Peter Sims's Blog, page 5

Wall Street Journal recognizes 'Little Bets' among 'Best Advice Around'

It was a profound honor to learn that The Wall Street Journal selected Little Bets as one of the six top entrepreneurial advice books in an article entitled, "The Best Advice Around, From Those Who Took It," alongside books like the iconic, Art of the Start by my friend and Silicon Valley legend, Guy Kawasaki, the author, entrepreneur (including as founder of Alltop.com) thought leader, investor, and former chief evangelist @ Apple.

Quoting Saras Sarasvathy, a professor @ the Darden School at the University of Virginia, who I and many others including the well-known entrepreneur and investor Vinod Khosla consider the most insightful researcher on entrepreneurship, the article reads:

"This book demolishes the usual excuses entrepreneurs have for not starting a business," says Saras D. Sarasvathy, an associate professor at the University of Virginia's Darden School of Business, in the article, adding that the book "shows how 'doing the doable' without waiting for a big idea, or guarantees about the final outcome, can lead to amazing breakthroughs."

(see this Big Think interview with Sarasvathy's for a great overview of her work and findings)

Thank you so much to Dr. Sarasvathy and the Wall Street Journal for this generous recognition.  Let's do this.

Annoucing Fuse Corps: a bold new approach to social innovation

For the past several years, I have had the great pleasure of collaborating with a remarkable group of people to create and launch Fuse Corps, an innovative social venture that will pair some of America's top entrepreneurial leaders with governors, mayors and community leaders across America drive meaningful social change. We identify concrete projects in local communities that address a national priority (such as education, economic development or health care). We then recruit and deploy highly-skilled and passionate professionals to help develop and implement innovative and lasting solutions. Here's a short two minute video with the overview, featuring Sacramento Mayor Kevin Johnson, a dynamic leader who will have two Fuse Corps fellows reporting to him in 2012, including one who will help him drive energy reforms and one to catalyze creative ways to reform the Sacramento Unified School District:

It will be a very prestigious honor to be selected as a Fuse Corps Fellow, and about half of the 2012 pilot 10 fellows will come from sponsoring companies like McKinsey, Starbucks, G.E., McDonalds, and so on. The other half will come from all walks, as applications are open to all. We are looking for creative, dynamic, doers who have a history of catalyzing and leading, with a willingness to get their fingernails dirty in the trenches of America to help renew and reinvent the country from the bottom up.

My cofounders include a diverse and dedicated group of leaders, including, Lenny Mendonca, a senior partner @ McKinsey & Company (& cofounder with his wife, Christine of the awesome Half Moon Bay Brewery), the talented social entrepreneur Jennifer Anastasoff who has vigorously taken on the challenge of being our fearless leader, David Viotti, the former Chief Learning Officer of Sun (US) and Fuse Corps' chief learning officer, Ayesha Khana, who leads the Civic Incubator at the Points of Light Institute, which will incubate Fuse in year 1 and provide back-end services, Margeurite Kondracke, long time CEO and now senior advisor to General Colin and Alma Powell's education nonprofit America's Promise, and the dynamo who is Sonal Shah, who until recently led the White House Office on Social Innovation and Civic Participation.

It has taken a remarkable team effort to get this venture off the ground, and while it has not been easy, it has been endlessly rewarding and fun, and laughter filled, a testament to the team involved, which includes many other amazing people not included here, such as the teams @ the Stanford Institute of Design (the d.school), where every fellow will begin their experience to learn how to think and work like an entrepreneur, and our friends at KIVA, the Aspen Institute, and in education circles, including our first two cheerleaders and advisors, Alan Khazei, the legendary cofounder of City Year, and Teach for America founder and CEO, Wendy Kopp, who needs no introduction.

But at a time when the country (and world) are desperate for fresh approaches to problem solving, as Thomas Friedman and Michael Mendelbaum describe so well in their new book That Used to be US, rather than the status quo top down approach, we hope that Fuse Corps can help provide both positive leadership to help solve citizens' problems from the ground up, while nuturing a generation of leaders who can think and act differently throughout their lives, and to carry with them an empathy for problems they may not see in their day to day lives inside companies, the military, or any other part of society.

Applications are now open, via the Fuse Corps website.

The best way to predict the future is to invent it, but and that starts with little bets from everyone, so thanks for taking a moment, so please JOIN US and if you could take a look, encourage great people to apply, and help spread the word if you can.

LET'S DO THIS!

This revolution will be improvised.

John Legend & Inventing the Future

Last weekend, I had the chance to connect with singer & songwriter John Legend before his concert with Sade at Oakland's Oracle Arena.  I met John for the first time 4 or 5 years ago in Los Angeles, when he was known in some circles, through our good mutual friend Kweli Washington who has worked with John for years.

Kweli is just a wonderful guy, who I know because he was one of the first beneficiaries of Summer Search where I was on the national board until last year, a year-long, intensive youth mentoring and leadership development program for low-income high school students.   In its roughly 15 year history, Summer Search has a great track record of helping students to graduate from highly school (nearly 100%), get into four year colleges ( ~95%), and then graduate (90%+), and Kweli was a star story.  He had a great experience with Summer Search that lifted his aspirations and he went from Oakland to Harvard College, and then went onto  become a Rhodes Scholar before he went into the business world and became a consultant at Boston Consulting Group in Boston, and has always been active with Summer Search since.  But, true story if you can believe it, Boston Consulting Group is where Kweli and John met and worked as analysts, after John graduated from University of Pennsylvania.  At the time, John's name was his given name "John Stephens," which he would change to "John Legend" once he got into music, but back then Kweli and John worked full-time at BCG during the day, and John would go out and perform at night to develop his career and sample tapes.  John was a very active as a leader in University of Pennsylvania's a cappella singing groups and it was, in fact, one of John's roommates from Penn, Devo Springsteen (one of my favorite names of all time, formerly "Devo Harris"), who would introduce him to Kanye West, who would be instrumental (no pun intended) in helping John to launch his recording career.

But, anyhow, from that first interaction with John through interviewing him for Little Bets, through catching up with him a bit last weekend, I have been impressed by his curiosity, insightfulness, and desire to DO SOMETHING with his life beyond just making great music and being a celebrity.  He is also one of the most present people I interviewed, or when you speak with him — you never feel like his mind is elsewhere, he's very attentive.  It does seem like he would rather not have to do meet & greets and all the stuff you have to do when you're a star, but once you're engaged on a topic, he's all over it, whether it's a discussion about education reform, or Ralph Waldo Emerson, or religion, or creativity.  He clearly reads a lot because he sites a lot of references, and backs up his points with either empirical research or first-hand insights and observations, all with the intention of GETTING SHIZNICK DONE to make a positive impact.  He's a public intellectual of sorts.

Take the badly needed topic of education reform in the U.S.  John is on the board of Teach for America, working with one of the most impressive leaders in America, Wendy Kopp, and he participates as an activist in causes where he can use his celebrity to either have a voice or to give voice to a movement of peoples trying to change the status quo.  For example, he sang the theme song to the movie Waiting for Superman, entitled "Shine," one of the most beautiful songs I've ever heard, now one of the favorites of teachers all around the country, a reminder of what education is all about — to help people shine.  Check out the video here:

John Legend, \"Shine\"

But while I am a big fan of John's music, what I admire about him the most is his desire to take his talents, celebrity, and resources to GET INVOLVED in an attempt to do many, many little things to try to make a difference, both in the individual lives of kids around the country as a role model, and to contribute to the public policy discussions and debates.  Just have a peek at this interview with YouTube World View for a flavor:

John Legend – YouTube World View interview

So, there in the bowels of the Oracle arena, my date Laura and I had the chance to meet John before he went on stage to open for Sade, as part of her national tour.  (He lit it up, of course.)  After talking for a few minutes, including about Thomas Friedman's excellent new book, That Used to Be Us, which I reviewed for Reuters.com last week (and that John was excited to read so I gave him my copy, underlined, dog eared and all, his team was ready to take a picture.  I brought signed copies of Little Bets for John and his team, and later I ended up giving copies to his entire band since they also wanted to read it (funny side story: the John Legend Band tour bus is literally wall to wall with Little Bets books and signed cards thanks to their enthusiasm and desire to help spread the word – God save us!).  But, back to that moment before we took the picture, John showed the same stripes I've seen in each interaction for years: the generosity to say enthusiastically, "Hey man, We've got to hold the book up!"

And so we did.

The path from Boston Consulting Group analyst to world changing social activist wasn't an easy one for John (just as Kweli saw John toil to get heard), but his courage, willingness to make little bets, and push forward by doing things and following his dreams have paid off.   He's not only a 9-time Grammy Award winner, he's changing the world every day has he invents the future, both for himself, and for millions of young people who benefit from his voice, views, and, yes, LEADERSHIP.  It's what the country is thirsty for and is part of the reason why THIS REVOLUTION WILL BE IMPROVISED

Little Bets featured in The New York Times

August 6, 2011

Daring to Stumble on the Road to Discovery
By PETER SIMS

AT the recent Aspen Ideas Festival, the New York Times columnist Thomas L. Friedman said that when he graduated from college, he was able to go find a job, but that our children were going to have to invent a job.

Jobs, careers, valued skills and industries are transforming at an unheard-of rate. And all of the change and uncertainty can make us risk-averse and prone to getting stuck.

Despite these realities, our education system emphasizes teaching and testing us about facts that are already known. There is much less focus on our ability to discover, create and reinvent.

The same often holds true in the workplace. Perfection is rewarded, while making mistakes is penalized. It's no wonder that "failure" has taken on a deeply personal meaning, something to be avoided at nearly all cost.

The skills we're taught work well for familiar situations, yet we're trained to perfect our ideas and use the past to predict the future with linear plans in a nonlinear world. As such, we need a completely new mind-set. Linear thinking is a death knell for creativity.

When I worked as a venture capital investor, I found that most successful entrepreneurs don't begin with perfected ideas or plans — they discover them. Entrepreneurs think of learning the way most people think of failure.

A prime example is Howard Schultz, one of the most successful entrepreneurs of our time. When he started what would become Starbucks, he modeled the first stores after coffeehouses in Milan, a new concept for the United States in the 1980s. He was clearly onto something, but the baristas wore bow ties — which they found uncomfortable — and customers complained about the nonstop opera music and menus that were written primarily in Italian. And the early stores had no chairs. Mr. Schultz routinely acknowledges that he and his team made a lot of mistakes. But they learned from them, as they did from countless other experiments.

Consider another example — what it takes to create great comedy. Editors at The Onion, the humor publication, estimate that they try out hundreds of headlines each week before they finally decide to use only a small percentage of them.

Even the most successful stand-up comedians, like Chris Rock, try thousands of new ideas in front of small club audiences in order to develop a one-hour act. Some jokes fail, but Mr. Rock is willing to be imperfect; he persists night after night because every small bet takes him closer to a brilliant act on the big stage.

This is how comedians and entrepreneurs must work — by making countless small bets to discover what works. The real genius is in the approach.

The same holds true for leaders, managers and collaborators. They must to be willing to learn from mistakes. Affordable risks should be encouraged, and small failures celebrated — these are the mark of learning organizations. Otherwise, risk aversion will lead to stagnation and decline.

In a time when valued skills and occupations shift constantly, we must be able to discover interests, opportunities and careers by experimenting. Or by reinventing ourselves altogether.

The architect Frank Gehry, for instance, designed relatively conventional buildings for much of his early career. But inspired by how contemporary painters and sculptors worked, Mr. Gehry performed a series of experiments on his own house in Santa Monica, Calif., during the late 1970s .

Working with plywood, corrugated metal and chain-link fencing, he built a new exterior around his original house.

His experiments were the precursor to what would become his distinctive style, evident in the Guggenheim Museum Bilbao in Spain and the Walt Disney Concert Hall in Los Angeles. The money was good in conventional architecture, yet he decided to start anew, using his own style and voice.

INVENTION and discovery emanate from the ability to try seemingly wild possibilities; to feel comfortable being wrong before being right; to live in the world as a careful observer, open to different experiences; to play with ideas without prematurely judging oneself or others; to persist through difficulties; and to have a willingness to be misunderstood, sometimes for long periods, despite the conventional wisdom.

All these abilities can be learned and developed, but doing so requires us to unlearn many of our tendencies toward linear planning and perfectionism.

As the technology pioneer Alan Kay put it: "The best way to predict the future is to invent it." It begins with a little bet. What will yours be?

Peter Sims is the author of "Little Bets: How Breakthrough Ideas Emerge from Small Discoveries."

Original article as it appeared in The New York Times on August 6, 2011.  Please see link for reprints.

What are Little Bets?

Click here for an excerpt from "Little Bets."

What is a "little bet"?

Little bets are a way to explore and develop new possibilities. Specifically, a little bet is a low-risk action taken to discover, develop, and test an idea. Chris Rock develops new comedy routines by making little bets with small audiences; Amazon's CEO Jeff Bezos makes small bets to identify opportunities in new markets like cloud computing. Little bets are at the center of an approach to get to the right idea without getting stymied by perfectionism, risk-aversion, or excessive planning.

How is this approach different from and better than the typical way most people do something new?

We're taught from an early age to use certain procedures and rules to analyze and solve problems, such as for math or chemistry. There's an emphasis on minimizing errors and avoiding failure. These skills serve us extremely well when we have enough information to put into a formula or plan. But what happens when we don't even know what problems we're trying to solve? In those kinds of situations, engaging in a process of discovery and making little bets complements more linear, procedural thinking.

What research did you do for this book and what did you set out to discover?

I wanted to find out what went on behind the scenes with some of the great achievements and innovations. Most of them weren't the epiphanies of geniuses, but instead the result a specific type of experimentation. To find the common elements of their approach, I reviewed empirical and neuroscience research about creativity and innovation, interviewed or observed dozens of people about their approach from Army counterinsurgency strategists to agile software development teams, architect Frank Gehry and comedian Chris Rock. I also talked to entrepreneurs who had self-financed billion dollar businesses, experts in the rapidly growing field of design thinking, as well as musicians like John Legend. Last, I interviewed executives inside a range of organizations such as Amazon, Pixar, Procter & Gamble, Google, 3M, General Motors, and Hewlett Packard.

What about big bets? Why do you focus on little bets?

We all want to make big bets. That's a Silicon Valley mantra. Be bold. Go big. But I think ingenious ideas are over-rated and that people routinely bet big on ideas that aren't solving the right problems.  I've heard thousands of entrepreneurial stories, some extremely successful, but many mediocre, or not successful.  That combined with the extensive research my team and I did for this book leaves it clear to me that instantaneous ideas are extremely rare, in business, art, science, or you name it.  Just as Pixar storytellers must make thousands of little bets to develop a movie script, Hewlett Packard cofounder Bill Hewlett said HP needed to make 100 small bets on products to identify six that could be breakthroughs. So, little bets are for learning about problems and opportunities while big bets are for capitalizing upon them once they've been identified.

What surprised you most in what you found?

How successful people in vastly different fields had arrived at very similar approaches. Story developers at Pixar, Army General H.R. McMaster, and Frank Gehry use the same basic methods and make lots of little bets. They even use similar language and vocabulary – like "using constraints" or "reframing problems"– but they all learned their approaches through their experiences, not in school. As General McMaster said the parallels were almost "eerie."

Why is it more important than ever to master a "little bets" approach?

We live in uncertain and rapidly changing times that can make us risk-averse, prone to getting stuck. Little bets provide an antidote. For example, Twitter originated out of little bets made inside Odeo, a podcasting company that was going nowhere. After asking employees for suggestions about what the company should do, Odeo founder Evan Williams gave Jack Dorsey two weeks to develop a prototype for his short messaging idea. Twitter was soon born. Another key reason why the time is right to embrace a little bets strategy is unlike previous generations, people now change jobs every few years and, according to researchers, will even switch careers up to six or seven times over a lifetime. That's a very new way of relating to our work and careers. Little bets must become a way to see what's around the next corner, or we risk stagnating.

 

What Google Could Learn from Pixar

Google has reached a pivotal moment in its history. What can it do to expand beyond its incredible core business, which is now reaching a more mature phase? For insight on how it can develop, let's look to Pixar.

Pixar is as close to a constant learning organization as there is, with a proven ability to reinvent and a genuine cultural humility. Google's founders could learn from Pixar's founder and president Ed Catmull's prolonged and determined efforts to counter the natural human reactions to success by aspiring to proactively (and honestly) seek-out and solve new problems constantly, recognizing that he doesn't have all the answers on his own.

Despite an unbroken string of 11 blockbuster films, Catmull regularly says, "Success hides problems." It's an insight Google should acknowledge and act on. Google's leadership admirably tolerates failure on side-projects (and big projects as well), but what Pixar has that Google does not is a culture where the fear of complacency is a strong motivator, where new problems are identified, discussed, and addressed openly and honestly, all of which requires humility.

As David Price describes in his superb The Pixar Touch, Pixar began its life as a computer hardware company. Price writes that Steve Jobs never expected Pixar to be a film company when he bought the company from George Lucas in 1986. Pixar was then the 45-person computer graphics group of Lucasfilms, led by Catmull, whose dream since graduate school had been to make a full-length digitally animated film. The group had developed the Pixar Image Computer, a computer graphics machine that produced high-end visual imaging (such as for MRIs). Jobs thought the technology had breakout potential when he bought it, yet the Pixar Image Computer never found a market.

Jobs also shrewdly allowed a tiny animation division, led by John Lasseter, a former animator from Disney, to make little bets on short animated films (and, later, TV commercials). Shorts would become the company's vehicle to build the technical and storytelling expertise, as well as the credibility necessary to ultimately coproduce (with Disney) Toy Story in 1995, the first digitally animated feature film.

The 1980s were difficult for Pixar. Steve Jobs deserves enormous credit for his role in funding and driving the company. But, despite Pixar's small wins with short films, success was far from guaranteed. During this period, Catmull was puzzled by why so many successful companies ultimately failed. "I'm thinking, 'If we're ever successful, how do I keep from falling into the traps these companies are falling into?" he recalled in a recent lecture at Stanford Business School.

Catmull watched as companies like Evans & Sutherland, a pioneering computer graphics company, and Silicon Graphics lost their lead. Like Google today, those companies had access to great talent and problems, yet somehow lost their edge and market lead. He studied Toyota the most. Today, Catmull sets the tone for a company culture that is unusually open and honest, resembling Toyota's aspiration of constant improvement. (Toyota's current challenges aside, Amazon's Jeff Bezos is another serious student of Toyota and its processes). Catmull constantly and proactively solicits feedback from Pixar employees, who say that the mentality of constant improvement flows throughout the company.

Ed Catmull (source: Pixar)

As with Toyota's methods, what interests Catmull the most, and appears to motivate his actions, is to constantly identify and solve new problems. When Catmull gives a public speech or lecture, what's most noticeable is that he talks about the problems that Pixar has encountered and the mistakes that he has made. Pixar has, for example, nearly burned-out its employees on numerous occasions. Like every organization, there are also pockets of the company that are extremely resistant to change.

Catmull freely acknowledges through his words and deeds that doesn't know what he doesn't know. When delivering a lecture at Stanford's Computer Science department in April, he compared trying to build a successful lasting company to a constant iterative creative process. "There is a lot about this process which I find mystifying still," he said, "There's certain things that I think we've got right and certain things we've got wrong."

Outsiders are routinely surprised by Pixar's cultural honesty and willingness to be challenged. When Stanford professors Robert Sutton and Hayagreeva "Huggy" Rao interviewed Pixar director Brad Bird with Allen Webb, Bird recounted being recruited to Pixar:

"Steve Jobs, Ed Catmull, and John Lasseter said, in effect, 'The only thing we're afraid of is complacency, feeling like we have it all figured out. We want you to come shake things up. We will give you a good argument if we think what you're doing doesn't make sense, but if you can convince us, we'll do things a different way.' For a company that has had nothing but success to invite a guy who had just come off a failure and say, 'Go ahead, mess with our heads, shake it up.' When do you run into that?"

Ed Catmull and Pixar have the potential to one-day be the Toyota of American business, a role model for building a constant learning organization. It's a striking model for Google. What do you think? Is Pixar a good role model company for Google and its founders these days? What advice would you give Google executives at this pivotal inflection point?

Book Review: Good Boss, Bad Boss

Bob Sutton

Originally published on Reuters.com.

It has been damn near impossible to find consistently good and objective insight and analysis from business thought leaders. But Robert I. Sutton, a professor of Management Science and Engineering at Stanford and the Stanford Institute of Design (where we have overlapped), is an exception.

His new book, out now, is his best to date. Good Boss, Bad Boss is food for thought for managers and leaders in organizations large and small. It is packed with insight, lists of "how to" suggestions, and questions for bosses to ask themselves.

Sutton weaves many of these nuggets together with interesting stories in Good Boss, Bad Boss — while building on his last book, The No Asshole Rule, a New York Times best seller.

Sutton draws upon an impressively broad collection of research, including fascinating sociology research from Rob Cross that shows top performing employees are far more likely to have high energy than high IQs. He also gives some space to Frank Flynn's research about what kind of boss is most effective — competitive, aggressive, passive, or submissive. "Moderately assertive" bosses win. Those bosses are able to strike a balance between managing too much and too little, something Sutton calls "Lasorda's Law," after the former Los Angeles Dodgers manager Tommy Lasorda's style.

Most of the book is organized around insights like these, including INSEAD's Morton Hansen whose research shows the problems with "solo star" organizational cultures and Amy Edmondson's research about the importance of psychological safety in order to increase decision-making and creative confidence.

Sutton also quotes from Karl Weick, the legendary psychology professor at University of Michigan's business school, who taught Sutton: "fight as if you are right, and listen as if you are wrong."

Sutton laces the observations together with illustrative anecdotes about good bosses like 3M's William Coyne, Pixar's Ed Catmull, IDEO's David Kelley, and Lenny Mendonca of McKinsey & Company – and bad bosses, such as the temperamental Joe Cassano of AIG, whose division lost an estimated $45 billion.

He also shares the best organizational insights and observations he has accumulated over the years such as at Avis, General Motors (a company and culture Sutton has followed closely and astutely), and The Onion. General Motors managers, for example, were distanced from the needs of their customers for years because they got free GM cars, without haggling at dealerships. Meanwhile, writers at The Onion throw out 600 headlines ideas for every 18 that get published — a testament to the importance of creating failure-tolerant cultures.

At times, though, so many insights make the book feel a bit like a cookbook and wind up getting lost in the shuffle.  Sutton's a good writer, although be prepared to dog-ear and underline your copy to revisit the themes that resonate the most.

The best chapter, though, does just the opposite. Chapter 8: "Squelch Your Inner Bosshole" presents Sutton's unique contribution to the mountains of leadership and management literature – while illustrating the corrosive long-term effects that toxic and bullying bosses (i.e. assholes) have on organizations, Sutton presents a compelling case for the need for good bosses. In doing so, he coins a new term "bosshole."

"Bossholes make people sick," he writes before citing a study of 6,000 British civil servants over 20 years that found that people experienced more heart attacks, angina, and deaths from heart disease when bosses criticized them unfairly, didn't offer praise, and didn't listen to their problems.

A Swedish study of over 3,000 workers produced a similar finding. "I would call those lousy Swedish bosses incompetent assholes, as they were bad at getting things done and treated people like dirt," Sutton writes. Sutton's blend of rigorous empiricism, humor, passion, and catchy phraseology is both memorable and powerful.

So is your boss a "bosshole"? Sutton provides a 20-item survey here to find out.

Is Google at Risk of Becoming the Next Microsoft?

Published originally on TechCrunch.

In late April, JP Morgan unexpectedly invited me to a "thought leaders dinner" to discuss the latest goings on in Silicon Valley and digital media. In a private room at the San Francisco restaurant Kokkari, there were about 20 of us seated around a long rectangular table, including venture capitalists from prominent firms, successful entrepreneurs, and a handful of people from J.P. Morgan, including Jimmy Lee, the firm's well-known Vice Chairman, who sat at the head of the table. (I was, like Kevin Costner's character in Bull Durham Crash Davis, "the player to be named later.")

Anyhow, after about an hour and a few glasses wine, Jimmy raised the main question he was curious about: "I want to know from each of you: which company would you go long on and which would you short?" We could pick any timeframe. And, as it turned out, while the long picks varied widely from Amazon to Yahoo!, 12 of the 15 'thought leaders' shorted Google. Jimmy was surprised, virtually astounded: "Wow!" he exclaimed, "You guys are really negative on Google, huh?"

I, too, was surprised. Google has been, after all, the most successful company in recent history (in terms of churning out growth and profits), led by Eric Schmidt, a well-respected CEO. And, we've seen book after book about why everyone should be more like Google. I admire Google, its people, and what they have been able to accomplish enormously. It's astonishing. But the opinions in that room were not based on the company's past performance. They were based on insights about Google's future. Below are the reasons people cited for shorting the company (which, interestingly, were fairly diverse):

–Google has experienced a severe talent drain over the past several years, losing some of its most entrepreneurial and innovative people. Although Google's has high retention rates, Google's talent challenge is not in terms of numbers, it's the type of people who are leaving and why they are leaving. The talent drain from Google has been well documented. Venture capitalists in the room (without a vested interest in the companies) argued that Facebook and Zynga are currently considered hot places to work in Silicon Valley. Google has, for example, seen a stream of people leave for Facebook including, more recently, the likes of Erick Tseng, the senior product manager of Android, Google's critically important mobile initiative.People close go Google say upward management is slowly replacing the company's early culture of innovation. Entrepreneurial types and thought leaders who feel confined or unmotivated are moving. People will even say that it reminds them of Yahoo back in 2004-2005, not the meritocracy they once joined.

–The company has run out of easy growth opportunities and must now find big chunks of new revenue. With the core search business maturing, Google increasingly seems to increasingly feel the need to make some "big bets." That is a problem that maturing companies face that CEOs call "the tyranny of large numbers." Even mobile search, which is seeing impressive growth numbers of a small base, is still too small to make a material difference for the company. The company is obviously trying like crazy to find growth pockets, knowing that mobile is a ways off. The recent $700 million ITA acquisition is a great case in point of how it is going to spread out some medium-sized to big-bets to see what sticks. That is, companies must find bigger and bigger chunks of revenue to maintain growth rates. This problem is documented well by innovation researchers Professor Clayton Christensen in The Innovators Solution, and Jim Collins in How the Mighty Fall.

–The company lacks a coherent strategy, especially in mobile. As Schmidt and other Google execs have stated, mobile is core to future growth. A number of people around the table that night had unique insight into Google's mobile efforts. They argued that growing nascent mobile revenues will take significant time, especially since there aren't many sizable acquisition targets available in mobile after Google's purchase of AdMob. Instead, the recent purchase of ITA Software was an indicator of how the company might make some medium to big bets to see what sticks.

–It's about people, people, people. Google's engineering-dominated culture isn't news to anyone. But As Peter Drucker opined in his landmark book Innovation and Entrepreneurship, "Successful innovators…look at figures, and they look at people." The company has long recruited people who fit a very specific profile.

Product manager candidates, for example, are told they must have computer science degrees from top universities. But while Google's core algorithm was a brilliant feat of engineering innovation, a growing chorus of voices question whether it can be sustained. That cookie-cutter approach to people misses important opportunities for diversity and creates glass ceilings for non-engineers, both of which stifle innovation. Cultural hubris, another pattern Jim Collins in particular raises, is of foremost concern. It is often said that at Google the engineers lead engineering, product, and even marketing decisions. But when the company has failed, such as with Google Wave or Google Radio, critics have questioned whether the company really understands people.

For these reasons and more, perhaps the question that "in the know" Silicon Valley observers are now increasingly asking is: Could Google be the next Microsoft? That is, much like Google revolutionized search, Microsoft was a pioneer with its market-dominating operating systems and Microsoft Office. But outside the Xbox, Microsoft has struggled severely to produce new innovations. Deeper cultural problems were hidden by amazing performance and success.

One thing is for certain: it's a pivotal time in Google's history. If the company does not put these types of issues on the table, the chorus of short sellers will increase. But with mountains of cash, access to great people and big problems, I see the moment as an opportunity. It's a chance to reflect, ask some tough questions, openly discuss the challenges, and incorporate some fresh thinking and people, so that this great symbol of global innovation can evolve and grow.

What do you think—are you long or short? Is Google at risk of becoming the next Microsoft or on the verge of a creative explosion?

Think Like Chris Rock: Little Bets

Chris Rock has become one of the most popular comedians in the world and, while there is no doubt he's got great talent, his brilliance also comes from his approach to developing his ideas. The routines he rolls out on his global tours are the output of what he has learned from thousands of "little bets," nearly all of which fail.

When beginning to work on a new show, Rock picks venues where he can experiment with new material in very rough fashion. In gearing up for his latest global tour, he made between 40 and 50 appearances at a small comedy club called Stress Factory in New Brunswick, New Jersey, not far from where he lives. In front of audiences of say 50 people, he will show up unannounced, carrying a yellow legal note pad with joke ideas scribbled on it. "It's like boxing training camp," Rock told the told the Orange Country Register.

When people in the audience spot him, they start whispering to one another. As the wait-staff and other comedians find places to stand at the sides or back, the room quickly fills with anticipation. But he won't launch into the familiar performance mode his fans describe as "the full preacher effect," when he uses animated body language, pitchy and sassy vocal intonations, and erupting facial expressions. Instead, he will talk with the audience in an informal, conversational style with his notepad on a stool beside him. He watches the audience intently, noticing heads nodding, shifting body language, or attentive pauses, all clues about where good ideas might reside.

In sets that run around 45 minutes, most of the jokes fall flat. His early performances can be painful to watch. Jokes will ramble, he'll lose his train of thought and need to refer back to his notes, and some audience members sit with their arms folded, noticeably unimpressed. The audience will laugh about his flops – laughing at him, not with him. Often Rock will pause and say, "This needs to be fleshed out more if it's gonna make it," before scribbling down some notes. He may think he has come up with the best joke ever, but if it keeps missing with audiences, that becomes his reality. Other times, a joke he thought would be a dud will bring the house down. According to fellow comedian Matt Ruby, "There are 5-10 lines during the night that are just ridiculously good. Like lightning bolts. My sense is that he starts with these bolts and then writes around them."

For a full routine, Rock tries hundreds (if not thousands) of preliminary ideas, out of which only a handful will make the final cut. A successful joke often has six or seven parts. With that level of complexity, it's understandable that even a comedian as successful as Chris Rock wouldn't be able to know in advance which joke elements and which combinations will work. This is true for every stand-up comedian, including the top performers we tend to perceive as creative geniuses, like Rock or Jerry Seinfeld. It's also true for comedy writers. The staff of writers for the humor publication The Onion, known for its hilarious headlines, propose roughly 600 possibilities for 18 headlines each week, a 3% success rate. "You can sit down and spend hours crafting some joke that you think is perfect, but a lot of the time, that's just a waste of time," Ruby explains. This may seem like an obvious problem, but it's a mistake that rookie comedians make all the time.

By the time Rock reaches a big show – say an HBO special or an appearance on David Letterman – his jokes, opening, transitions, and closing have all been tested and retested rigorously. Developing an hour-long act takes even top comedians between six months and a year. If comedians are serious about success, they get on stage every night they can, especially when developing new material. They typically do so at least five nights per week, sometimes up to seven, and sweat over every element and word. And the cycle repeats, day in, day out.

Most people are surprised that someone who has reached Chris Rock's level of success still puts himself out there in this way, willing to fail night after night. But Rock deeply understands that ingenious ideas almost never spring into people's minds fully formed; they emerge through a rigorous experimental discovery process. As Matt Ruby says of Rock's performances, "I'm not sure there's any better comedy class than watching someone that good work on material at that stage. More than anything, you see how much hard work it is. He's grinding out this material."

The iPhone: How to Design a Great Business Model

Apple's impressive quarterly earnings report this week, bolstered by iPhone sales, exemplified what has become increasingly clear: Apple has not only designed a highly successful product with its iPhone, the company's use of design principles have allowed it to build an incredible business model and ecosystem that has even Microsoft admiring it. Steve Balmer, CEO of Microsoft, wrote in a company-wide email on July 23rd that, "…there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete…"

What can we take from this? Design has always been a part of Apple's DNA and two key underlying principles from the world design thinking, which is being advanced in remarkable ways by my colleagues at the Stanford Institute of Design (the d.school), can be seen with the iPhone.

First, it's critical to understand the underlying needs of your customers or partners, which can be very different than what they say they want. Not only is the phone enjoyable to use, the iPhone value chain (or value network) has incentives for its partners and monetization opportunities for Apple throughout. The prime example is the iPhone Application Store where outside software developers keep 70% of each sale for the products they develop, since Apple understands that outside software developers need the right incentives to work weekends and late nights. But, Steve Jobs seems more than happy to take 30%, especially as he predicts gross sales of iPhone applications will soon reach $1 billion.

When it comes to iPhone service and distribution, AT&T needs ARPUs and users, so Apple gives AT&T those in spades on an exclusive basis, and in exchange AT&T pays Apple an estimated $320-$420 for each new subscriber (according to Oppenheimer). Meantime, Best Buy needs to improve its brand and customer pull for mobile phone products and services. Adding iPhone sales to its stores will do just that, while Apple's distribution reach will grow dramatically.

A second key design principle to highlight here is the use of rapid, low-cost prototypes to gather market insights in order to innovate and improve the offering. Each time a new application is launched, no one knows if it will become a big winner. Perhaps people will flock to games like "Texas hold 'em"; or, maybe the entire financial community will rush to download the HP-12c calculator iPhone application. The original HP-12c does, after all, cost $80 compared to the $19.99 iPhone application. Apple cannot predict all of the needs it can serve with the iPhone and, as Chris Anderson brilliantly observed, there's a Long Tail of needs. Through the iPhone Application Store, the market can surely align needs with solutions and Apple has designed its business model to facilitate the operation of that ecosystem, while taking nice profits along the way.

As more people and companies are incented to contribute to the iPhone ecosystem, the phone's utility grows and the customer experience improves. That drives overall demand. All of this helps to explain why people are still willing to wait two hours in line to buy one or why one of the biggest challenges CIOs face these day is managing requests for iPhones (just ask any CIO).

Indeed, Apple is benefiting from the virtuous cycle of the iPhone ecosystem:

1) Design a product that people love to use;

2) Develop ways to fill the needs of partners who will then increase the value of the ecosystem;

3) Monetize each element of the value network; and,

4) Allow everyone in the ecosystem, most notably Apple, to reap the benefits of scale through increased revenues, profits, and defensibility of the model.

Case in point: Nokia recently announced plans to launch a phone with 300 songs pre-sold, but good luck competing against an iPhone ecosystem that becomes more valuable every day.

Let's just hope Google's Android platform doesn't disrupt the iPhone phenomenon. It's still too soon to tell.

Even still, we can all learn from Apple's DNA – their innovation mindset – that by constantly observing and understanding the needs of those we are serving and challenging our assumptions against market desires through rapid, low-cost experiments, we can first create great value for our customers and partners, then capture and monetize that value throughout an ecosystem.