Not so crazy after all

Executive Education
| The European | 13 April 2020

Few people are familiar with the life and times of Vannevar Bush, and even fewer have heard of his brainchild, the National Defense Research Committee (NDRC). And yet, Bush and the NDRC played an instrumental role in America’s victory in World War II, developing crucial military technology such as the radar. Bush, a shrewd academic and engineer, made sure that scientists and military officers worked separately, but also learned from each other to come up with practical ideas that could be useful for the war effort. Following the war, he spearheaded the establishment of government agencies funding basic research that has led to inventions such as transistors and microwaves.

Bush’s examples should be an inspiration for modern companies and governments, claims the physicist and entrepreneur Safi Bahcall in his new book Loonshots: How to nurture the crazy ideas that win wars, cure diseases, and transform industries. Bahcall, co-founder of the biotech company Synta Pharmaceuticals, argues that groundbreaking ideas – the titular “loonshots” – don’t come out of nowhere. Loonshots are neglected projects that no one believes in, until they find their way into everyday practice and change the world. Examples abound, from the discovery of insulin to unexpected box office hits such as Toy Story. But how can companies nurture loonshots?

How to nurture innovation

From yoga sessions and mindfulness classes to table-tennis tables, Silicon Valley companies – and increasingly large corporations – are doing their best to get “culture” right, pushing their employees to be more creative. Bahcall finds that futile. Structure drives culture, rather than the opposite, he says. “Begging your employees to innovate more won’t accomplish much, just like yelling at the molecules in a block of ice to ‘loosen up’ a little bit won’t melt that ice. But a small change in temperature can get the job done,” he explains.

Separating “franchise”, the part of the company dealing with everyday operations, from the cool kids who toy with crazy ideas is imperative, says Bahcall, who uses analogies from science to demonstrate his point: “You need these two separate structures because you can’t ask the same people to minimise risk and maximise risk, at the same time. That’s like trying to get a glass of water to be both solid and liquid at the same time. You’ll just get slush.” However, communication between them is vital to achieve what Bahcall calls “dynamic equilibrium”: a kind of corporate nirvana that can help firms stay ahead of the curve. If franchises focus on minimising risk and maximising quality, loonshots strive for the opposite by embracing risk-taking. “For the first group, failures are a stigma. For the second group, a lack of failure signals a serious concern: timidity in exploring the possible. You want the people in your loonshot group trying ten things, nine of which fail, because that tenth thing might change your industry.”

Inaction is a bigger risk than failure, as competitors can innovate too. “You may wake up one morning and discover that loonshot too late, when it’s heading toward you like a bullet to the head,” Bahcall says. In the book, he uses the story of Pan Am, a once pioneering airline, as an example of what can go wrong. Although the firm dominated the skies of North America for the biggest part of the 20th century, it collapsed in 1991, defeated by smaller, nimbler firms following innovative strategies – an example of what Bahcall calls “S-Loonshots”.

However, death is not destiny for incumbent firms, if they learn how to nurture loonshots. Bahcall suggests that they should start by developing a small team that searches for loonshots. One part of the team, according to Bahcall, should be focusing on strategy and define challenges, from external ones, such as complementary products or services, distribution channels and pricing models, to internal ones including hiring, vendor dynamics and the decision flow. Crucially, Bahcall advises firms to avoid “false fails”: early shooting down of potentially groundbreaking loonshots due to problems in the test used to gauge their applicability, rather than the idea itself.

Firms with a stellar track record in innovation can succumb to stagnation if they don’t manage what Bahcall calls “phase transitions”: structural changes that resemble chemical or physical processes found in nature, such as that of water reaching the freezing point. Like chemists, business leaders have to learn how to control the conditions to achieve an ideal combination of results in the present and investment in the future.

The Magic Number

 In business, as in nature, size matters. Companies that employ more than 150 people – which Bahcall has aptly named “The Magic Number” – are vulnerable to stagnation, as internal politics become more important than results for employees. “Whenever you organise people into a group with a mission and a reward system tied to that mission, you create two competing forces: stakes in outcome versus perks of rank.” When a firm remains small, outcomes outweigh ranks. It is only when the Magic Number is surpassed that politics takes priority.

However, Bahcall suggests that this number, magic as it might be, is not written in stone. As a scientist can control the conditions of an experiment, business leaders can change certain “control parameters” – the underlying elements of structure that drive that transition – to ensure that their firms stay relevant. “You can think of it like sprinkling salt on the sidewalk after it snows at night,” Bahcall says. “Ordinarily water melts at 32 °F. But adding salt lowers the binding energy between molecules, making them less likely to stick together and more likely to slosh around. That lowers the freezing point so that when you wake up in the morning and step on the sidewalk you wet your shoe in a puddle rather than slip on ice and end up in the hospital. That’s what we can do for teams and companies, once we understand the equivalent control parameters for organisations.”

The Moses Trap

One problem established companies, and particularly tech powerhouses, need to tackle is the cult of the founder. Over the last few decades, markets and investors have learned to passionately worship visionary entrepreneurs. If the late Steve Jobs was a god for technologists and investors alike, Tesla’s Elon Musk has become the new prophet of the tech religion. The demise of WeWork, a co-working space startup that despite a valuation of $47bn was led by its founder Adam Neumann to a botched IPO, demonstrates the dangers of treating charismatic founders as demi-gods.

For companies with a track record in groundbreaking research, the risk is even bigger. Some of them fall prey to what Bahcall calls the “Moses Trap”, as charismatic entrepreneurs and business leaders often overestimate their ability to shape the future. In the book, Bahcall uses the story of Polaroid as an example of such hubris. In the late ’70s, the company’s co-founder, Edwin Land, spearheaded the launch of Polavision, an instant colour home movie system that was bombastically advertised as a revolutionary product. Despite its technical advantages, Polavision flopped, facing tough competition from videotape-based systems. Land’s miscalculation contributed to the company’s demise a few years later.

How can business leaders be resourceful Davids rather than unimaginative Moses? One way, Bahcall suggests, is to learn how to manage the transfer of knowledge between teams, rather than the technology itself, by “encouraging experiments and letting the data and market drive decisions, rather than opinion and authority.” Loving both “artists” (innovators) and “soldiers” (everyone else) is also vital. Last but not least, leaders need to pick their advisors carefully, Bahcall says, by “surrounding themselves with truth-tellers who will call them out when their ego gets out of control.”

Loonshots in government

If loonshot development is a science, could it be combined with the art of governing? Many governments certainly think so, setting up small think tanks and employing scientists from a wide range of disciplines to disrupt sclerotic bureaucracies with fresh ideas. Dominic Cummings, an adviser to the British Prime Minister Boris Johnson, has publicly proclaimed his goal to shake up the UK civil service by launching a body similar to the US Defense Advanced Research Projects Agency (DARPA), the modern equivalent of Bush’s NDRC. In a famous blog post published last January, Cummings called for scientists and “weirdos” to apply for positions in the UK government. Bahcall, who has worked with President Obama’s council of science advisors, a body supporting US science and technology research, admits that he “enjoyed and admired that post.” “I wish we had more of that here in the US,” he says. “A few weeks ago I emailed the address he [Cummings] posted with some thoughts but never heard back. Maybe I’m not weird enough.”

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