Conventional wisdom in the start-up scene holds that execution is much more important than ideas. Likewise, many larger companies that consider themselves as moderately advanced with respect to innovation, believe that having ideas is not their problem, but implementing them. This article argues that this notion is based on a dangerous misunderstanding about the nature of ideas.
One of the most widely accepted truths in entrepreneurship and innovation circles is that ideas don’t matter much. Execution is what really matters. When asked what they look for when evaluating young start-ups, successful investors will often say that they need to believe that the team will be able to deliver. Ideas are considered to be cheap and abundant.
Some would even argue that a good team can make anything work. Take the example of Airbnb: According to its co-founder Nathan Blecharczyk, investors initially hated their business idea. When they pitched to Paul Graham of the famous start-up accelerator Y Combinator, Graham spent a good portion of the time explaining to them why the idea would not work. Then, at the end of the pitch, they handed him a cereal box themed for the US presidential elections: As they ran out of money, the team had the idea to sell “Obama O’s” and “Captain McCain” boxes filled with ordinary cereal over the internet. The Cereal boxes had nothing to do with their actual business idea but brought in some urgently needed cash and created some media attention. Now Graham was impressed.
They got accepted not because they could convince Graham that offering private rooms to strangers was a billion-dollar idea. They got accepted because he believed that the founder team was truly determined and would be successful somehow – despite their idea.
Many people seem to view ideas as the result of a singular event
The Airbnb example appears to perfectly illustrate that ideas don’t matter. However, this conclusion is based on a fundamental misunderstanding of what an idea actually is: Many people seem to view ideas as the result of a singular event – like Isaac Newton’s theory of gravitation that suddenly occurred to him when an apple fell on his head. But that’s not how it happened. Even if the legend with the apple was true, it actually took Newton many years to complete his theory.
An idea is a mental representation of something. Execution can thus be defined as the realization of an idea in the physical world. In the start-up world, adapting ideas and executing them usually happens at almost the same time in short cycles. You build something (execution), observe how it works and learn something (reshaping the idea). Because these two processes are intertwined, it is tempting to claim that once the initial idea has been conceived, it is all about execution and that the reshaping of the idea will happen automatically. In many start-ups this may be the case. In fact, our own research shows that 9 out of 10 respondents from companies with less than 50 employees think that good ideas are captured and nurtured effectively within the firm. Within large companies with over 10,000 employees, however, this figure is just above 10%.
Ideas may be cheap, but in larger organizations they are often hard to sell
In the corporate world, neglecting the process for shaping ideas can have catastrophic consequences. The problems start when conceiving new ideas. It is not a secret that the chances that ideas get realized depend on how powerful the individuals are who bring them up. However, it also matters a big deal where it is “situated”. The very same idea can be a “Global Marketing idea” or a “local business idea” – depending on who “owns” it. This may sound a bit strange, but the process of reshaping the idea that follows will often depend more on the organizational context than on what would be most beneficial from the perspective of the customer or the company as a whole. Consider the example of an app that is supposed to help the company better engage with its customers. If the local business unit owns it, it will likely be motivated to develop the idea into a direction that focuses on short-term financial value in that country. In contrast, the Global Marketing organization may be incentivized to develop it into a more strategic direction. This becomes a real problem if too many good ideas within the company get corrupted or even killed because they don’t match well with the current goals of the org unit that happens to own it.
For high-profile ideas, the starting point is no better: In this case, decision-makers will be senior executives or even board members. As the personal stakes for all the people involved are high, some good ideas may not even be considered because “there is no way that executive XYZ will like this”. But let’s assume that the revolutionary new business model idea gets a fair chance. What will typically happen next is that, a few months later, the idea gets presented for half an hour or so at an executive meeting. Preparation for this day typically involves a highly detailed business case and a sophisticated concept in slide format. The idea is presented as convincingly as possible, and ideally anticipates all the objections that may be raised by the executives. The principal usefulness of detailed business cases for radical ideas with high uncertainty is material for another article. But what is critical for the prospects of the idea itself is that the executives will decide about a specific version of the idea. After that, any major change to the idea would contradict their decision. No matter how thought-out the idea, it is unlikely that it will be perfect at this stage – before it had a proper test with reality. Innovators in large organizations therefore often face a difficult dilemma: If they present the essence of their idea and claim the flexibility to make fundamental adaptations later on, deciders may find the proposal too generic. If they argue for a very specific version of the idea, it may be more convincing to deciders who are used to this kind of proposal. Yet the innovation team will have a hard time making anything but minor changes afterwards.
Some large companies have already started to change their decision-making processes and do some experimentation. Yet in many cases, large organizations tragically still end up implementing a version of good ideas that is still far from product-market fit. In our research, only one in five respondents see their company’s implementation track record in a positive light. In hindsight, many will blame poor execution in such cases. In reality, though, the process of shaping ideas may be the real cause of the problem.
Three means to improve a flawed process for reshaping ideas
So what if your company happens to be one with a flawed process for reshaping ideas? There is no easy fix, but the following will certainly help:
1. Stop pretending you’re a start-up: Unlike for start-ups, reshaping ideas will not happen automatically in your company. You can run Design Thinking workshops and try to become more agile. That’s all good but won’t fix your fundamental decision-making problems. With all the hype around start-up methods, traditional organizational development has come a bit out of fashion. But in combination with modern innovation methods, smart organizational design and clear roles can make a massive difference. One lever is to dedicate sufficient internal resources for doing innovation, especially in fields that are new to the company. While it is tempting to outsource innovation to external consultants, the ability of smartly reshaping ideas depends on internal people who „get their hands dirty“. In many cases the best option is a co-innovation approach with external innovation specialists that ensures the necessary capabilities are available while fostering organizational learning.
2. Out-sprint the organization: Design Sprints – an intense week of usually five full-day workshops – can seem like a miracle to participants that are used to slow, cumbersome decision-making processes. A Design Sprint dedicates one day to understanding the problem, one to ideation, one to decision-making, one to prototyping, and the final day to user testing. In essence, a Design Sprint is an ultra-compact idea-shaping process. It is simply too fast for the organization to corrupt the idea – until the Design Sprint is over. Hopefully, at that point the idea is already far enough to survive.
3. Nudge your way out of it: Despite all the barriers to innovation that we witness at large organizations, I still firmly believe that most people fundamentally like innovation and want their company to succeed. Behavioural economics can teach us a great deal about why many companies as a whole seem to contradict that belief. To address this issue, we have developed an approach that we call „Innovation Nudging“. The term “nudging” was coined by Richard Thaler and Cass Sunstein to describe a subtle way for positively influencing behaviour. Analogous to the original meaning, Innovation Nudging refers to methods that systematically enable people to make decisions in favour of innovation rather than against it. For example, if senior executives offer that anyone can send them their idea and that they will respond within 72 hours, this public commitment will encourage people to share their best ideas and put significant pressure on executives to keep their promise and consider these ideas. Once people have the right choices to select from, many will indeed become innovators – even without bonus payments or corporate guidelines that try to force them.
In the world of start-ups, the discussion about “idea vs. execution” is mostly about semantics. Whether it counts as good execution or smart idea reshaping that Blecharczyk and his Airbnb colleagues found out that it would be smart to send hosts a professional photographer and make their apartment look more attractive online – that doesn’t matter. For larger companies, however, where reshaping ideas and executing them are not as tightly linked, it matters a great deal. These companies need to understand where in the process their ideas get corrupted and why – instead of parroting slogans from the start-up community about ideas being irrelevant. Once they have fixed their process for reshaping ideas, ideas will finally be not only cheap but also valuable.
- I first heard the cereal box story from Nathan Blecharczyk himself when he gave a talk in Berlin in March 2017. Another, more detailed account of that story can be found on Wired.
- Wikipedia (retrieved Jan. 16, 2020): https://en.wikipedia.org/wiki/Isaac_Newton#Apple_incident
- Based our „Business Model Waves“ innovation test with participants from a total of 90 companies (all sizes, 2014-2019). The test consists of 33 questions an assesses the innovative capacity of organizations: the strengths and weaknesses along the innovation process (“Innovation Capabilities” score), the “Innovation Personality”, and the “Innovation Risk Patterns” of the organization. For more information see our website.