The Innovator’s Hypothesis: How Cheap Experiments Are Worth More than Good Ideas
Michael Schrage
The MIT Press (2014)

How and why “simple, fast, cheap, smart, lean, and important experiments can supercharge any serious innovation process”

As I began to read Michael Schrage’s latest book, I was again reminded of a passage in Paul Schoemaker’s latest book, Brilliant Mistakes: “The key question companies need to address is not `[begin Should we make mistakes?’ but rather Which mistakes should we make in order to test our deeply held assumptions?'” This is precisely what Anjali Sastry and Kara Penn have in mind when introducing, in Fail Better, what they characterize as a better approach to innovation: designing smart mistakes, learn from them, and thereby achieve greater success and do so sooner.

Peter Sims has much of value to say about this strategy in Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. As he explains, “At the core of this experimental approach, little bets are concrete actions taken to discover, test, and develop ideas that are achievable and affordable. They begin as creative possibilities that get iterated and refined over time, and they are particularly valuable when trying to navigate amid uncertainty, create something new, or attend to open-ended problems.”

In Serious Play (1999), Schrage introduces several core concepts that he develops in much greater depth in this, his latest book. The 5×5 X(experimental)-team approach is a rapid innovation methodology emphasizing lightweight, high-impact experimentation, as follows: “Give a diverse team of 5 people no more than 5 days to come up with a portfolio of 5 business experiments that cost no more than $5,000 (each) and take no longer than 5 weeks to run.” Schrage adds, “the 5×5 seeks an 80/20/20 vision. That is, what hypothesis could we test — what experiments could we run — that generate 80 percent of the useful information that we need to make a decision in 20 percent of the time, and with but 20 percent of the resources that we ordinarily use to do so?” Schrage thoroughly explains the theory and practice of this method in the book. Yogi Berra once observed, “In theory there is no difference between theory and practice. In practice there is.” Presumably Schrage agrees.

These are among the dozens of passages of greatest interest and value to me, listed also to suggest the scope of Schrage’s coverage:

o The Business Experiment: A fast, inexpensive, and informative test of a business hypothesis (Pages 10 & 12)
o Implementation and prototypes (24-33)
o Experimentation and innovation (36-38 & 85-87)
o Warren Buffett (49-56)
o Resistance to business experiments (67-687, 85-88, & 178-179)
o Blockbuster (77-85)
o Julian Simon (89-92)
o 5×5 X-team approach (95-138)
o Business experiments (141-153)
o Charles Kettering (146-148)
o Business hypotheses (177-185)
o David Kelley (210-211)
o Decision theory (213-216)

I commend Schrage on his innovative use of (boxed) mini-commentaries, inserted throughout his narrative that include “The 5×5” (Page 5), “Formulating the Hypothesis” (11), “Moving from Hypothesis to Experiment” (12-13), “A Prototype Is a Hypothesis” (30-32), “Scott Cook, Founder and Chairman of Intuit, on Experimentation” (57-58), and “Q&A: The Experimenter [Gary Loveman]” (205-206). This material complements rather than supplements the information, insights, and counsel he provides elsewhere in the narrative. The same can be said of passages that examine experiments by real people in real-world situations, experiments that produced mixed results to be sure but demonstrate the truth of Thomas Edison’s claim, “I have not failed. I’ve just found 10,000 ways that won’t work.” The companies that have –or should have — followed the 5×5 X-team approach include (in alpha order) Amazon, Apple, Blockbuster, Delco, Facebook, GE, General Motors, Google, NCR, P&G, Tesco, Toyota, and Walmart.

John Kotter once suggested that the most difficult challenge to change initiatives is to change how people think about change. The same can be said about innovation and experimentation, as Schrage suggests in the book’s final chapter, “Experimenting with Experimentation.” He quotes Kevin Kelly: “Anybody who works in science knows that they’re constantly finding new things that they don’t know. It increases their ignorance…while science is certainly increasing knowledge, it’s actually increasing our ignorance even faster. So you could say that the chief effect of science is the expansion of ignorance.” You could also say, at least I do, that rather than increasing ignorance, science increases our knowledge of what we don’t know. Some of the worst decisions people make are based on insufficient or inaccurate information. Hence the critical importance of testing all assumptions and premises. Paradoxically, the most innovative and creative thinking requires the multiple disciplines of the scientific method.

Here’s Schrage’s response to Kelly’s comments: “Substitute business for science and opportunity for ignorance, and Kelly’s tongue-in-check observation explains why the ongoing revolution in experimentation defines the innovation future. There’s never been a better time for innovating with experiments or experimenting with innovation.”

Obviously the “Whack-a-mole” approach to innovation makes no sense nor does a concentration of massive resources on one major experiment. Breakthroughs are few and far between lots of small, low-risk, prudent, and numerous experiments.

Invoking a set of horticulture metaphors, here’s my take on Michael Schrage’s approach: innovation requires careful planting of seedlings (i.e. ideas, possibilities, hypotheses) in properly prepared soil. Cultivate them and protect them for a while, then nourish those that begin to indicate promising growth. A few will. Perhaps combine a few of the others and keep an eye on them. Eventually, hopefully, there will a few robust results.