Last week, I wrote about increasing innovation in your company.

This week, in Part 2, we’ll talk about how to create the right environment and incentives for innovation to flourish.

Today’s post outlines a few key ideas and strategies I’ve found to be extremely effective.

Fear of Failure = Fear of Innovation

The day before something is truly a breakthrough, it’s a crazy idea.

But few companies actually try crazy ideas — especially the most successful ones.

Fear of failure paralyzes creativity, stops risk-taking, and ultimately slows innovation down to a halt.

Why do people fear failure?

Three principal reasons…

  1. Fear impacting their reputation: “If I fail, I won’t get the promotion.”
  2. Fear of losing time: “I’ve invested two years of my life, we can’t fail now!”
  3. Fear of losing money: “I’ve invested way too much money, we can’t fail now!”

How do you minimize fear of failure?

The right environment and the right incentives.

The 5-5-5 Program

A decade ago, Michael Schrage, a research fellow at MIT’s Sloan School, shared an elegant idea with me for creating a conducive environment for innovation in your company. He called it the 5-5-5 Program. Below is my variation on his concept.

Here’s the basic idea:

Teams of 5: Break your company (division, group, etc.) into teams of five people. Try to maximize diversity in the group (gender, age, expertise).

Why 5 people? There’s no “CEO” of a team of 5 people. There’s no need for an org chart or a communication plan. Information flows freely and there’s reasonable idea diversity. This is similar to Jeff Bezos’ ‘two-pizza rule’… an ideal working team size.

$500 or $5,000: Next allocate a budget for each of the teams… Something on the order of $500 to $5,000. This is the amount of money each team will spend during this program — enough money for the team to try a few experiments, without breaking the corporate piggy bank.

5 Days or 5 Weeks: Give the teams a fixed (short) amount of time to run a number of experiments to see if their idea has merit and gets traction. The amount of time is sufficiently short such that there are no negative consequences if nothing useful materializes.

Here are your instructions and parameters to your competing teams:

  • Principle 1: Most Exciting Results — Make it clear that you are looking for the “most exciting” results (or, in some cases, the “most specific” results). This will encourage teams to get creative and test “crazy” ideas that might have been distracting or taboo in any other context.
    For example, you might say: “I want you to try risky, crazy ideas. I want you to experiment. I want you to try a few ideas that haven’t been tried in our company before. I expect that most ideas won’t succeed, and that’s okay. Have fun with this. My goal is to reward creativity. Surprise me!”
  • Principle 2: Failure Is Okay — Remind teams that failure is okay. The only failure that is not acceptable is that they don’t try new and different ideas. Communicate the notion that small ideas won’t get your attention.
  • Principle 3: The Best Idea Wins — This is a competition, and the best idea, as determined by your executive team or companywide vote, wins the game. Depending on your bandwidth or budget, offer a compelling, exciting reward for the best idea. Perhaps offer to fund and implement the best idea(s).
  • Principle 4: Collaboration Is Key — Finally, remind the groups that if any one team succeeds in reaching the target, the whole company wins. Encourage collaboration and tell them that teams that collaborate will also be rewarded. You need to drive collaboration to increase the probability of great ideas bubbling to the top, and even collaboration across teams.

Remember, it’s critical that your team collects data on their experiments. Data is everything, so make sure they’ve identified their targets and understand their key performance indicators (KPIs).

Now, run the experiment.

You may be shocked by the results — the creativity and originality of your own employees is astounding.

Darwin’s Theory of Innovation

As it turns out, Darwin’s theory from On The Origin of Species also holds true for the origin (and evolution) of ideas (i.e., innovation).

The same conditions that increase the rate of biological evolution also drive the greatest rate of idea generation.

When Darwin wrote On the Origin of Species in 1859, he discussed three primary conditions as the drivers for “speciation” (the formation of new species):

  1. Small gene pool (small breeding group)
  2. High evolutionary selection pressures
  3. Geographic isolation

Metaphorically speaking, “speciation” is very similar to “ideation,” or the formation of new ideas.

And interestingly, the same conditions that led to speciation also lead to ideation.

Small Gene Pool = Small Team Size: As discussed in the 5-5-5 segment above, small diverse teams ranging in size from five to eight are ideal for breeding new ideas. Having too large a group can create artificial social pressures that prevent individuals from raising their hands or taking risks. Beyond this, larger groups typically have too many naysayers that tend to squelch outlier ideas.

High evolutionary selection pressures: Historically, we’ve seen incredible innovation during times of war (e.g., Kelly Johnson’s Skunkworks inventing the first jet aircraft in 1945). High-pressure environments incentivize people to try crazy ‘Hail Mary’ ideas, and while most fail, if one works, it is usually a true innovation.

Geographic Isolation: Place your “innovation team” outside the mother ship, far away from the hordes that will tell them how “crazy” their ideas are. True innovation is massively disruptive and the average employee hates disruptive change. Steve Jobs isolated his Macintosh team far away from the rest of Apple and proudly flew a pirate flag above the building.

Image Credit: Shutterstock.com

Dr. Peter Diamandis was named by Fortune Magazine as one of the World’s 50 Greatest Leaders.

He is Executive Founder of Singularity University, a Silicon Valley institution that counsels the world’s leaders on exponentially growing technologies.

He is the Founder and Executive Chairman of the XPRIZE Foundation which leads the world in designing and operating large-scale incentive co...

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