this is a process that it’s good to be a part of.”
From promise to delivery
During the tournament, the idea will go from the raw stage toward the final round. When the idea reaches the final stages, the team has to move from promise to delivery. They have to show real data that they’re gaining traction that might be a prototype, a pilot. You have to derisk it, show the biggest uncertainties, be it in the technology that they can derisk to a prototype, or be it in market consumer responses that they could derisk to a minimum viable product. There has to be some data, not just a good story. For that, adds Christian, you probably need some help from the corporate side.
“If you’re building a prototype, you need access to engineering resources. If you’re building a market research test, the pilot a beta, you probably need some people from marketing involved. So at some point, that innovator team that we formed at the beginning around the person who came up with the idea needs corporate help. And that’s a good thing.”
The innovation dilemma: innovation in or outside the business
If innovation is disruptive, where do we put it? Inside or outside the organisation? Is there a different structure that reports via the CEO, and not through the rest of the organisation?
This is the classic dilemma, says Dr Terwiesch. He has seen this story either way. In the story where the innovation engine is kept outside, it doesn’t get slowed down by the bureaucracies and the naysayers who have a vested interest in keeping the status quo. The opposite argument for bringing it inside is the only way that you can educate the establishment about the power, and the opportunities of this disruptive innovation is that you confront them with it and you show it to them inside.
“The reason why disruptive innovation is called disruptive innovation is there’s no easy and right and peaceful way that you can tame it and bring it to your organisation. It’s called the Innovator’s Dilemma for a reason. ”