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Report 103

Your newsletter on applied creativity, imagination, ideas and innovation in business.

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Wednesday 6 February2013
Issue 222

Hello and welcome to another issue of Report 103, your twice-monthly (or thereabouts) newsletter on creativity, imagination, ideas and innovation in business.

As always, if you have news about creativity, imagination, ideas, or innovation please feel free to forward it to me for potential inclusion in Report103. Your comments and feedback are also always welcome.

Information on unsubscribing, archives, reprinting articles, etc can be found at the end of this newsletter.


Note

Most articles in this issue of Report 103 can also be found in the archives together with dozens more articles, papers and thoughts.


 

In this issue of Report 103

  1. Loss Aversion and Idea Implementation
  2. Intense ACTion Facilitation (ADV)
  3. Optimism and Innovation
  4. When Brainstorming Works

Also some self promotional stuff about anticonventional thinking....


 

Loss Aversion and Idea Implementation

By Jeffrey Baumgartner

You've had a brilliant, creative idea that you believe could become a breakthrough innovation. You've researched and modelled the idea's potential and believe it could generate substantial more revenues for your company as well as reinforce your business's reputation as a leader in the field. So, you make a nice presentation emphasising the manifold benefits of your idea and present it to top management. You are convinced they will buy into your idea and are devastated when they reject it as being too expensive, too risky and probably something your customers would not like. What happened? How could they not be seduced by the benefits of your idea?

Your mistake was selling your idea on its benefits. You would have done better to sell it by emphasising the consequences of not implementing your idea. Allow me to explain.

Loss Aversion

We humans have a strong, demonstrated tendency to place more value on loss than we do on gains. In psychology and economic theory, this is called "loss aversion". For most people, the sorrow of losing€100 seems significantly worse than the joy of finding €100. Loss aversion impairs our decision making process. Imagine you are a senior manager with €1 million to invest in new projects. Two people come to you, each with a proposal. The first proposes a project that will use up the budget, but if it succeeds should earn the company a 100% profit in the first year and 50% annually thereafter. If it fails, however, the initial million will be lost. The second person proposes a project that will use up the budget, but is virtually guaranteed to earn a 20% return on investment annually. Better still, if it fails, you'll be able to recoup the €1 million. Which option would you choose?

If you are like most people, you would choose the second option. The returns are good enough and you can be sure you won't lose anything. Sure, the first option looks good and it would be great if it succeeded! But, what if it fails? What would be the consequences of backing a project that lost your company a million Euro? What would be the consequences of backing a project that took up all your budget and yet might fail?

The same thing happens when you sell an innovative new project based on the potential benefits. Of course senior managers would love the company to benefit from the massive revenues your project could bring. But in their minds, they will be considering the consequences of failure. They will ask themselves how much the company will lose if customers don't fall in love with your new product idea. Even if that loss is smaller than the potential benefits, it will worry the average manager more than the potential benefits would please her.

Working with Loss Aversion

What can you do? Use loss aversion to your advantage. When you present your idea to senior managers, be sure to spend time explaining the loss the company will face if it does not implement your idea. This might include lost market share, reduced income over time and even loss of prestige if you lose your market leadership position. In short, highlight the loss to the company if your idea is not implemented as well as the benefits if it is implemented. if you can do this convincingly, your idea is far more likely to be approved.

You can about loss aversion in Wikipedia.

 

Intense ACTion Facilitation

If you need really creative ideas that have the potential to become breakthrough innovations, give me three to eight of your creative thinkers and a day or two. The results will be incredible. Learn more...

 

Optimism and Innovation

By Fernando Cardoso de Sousa
President, APGICO

Whoever limits themselves to only listening to the news media, complemented by the comments made by people, will be convinced that the Portuguese are generally pessimistic. Nothing can be further from the truth, at least in the version of studies that report Portuguese people as being optimistic, that is: having a tendency to see the positive side of life. That is why we Portuguese bet so much on the lottery where the probability of winning is less than minimal. It is why we believe that our soccer club will surely win, even after a series of defeats. Of course, lonely or upper-middle class males, young people (especially those unemployed for more than one year), or people from the Alentejo (the southern, less populated region of Portugal), decrease the statistics a bit. However, the probabilities still not fall below 50%, even in situational optimism (i.e., dependent upon the situation, and not solely because of an individual's personality - or dispositional optimism). It is also very dependent on the level of education. Indeed, the present crisis is far behind other causes of pessimism, such as family, social interaction and health. Even the Catholic religion and its rituals favour collective optimism, while enhancing the value of hope and faith. In fact, everything that has to do with social interaction fosters optimism.

Optimism is Contagious and Is the Result of Social Interaction

Not everything is good about optimism, of course. As in Voltaire's Candide, this Leibnizian optimist believes that "everything is for the best in the best of all possible worlds", to the point of thinking that all was well in Lisbon, right after the 1755 earthquake that destroyed the city. Studies indicate a higher incidence of excessive optimism among sequential entrepreneurs, i.e., those who pursue a single line of business, as opposed to portfolio entrepreneurs who engage in more than one industry and who are more moderate in the calculation of probable success.

In either case, you cannot create anything without a good dose of optimism for creativity; as optimism is primarily an emotion in which the exercise of will is above all other feelings. As much as with knowledge, or talent, the person who does not have a disciplined will will never be able to achieve anything truly important (this is one of the gifted people dramas).

The same happens in businesses which is why innovation is mainly the pursuit of a constant discipline. This has been revealed in a recent study, where the researchers concluded that the innovative entrepreneur is primarily a disciplined individual oriented towards sharing with collaborators, internally and externally. In this study, discipline, persistence and collaboration emerged as the keywords for innovation in companies, particularly in the creative industries. This is perhaps because these managers have a need for organizational skills and work dedication; objectivity; and the ability to concentrate, while having to share decisions with a more specialized and dedicated population of employees than in other sectors of activity.

It follows that, if we want innovation to exist, we must bring people together. Without that, there is no optimism that endures. Of course, first you have to get optimistic people. Without them, nothing can be done. But then you might want to temper the group with some pessimists, so that the illusion of success does not overshadow reality. In either case, the key is not only to have people with great ideas, but to have those which are able to persist beyond failure. This does not mean to do so blindly and ignoring evidence or imagining that everything will be solved by the incoming “D. Sebastian” (a character of Portuguese mythology who will arrive on a foggy morning and save the country), but consciously, learning from mistakes, experimenting, evaluating and retrying, but always endeavoring.

Optimism, as well as creativity, can be learnt by practice. And practice is not only looking to change the perception of reality and imagining new ways to interpret it, but also adopting routines that will help to maintain a firm determination to move on. Even if, in order to create, need some insulation, you also need to have social interaction, so that optimism can be maintained in spite of failure. In fact there is no such thing as lonely creation. Thus, if the company wants good ideas to be put into practice, it must employ teams and projects as its main form of progress whilst, at the same time, ensuring that compliance with day-to-day routines remains a strong point for creating a culture of discipline.

 

When Brainstorming Works

By Jeffrey Baumgartner

I have been highly critical of brainstorming over the past year or two. And I am not the only one. The formal brainstorming process as defined by Alex Osborn some 60 years ago has come in for criticism since Mr. Osborn first wrote about it. But over the past couple of years, a growing body of research shows that all the assumptions behind brainstorming are flawed. (You can read more about this in my paper on anticonventional thinking - PDF). But the truth is, I am being unfair. Brainstorming is not an effective process when you need to generate highly creative ideas, especially if you want to identify a highly creative idea and implement it. Indeed, when I do anticonventional thinking workshops and ask how many people in the room have participated in traditional brainstorms, nearly everyone's hand goes up. Then when I ask who has participated in a brainstorm where a very creative ideas was generated and implemented. Nearly everyone's hand goes down!

But I do not believe brainstorming is useless. There are three areas where I have seen it used effectively.

When you Want to Implement Lots of Incremental Ideas

If you need a number of incremental ideas, rather than one big idea, brainstorming is great. For instance, the human resources division of a company might ask: "In what ways can we improve the working environment" and hope to get a number of small ideas, many of which will be implementable. The overall effect will be a clear improvement in the workplace environment as well as a feeling among employees of having contributed to that improvement.

Feel Good Innovation

As business processes go, brainstorming is probably second only to workplace massages for making people feel good. Lots of positive reinforcement combined with a rule against criticism pretty much ensures that all of the brainstormers in a session will feel good about themselves afterwards. Better still, the metric by which most brainstorms are judged is the number of ideas submitted. This is almost always a bigger number than participants expect. So, again, they can feel good about their participation. Lastly, managers who organise brainstorms can feel they are doing innovation and doing it well, again citing the number of ideas generated as proof that they've done innovation.

Legitimise a Pre-existing Idea

It may seem counterintuitive, but brainstorming is a great way for a manager to legitimise as innovative an idea that she has developed on her own. This may be done intentionally or subconsciously But if a manager has a pet idea she would like to see developed, she can organise a brainstorm. There she can either put forward the idea herself or, if she has discussed the idea with her colleagues, be reasonably sure that it will be added to the list of ideas generated in the brainstorm. If participants know the manager favours a particular idea, they are also likely to vote it as one of the best afterwards. External facilitators may not be aware that this is happening. But a number of people I've spoken with (who are not brainstorm facilitators) have seen this scenario happen.

Is this wrong? I don't think so. If it allows a good, creative idea to be realised, it cannot be a bad thing. Moreover, there is the potential that participants will build upon it, turning it into a better idea. But it is not necessarily fair to the other participants.

It is also worth noting that a talented brainstorm facilitator can modify the brainstorming technique sufficiently to overcome the inherent weaknesses of brainstorming and so see some highly creative ideas come out of it.

So, traditional brainstorming is coming under deserved criticism for its poor creative results. But that does not mean it is a bad process. It has its uses and, in the right hands, can be a reasonably effective approach for generating creative ideas.

 


 

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Happy thinking!

Jeffrey Baumgartner


 

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Report 103 is edited by Jeffrey Baumgartner and is published on a monthly basis.

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Jeffrey Baumgartner
Bwiti bvba

Erps-Kwerps (near Leuven & Brussels) Belgium