‘Loonshots’ book review by Ron Immink

As part of the literature review for the intrapreneurship project Ron Immink has reviewed the book: “Loonshots” by Safi Bahcall.

“Loonshots” is a very different book about innovation and organisational design. Closer to Taleb and “Antifragile”  than “Creative construction”. Also reminds me of “The day after tomorrow”. Solid, fluid and superfluid as key concepts to manage your innovation portfolio.

Managing superfluid

Particularly superfluid is difficult. Those are the loonshots you need, but loonshots by their nature are completely and utterly unpredictable. However, the most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy. Without loonshots companies (and empires) will eventually die.

Phase transition

Loonshots shares the lessons and learning of how to manage innovation from a loonshot perspective. It as with startups and biology, you need lots of weird ideas, and there is no way of predicting which ones will succeed. It is all to do with phase transition. Organisations work in the same way and when you start to understand why teams suddenly turn, you can start to control those transitions. The same way as temperature controls the boiling and freezing of water. Solid, fluid, superfluid.

Water

Think of the water molecules in the tub as a platoon of cadets running randomly around a practice field. When the temperature drops below freezing, it’s as if a drill sergeant blew a whistle and the cadets suddenly snapped into formation. The rigid order of the solid repels the hammer. The chaotic disorder of the liquid lets it slip through. Systems snap when the tide turns in a microscopic tug-of-war. Binding forces try to lock water molecules into rigid formation. Entropy, the tendency of systems to become more disordered, encourages those molecules to roam. As temperature decreases, binding forces get stronger and entropy forces get weaker. When the strengths of those two forces cross, the system snaps. Water freezes.

Competing forces

All phase transitions are the result of two competing forces, like the tug-of-war between binding and entropy in water. When people organise into a team, a company, or any kind of group with a mission they also create two competing forces, two forms of incentives. We can think of the two competing incentives, loosely, as stake and rank. When groups are small, for example, everyone’s stake in the outcome of the group project is high. The perks of rank, job titles or the increase in salary from being promoted, are small compared to those high stakes. As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behaviour no one wants.

Inevitable

The bad news is that phase transitions are inevitable. All liquids freeze. No group can do both at the same time, because no system can be in two phases at the same time. One molecule can’t transform solid ice into liquid water by yelling at its neighbours to loosen up a little. When the density exceeds a critical threshold, the system will flip from the smooth-flow to the jammed-flow state.

Control parameters

Identifying control parameters is the key to changing when systems will snap: when solids will melt, when traffic will jam, or when teams will begin rejecting loonshots. As the temperature of water falls, molecules vibrate more slowly until they reach a critical temperature, at which point their binding energy exceeds their entropy, and they crystallise into the rigid order of ice. That’s the liquid-to-solid phase transition.

Live on the edge

To nurturing loonshots, you need to live on the edge of a phase transition: the unique conditions under which two phases can coexist. Engineering serendipity, create the opportunity and space to explore the bizarre and creating a dynamic equilibrium between loose and structure. The magic is in the network, a shared purpose and the loose connections.

The rules

• Do not undertake a program unless the goal is manifestly important and its achievement nearly impossible
• If anything is worth doing, it’s worth doing to excess.

Shelter radical ideas

There is a need for separating and sheltering radical ideas—the need for a department of loonshots run by loons, free to explore the bizarre. Where failure is accepted and expected. The breakthroughs that change the course of science, business, and history, fail many times before they succeed. Sometimes they survive through the force of exceptional skill and personality. Sometimes they survive through sheer chance. In other words, the breakthroughs that change our world are born from the marriage of genius and serendipity.

Create a loonshot structure

There is a pervasive myth of the genius-entrepreneur who builds a long-lasting empire on the back of his ideas and inventions. Rather than champion any individual loonshot, the secret is to create an outstanding structure for nurturing many loonshots. Rather than focus on being a visionary innovator, be a careful gardener. Getting the touch and balance right requires a gentle helping hand to overcome internal barriers, the hand of a gardener rather than the staff of a Moses. The tips (not that dissimilar to “Zone to win”):

Separate the phases

The goal of phase separation is to create a loonshot nursery. The nursery protects those embryonic projects. It allows caregivers to design a sheltered environment where those projects can grow, flourish, and shed their warts. Tailor the tools to the phase

Love your artists and soldiers equally

Surviving those journeys requires passionate, intensely committed people—with very different skills and values. Artists and soldiers. Manage the transfer, not the technology. Manage the balance between loonshots and franchises—between scientists exploring the bizarre and soldiers assembling munitions; between the blue-sky research of Bell Labs and the daily grind of telephone operations. Rather than dive deep into one or the other, focus on the transfer between the two. Intervene when the balance breaks down. Keeping the forces in balance is so difficult because loonshots and franchises follow such different paths.

Beware the False Fail

False Fail—a result mistakenly attributed to the loonshot but actually a flaw in the test. We will see the False Fail over and over, both in science and in business. There are many reasons projects can die: funding dwindles, a competitor wins, the market changes, a key person leaves. But the False Fail is common to loonshots. Skill in investigating failure not only separates good scientists from great scientists but also good businessmen from great businessmen.

Create project champions
Fragile projects need strong hands. Great project champions are much more than promoters. They are bilingual specialists, fluent in both artist-speak and soldier-speak, who can bring the two sides together.

Listen to the Suck with Curiosity

Listening to the Suck with Curiosity (LSC), overcome the urge to defend and dismiss when attacked LSC means not only listening for the Suck and acknowledging receipt but also probing beneath the surface, with genuine curiosity, why something isn’t working, why people are not buying. It’s hard to hear that no one likes your baby. It’s even harder to keep asking why.

Ferocious attention to detail

Ferocious attention to scientific detail, or artistic vision or engineering design, is one tool, tailored to the phase, that motivates excellence among scientists, artists, or any type of creative.

Beware of the Moses trap

When ideas advance only at the pleasure of a holy leader—rather than the balanced exchange of ideas and feedback between soldiers in the field and creatives at the bench selecting loonshots on merit—that is exactly when teams and companies get trapped.

The types of loonshots

There are two types of loonshots. P and S.

• With P-type loonshots, people say, “There’s no way that could ever work” or “There’s no way that will ever catch on.” And then it does.
• With S-type loonshots, people say, “There’s no way that could ever make money.” And then it does.
• Deaths from P-type loonshots tend to be quick and dramatic. A flashy new technology appears (streaming video), it quickly displaces what came before (rentals), champions emerge (Netflix, Amazon), and the old guard crumbles (Blockbuster).
• Deaths from S-type loonshots tend to be more gradual and less obvious. It took three decades for Walmart to dominate retail and variety stores to fade away. S-type loonshots are so difficult to spot and understand, even in hindsight, because they are so often masked by the complex behaviours of buyers, sellers, and markets.

Mindset
The book covers mindset, and there the book reminds me of “The algorithmic leader”.The difference between a system mindset and outcome mindset. Teams with an outcome mindset, analyse why a project or strategy failed. Teams with a system mindset, probe the decision-making process behind a failure. How did we arrive at that decision? System mindset means carefully examining the quality of decisions, not just the quality of outcomes. Which is why probing wins, critically, is as important, if not more so, as probing losses. Failing to analyse wins can reinforce a bad process or strategy. Always ask how the decision-making process can be improved

Examples of randomness

The book is full of examples and what it illustrates is the sheer randomness, the messiness, the serendipity of breakthrough ideas and companies. Bell lab, Genentech, Pixar, Star Wars, James Bond, IKEA but it also points out one organisation that has been at the forefront of many breakthroughs, which is DARPA. Since 1958, this one two-hundred-person research group, deep inside a massive organisation, has spun out the internet, GPS, carbon nanotubes, synthetic biology, pilotless aircraft (drones), mechanical elephants, the Siri assistant in iPhones, and more. Never underestimate the importance of government on innovation and technology development.

Lessons from DARPA

The DARPA’s principles are elevated autonomy and visibility; a focus on the best external rather than internal

• DARPA is run like a loose collection of small startups, with no career ladder. Their employee badges are printed with an expiration date.
• DARPA’s structure has eliminated the benefit of spending any time on politics, of trying to sound smart in meetings and put down your colleagues by highlighting the warts in their nutty loonshots so that you can curry favour and win promotions.
• DARPA managers are broadly known in their community. They are granted authority to choose their projects, negotiate contracts, manage timelines, and assign goals. The combination of visibility and autonomy creates a powerful motivating force: peer pressure.
• In DARPA recognition from peers is a form of intangible or soft equity. It can’t be measured through stock price or cash flows. But it can be just as strong a motivator, or even stronger, as both a carrot and a stick.

Your company

You won’t apply the same way to every company (most companies are not faced with problems that might be solved by a giant nuclear suppository). But every organisation can find opportunities to increase autonomy, visibility, and soft equity. Some additional tips:

Beware of the skill fit

Match employees and projects and ensure optimal skill-fit. Poor project–skill fit can also result from an overmatch: skills so far above project needs that the employee has maxed out what he or she can contribute. Employees who are not stretched by their assigned projects have little to gain from spending more time on them. How much might politics decrease and creativity improve if rewards for teams and individuals were closely and skillfully matched to genuine measures of achievement?

Watch the incentives

“Powerful” has an interesting perspective on incentives.  Competitors in the battle for talent and loonshots may be using outmoded incentive systems. Bring in a specialist in the subtleties of the art—a chief incentives officer. Companies with outstanding chief incentives officers—experts who understand the complex psychology of cognitive biases, are skilled in using both tangible and intangible equity, and can spot perverse incentives—are likely to do a better job than their competitors in attracting, retaining, and motivating great people. In other words, they will create a strategic advantage.

Management span

Wider spans (15 or more direct reports per manager) encourage looser controls, greater independence, and more trial-and-error experiments. Which also leads to more failed experiments. Narrower spans (five or fewer per manager) allow tighter controls, more redundancy checks, and precise metrics. When we assemble planes we want tight controls and narrow spans. When we invent futuristic technologies for those planes, we want more experiments and wider spans.
A wide management span helps nurture loonshots: it encourages constructive feedback from peers. Peers, rather than authority.

Disruptive innovation

The author makes a good point about loonshot versus disruptive. A loonshot refers to an idea or project that most scientific or business leaders think won’t work, or if it does, it won’t matter (it won’t make money). It challenges conventional wisdom. Whether a change is “disruptive” or not, on the other hand, refers to the effects of an invention on a market. Early-stage projects in rapidly evolving markets behave like a leaf in a tornado. You wouldn’t put a lot of faith in guessing where that leaf might end up. It’s easy to point to technologies that disrupted a market in hindsight, once the leaf has landed.

Embrace the crazies

Look for the innovation outliers (read “Quirky” and the “Rebel talent”. Perhaps everything that you are sure is true about your products or your business model is right, and the people telling you about some crazy idea that challenges your beliefs are wrong. But what if they aren’t? Wouldn’t you rather discover that in your own lab or pilot study, rather than read about it in a press release from one of your competitors? How much risk are you willing to take by dismissing their idea?

Survival

You want to design your teams, companies, and nations to nurture loonshots, in a way that maintains the delicate balance with your existing business, so that you avoid ending up like the Chinese and Roman Empire or most of the companies in your sector in the near future. See loonshots as insurance for day after tomorrow.