CHAPTER 8

The Fork in the Road

Several popular YouTube videos show a motorcyclist speeding down a narrow path of a mountain, a path so narrow, in fact, that in some places it’s not much wider than his tires. As you watch the view from the biker’s helmet-mounted GoPro camera, you can’t help noticing that the slightest error on the rider’s part will send him and the bike crashing down the steep cliff. Of course, he makes it safely down the mountain, sometimes throwing in a backflip off a ramp along the way.¹

While I would love the thrill of doing this trick myself, I’m smart enough to know I’d never be able to pull that off and stay in one piece. I keep to the highway, which actually provides plenty of its own thrills. But as I pointed out in the previous chapter, no matter what your risk threshold, whether on a bike or as a leader of your business, you have to go outside your comfort zone if you want to go to interesting places and accomplish extraordinary things. The reality is, most risks don’t require the death-defying acts we see in extreme sports. They require courage to go somewhere new, but the wisdom to go there in the right way. When courage and wisdom align, we give ourselves a chance to innovate and make the risks we take pay off for us and our teams.

Innovation can seem daunting and complex, but at its core, it’s simply about turning ideas into money. The trick is to find the right opportunities that fit you and your business. In other words, it’s about evaluating and managing risks.

At Mitchell Communications, we’ve been early-to-market with a number of new offerings, for example creative services, because we believed the risk made sense for us and we had a strong right to win. At other times, we’ve stepped back to watch something develop before deciding whether to jump in. And at times we’ve passed on a risk altogether.

Most leaders have no shortage of grand ideas, and you may find yourself surrounded by idea people. That’s great. But as leaders, we have to learn to say “yes” only to the best. Believe me, I can think of a hundred things I’d like to try, but most of them should never see the light of day. I’ve learned the value of censoring my constant flow of ideas and focusing on the areas where I have the greatest opportunity to succeed.

That’s easier said than done, you might say. Maybe. But it doesn’t have to be as difficult as we often make it. I use some pretty simple criteria, first linked together by IDEO² to help define the sweet spot for innovation, that I think works across all industries. I try to adopt the opportunity mentality we talked about in the previous chapter and look for opportunities within the intersection of the following:

•   Desirability—is it wanted or needed?

•   Feasibility—can we do it?

•   Viability—can we make money?

These three criteria, allow you to think through things like the cost, the potential for increased revenues, profitability, how an idea might work in the marketplace, how it fits with your current and future strategies, and how you will measure success. Then when you arrive at the fork in the road, you can make a wise decision about which way to go.

Desirability: Reading the Signs

When I am riding down the road on a motorcycle, I am constantly looking and listening to what is happening around me. That includes the highway signs, of course, but some of the most important signs aren’t posted by the highway department. They are in the sights. They’re in the smells. They’re in the sounds. They’re often mystical and sometimes cryptic.

The same is true when we’re evaluating risks as a business leader. To know if a risk is worth taking, we have to know if our idea is wanted or needed. We seldom see a sign on the Interstate saying, “Go this way!” So to figure out if the idea is desirable, we have to understand our changing world. When we watch and listen to the world around us, we can spot trends, understand them better, and anticipate changes that are coming our way—all keys to managing risk and driving innovation. This is how we prepare to answer the always important question: Is there a market for my great idea? It’s how we identify the right ideas to fit the market.

Where should you look for ideas and trends? Everywhere. Listen to your children. Hire a teenager to spend an hour or two each month teaching you something he or she knows how to do. Glean insights from your hobbies, from family members, from friends. Read magazines and blogs across a broad spectrum of industries. Invite diverse thinking into your conversations, and look at things from a broad point of view. Fill your talent pool with people from different backgrounds and experiences.

Kara Trott, the CEO from Quantum Health whom I referenced in the previous chapter, is a rare bird in her industry because she hasn’t spent her entire career in health care or insurance benefits. She started in retail and is a lawyer by trade. Her “outsider” perspective is a competitive advantage. So she cultivates it by proactively looking in unlikely and unusual places in search of new ideas that are worth trying.

“A lot of innovation isn’t radically new thinking,” Kara told me. “It’s taking things that worked in other areas and figuring out a different application from that. Or it’s organic. Maybe you can’t develop something in your industry until you see something that was developed in another industry. It’s like the space program. So much technology came out of the space program that wasn’t applicable there but was applicable to packaging, food growth and preservation, and other industries. Some people think you have to invent something that doesn’t exist, and that’s not true.”

You likely will miss the most important signs along the road if you conform to “confirmation bias” where you read or listen only to sources that support your existing views. As F. Scott Fitzgerald said, “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”³

When you open your mind and look around, you can spot the trends that will inform the risks you take and the innovations you pursue. You’ll know what employees, customers, clients, vendors, and shareholders really want and need, then you can pursue it.

As children we all learned to play a simple game that created something from nothing; we started with an unrecognizable collection of dots, but when we drew lines between them, an image or pattern emerged. Connect-the-dots is a simple concept for child’s play, but do not be fooled by its simplicity. The same holds true in innovation. When we are faced with things that are unfamiliar, disorganized, even chaotic, we can make sense of them by drawing lines in just the right places and discovering new ideas as a result. Sometimes we even have to be willing to let go of the picture we thought would emerge or that we wanted to draw, and go with something totally different.

Consider how your world might look differently if you had spotted some trends sooner. For instance, one of the biggest trends today involves the emergence of the “sharing economy.” This is the Internet-driven phenomenon that allows people to rent rooms from each other or share a ride or borrow power tools, and it’s become big business for companies like Airbnb and Uber.

Airbnb, for instance, had a market valuation of $20 billion in late 2015, but it was founded in 2008 by a couple of people in California who decided to rent a spare room to strangers as a creative way to pay their rent. It took a few years, but Airbnb took off because of smart decisions that took advantage of marketplace trends like the growth of social media and people’s desire to buy locally and direct.

What could you or I have done differently in 2008 when we had seen this trend emerging? We could have talked to consumers who were using it, asked them why and what they liked about it. Listening to outliers helps us gain a different perspective from the accepted wisdom of the day. Seeing the trend early would have positioned us to innovate in our own world, because it would have helped us understand where the world was heading and therefore what was wanted or needed. Then we could more accurately evaluate the risks of doing something, or nothing, in response to those changes.

When I’m reading the signs to determine desirability, I try to do it in light of my needs, my organization’s needs, and our clients’ needs. An innovation expert once told me, “Obnoxious clients give you the future.” We don’t have obnoxious clients, of course, but I know what he meant. Clients who challenge you with their problems and don’t let you rest on your laurels are helping you understand where you need to grow as a company. Once you learn their pain points, you can identify a solution and determine if this is a one-off or if other clients have the same pain point. Your solution to their need just might become a service you can scale.

Feasibility: Knowing Thyself

Just because there’s a market for an idea doesn’t mean we should pursue it immediately or at all. Some risks aren’t worth taking, simply because the idea isn’t feasible. Some risks require front-end investments to make success feasible.

When I spoke with Kara about how they innovate at Quantum Health, she pointed out that most people think the idea is the innovation when really the innovation is in the execution.

“Ideas without execution are worthless,” she said. “A C-idea executed at an A-level is better than an A-idea executed at a C-level.”

When I think about barriers to execution, I often start with a seemingly unrelated question: “Will someone buy this from us?” I’m not asking if someone wants or needs what I’m offering. We’ve already addressed that. Now I’m asking if they will actually pull the trigger and “buy” it. If not, why not? What’s the barrier to execution? What’s the barrier to feasibility?

The question holds true regardless of whether the customer is internal or external. If we can’t deliver—or even if the customer believes we can’t deliver—when and where it’s needed, at the right price, and at the appropriate level of quality, then they won’t buy what we’re offering. If they won’t buy it, then the risk doesn’t pass the feasibility test. This helps unlock all sorts of reasons why something isn’t feasible: we don’t have the right people or enough people, we don’t have the necessary equipment, we don’t have the infrastructure, we don’t have access to the right vendors, or, and this is one leaders often miss, we don’t have the credibility.

I might have a great service idea, for instance, but the world might not see me as a credible provider of that particular service. The world might question my credentials or my experience or my expertise—and the world might be right. If our public relations agency suddenly announced we were going to sell a new line of innovative auto parts, no one would take us seriously. In an extreme example like that, I’d definitely drop the idea. But if the idea is good enough—like offering training services to our clients—I might invest in building credibility so we’re not seen as a pretender. Or if we’re already better positioned than others because of our unique expertise and track record, I might invest in telling our story so people realize we have the chops to deliver what they want or need.

The feasibility test often comes down to whether the risk is a natural extension of our core business. Lego is a great example of this. The famed toy block maker nearly went under in 2003, mainly because it veered so far from its core business. In an effort to compete with video games and other tech-driven toys, Lego was creating cartoons, manufacturing larger (non-Lego-like) blocks, marketing customized kits of Legos, and opening theme parks.

The company returned to sound footing by refocusing on its basic blocks, but that doesn’t mean it’s not trying new things. In fact, Lego’s “Future Lab” intentionally focuses on understanding what children want and how to deliver it in cool, fun new ways that fit within Lego’s core businesses.

Viability: Determining Your ROI

Remember, innovation is about turning ideas into money. The discussion about risk always circles back to finances, so you have to determine your return on investment (ROI).

The age-old business axiom “follow the money” rings true here. Before you introduce an idea into the marketplace, you need to examine who is willing to pay to bring the idea to life. You don’t want to be an idea in search of a market.

You might find a huge group that loves your idea but doesn’t have the money. Or maybe they have the money but they can’t get to it quickly because their organization is a bureaucratic mess. Or maybe they love your idea but think it would disrupt their status quo and they fear change. Ultimately, you have to find funding (customers, investors, etc.) whose interests align with what you can offer and who can provide the funding you need. That, by the way, might be the funding you need to get started, not to build your dream version. There are times when you have to innovate in stages, as each risk yields a reward.

Ultimately, every risk needs to deliver a return. You might even decide that you’re okay with a financial loss because the return provides something greater. For instance, we made a conscious decision as we began rapidly growing to invest heavily in our people. I firmly believe things like 100 percent employer-paid health care, in-house trainings, and other benefits I mentioned in Chapter 6 helped us recruit and retain our talent. But to fund these initiatives, we needed the rest of our business to be highly profitable. And I needed to feel strongly about the ROI.

ROI is critical no matter what type of risk you’re taking. I have often asked myself: if we invest this much money in getting something started, how long before we make our money back and make a profit? It’s the starting point for figuring out the best use of our money: where to invest, for how long, and for what return.

I wasn’t a financial expert when I started my firm, but I knew how important it was to run a fiscally sound business and I figured it out along the way. Today, I understand the finer points of GAAP (generally accepted accounting principles), which doesn’t make me a very interesting dinner date, but it has helped me do a better job of running a profitable enterprise.

As a leader, you need to be grounded in the fundamentals of finance. You’ve got to understand and appreciate practical principles like interpreting financial statements and leveraging key drivers in the business. If you’re looking for ways to enhance your financial savvy, I recommend Finance for Executives: Managing for Value Creation by Gabriel Hawawini and Claude Viallet, attending a class on finance, or if nothing else, asking a CPA to spend a half-day giving you a crash course on the basics. A good grasp of finance will empower you to make smarter business decisions and to have a better feel for how to place your bets for your particular situation.

Willing to Fail

When I speak on innovation, I often ask the audience members this question: What if I were one of the investors on the TV show Shark Tank, and I gave you $100,000 to drive growth in your business? How would you invest it? At Mitchell, we’ve always prioritized investing in both talent and technology. As a professional services business, we believe the magic comes from the intersection of the two.

Our foray into video provides a nice example. In 2009, we mainly outsourced whatever we did with video. It wasn’t a core strength for us or for agencies like ours. We faced a fork in the road. Should we continue to outsource or innovate by making video a core strength? There were risks involved, but ultimately we decided to launch a video team, and here’s why:

•   We read the signs and saw that it was something our clients wanted and needed, and they were willing to spend money on it.

•   The rise of social media opened new options for where we could use videos—on new platforms such as Facebook and in more interactive websites that companies were moving toward to enhance their online presence.

•   The response to our early work in video had been positive; clients liked our work.

•   We looked at the market and found capable and available local talent.

•   The price for high-definition equipment was dropping, making that part of the investment significantly more affordable.

All of that led us to believe the idea was desirable, feasible, and viable.

We invested about $100,000 and made that back in the very first year. Today we’re producing more than 300 different video projects annually with five full-time and part-time employees who work with all of the bells and whistles of a first-class video studio.

Was it a risk? Sure. There are no guarantees in life. But we were aware of the emerging opportunities, determined it made sense, and had the courage to pull the trigger.

Public relations is our core business, but today we are an integrated communications firm. We started our creative department in 2009 and moved quickly into video. We also have significant offerings around digital and social media, influencer marketing, Web technology, consumer insights, and training and development. This is where our industry is headed, and I’m glad we took some risk to establish these services along the way.

We’ve always been willing to take some calculated risks to establish new services that were quite different from other agencies. Sometimes it worked, sometimes it didn’t. For example, we tried to launch a research department several years ago that never took off for a variety of reasons, and critically the budgets we had secured for that team were shifting to other more pressing needs. So as painful as it was, we closed down that group, went back to the drawing board, and listened more.

What did clients want and need? As it turns out, it was insights rather than research. They wanted data-driven answers to the questions “So what?” and “Now what?” So we created a consumer insights team that actually drives our entire strategy and creative process. They have helped position us as strategic communications counselors, not just creative thinkers or excellent executors.

We wanted to be seen as trusted advisors playing at a high level with our clients. We did that by bringing insight and understanding, as well as all the new communications services they wanted and needed. But we only got there by freeing ourselves up to try different ideas.

Our approach to innovation then and now requires a dual mindset where we are equally skilled at inspiring people and encouraging big-picture thinking while also demonstrating the financial acumen needed to drive revenue and grow profits. The right mix allows us to enjoy the ride and reach the places we want to go.