Full text of entrepreneur Diana Kander’s talk: “Our approach to innovation is dead wrong” at TEDxKC conference.
Listen to the MP3 Audio here: Our approach to innovation is dead wrong by Diana Kander
Diana Kander – Entrepreneur
When I was 17 years old, I was really into Taekwondo. I was small and I had read all these statistics about the likelihood of getting attacked as a woman. So I thought that learning martial arts would make me safe.
I was one of the top students in the class. I had a green belt and I walked around thinking I was a real badass.
One night after an evening shift at the restaurant where I worked, I was attacked in the back parking lot. One of the customers who was very nice to me during my shift, was there waiting for me when I clocked out.
As I was fumbling around with my keys trying to get into my car, he came up and grabbed me by the throat. This was the moment I had been training for, for years. And yet my arms hung limp at my sides, my legs did not move. They felt like they were made of concrete. I didn’t fight. I was in shock.
Just then, one of my co-workers came out the back door and saw that something was amiss. He yelled in my general direction and my assailant ran off. I was incredibly lucky not to be hurt that evening.
But as an analytical person, I was also thoroughly confused why I hadn’t just deployed all of my Taekwondo training and handled the situation on my own.
So I thought back to my classes and how the teacher would always pair me up with somebody my size during sparring so usually a 12 year old girl. And there were so many things we weren’t allowed to do because they were illegal in tournaments. So no punches to the face or kicks to the groin, you know all the good stuff.
So what I realized was that I was really learning how to score points in a very controlled environment. Inside of a tournament. I wasn’t really learning how to defend myself because I had no practice against realistic opponents with realistic attack moves.
So the irony was that the very classes that I thought were teaching me self-defense left me unable to defend myself when it mattered most.
And today, there is another educational program that has a very similar ginormous fatal flaw. It’s the way we teach people to start new companies and launch new products.
Since the 1980s we’ve had an explosion in the number of classrooms and programs that are teaching people how to start new businesses. And over the same time period, studies show there’s been a gradual decrease in the overall number of new companies started and an actual increase in the number of companies failing and going out of business.
So how do we reconcile these two facts?
One simple solution is we’re teaching people the wrong thing. And it all has to do with how we’re teaching them to allocate their time.
You see, all these classes are very very similar. They tell you that once you have a great new business idea, the very next thing you need to do is write a comprehensive business plan. A 30 page document, complete with 5-year financial projections.
Then you raise investment from friends and family or outside investors. You build your product, and finally when all is said and done customers will run at you with open arms, all according to your plan.
People laughing about this in the audience because I think they understand Mike Tyson’s famous quote:
“Everyone has a plan until they get punched in the face.”
And when you try to predict the future for five years in advance in a vacuum, you’re going to get punched in the face.
So let me give you an example. The marshmallow challenge is this fascinating exercise that asks teams to build the tallest freestanding structure they can out of twenty sticks of spaghetti, one yard of rope, one yard of tape and one marshmallow. They’ve got 18 minutes and the marshmallow has to go on top.
So all different kinds of groups take the challenge: engineers, architects, business executives, MBAs, even kindergarteners, and consistently the MBAs do worse than every other group of participants.
So the average structure built is about 20 inches. The MBAs are averaging 10. Even kindergarteners are kicking their butts, building structures two and a half times taller.
So how is this possible?
These are the very people that we’re training how to plan and execute the ideas of the future. And again, it all has to do with how we’re teaching them to allocate their time.
So the MBAs usually spend about the first 30% of the challenge planning the perfect structure, allocating rolls. Then, 60% of their time actually building it. And finally, with just a minute or so left they place the marshmallow on top of the structure very confidently, only to watch the entire thing collapse under the weight of that marshmallow.
The business students wait until the very end of the exercise when they’ve already built the full structure to interact with the most valuable piece of the puzzle, that marshmallow. And they’re so confident in their plan that they don’t even leave themselves any time to make adjustments, you know just in case they’re wrong.
The kindergarteners have a totally different approach. They start with a small and stable structure with a marshmallow already on top. This takes just a few minutes and now they have lots of time left to experiment. They don’t believe there’s one right answer to this puzzle. They play to figure it out.
In the same time period that the MBAs build just one structure, the kindergarteners are able to build four or five different structures. That’s how they’re consistently outperforming.
To me the lesson of this challenge is that the longer you work on your plan in a vacuum, the more likely you are to fail.
I can actually attest to this from personal experience. For all the nice things Mike said about me in the introduction, he did not mention my colossal failure. I had a grand vision for a software product. I raised nearly half a million dollars in outside capital. I cashed in every favor I ever had. All because, I was so confident in my business plan. Took me months to write it.
And when we finally launched the product, customers just didn’t behave the way we thought that they would. We executed perfectly on a flawed plan and we spent more time planning and building than we did interacting with our customers to figure out if they were actually interested in buying and using our product.
Let me tell you failure hurts. But not nearly as much as regret. And what I wouldn’t give to have just a few more chances of launching that product.
So what if instead of teaching people who have a new idea for a product that they should spend the next three to six months of their lives writing this comprehensive plan, to convince everyone including themselves that they’re right.
What if instead, we taught them how to spend a month experimenting like those kindergarteners and testing some of their core beliefs about how their customers are going to behave.
Because human behavior is actually quite difficult to predict. More difficult than predicting how a marshmallow is going to behave, for sure. Some people disagree they think there are ‘no brainers’ in the world, that of course customers are going to want to buy this or use this product.
And for those people I’ve developed a really fun experiment with my students. So I asked them to go to a public place and give away five $1 bills, that’s right. They’ve got five chances to hand out free cash.
But first they have to write a short plan. So who’s their target customer? What are they going to say to get their attention? And out of five chances how many dollar bills will they give away?
Of course everyone thinks they’re going to give away 5 out of 5. It’s a no-brainer, right, everybody wants free cash. In almost every single time they’re wrong. Everyone learns, that it’s not a no-brainer. But giving away free cash is actually a lot harder than they thought. Some people are busy. Some people are skeptical.
So they learn that certain groups of people are actually more interested in their idea than others. That certain lines work better than others. And most importantly that their plan is just a starting place. That as soon as they encounter the real world they’re going to start making adjustments. So they understand the value of having those real world interactions, as soon as possible.
If we have any chance of reversing these macro trends, we have to stop teaching innovators that they have to be fortune tellers, who can see the future. That’s not realistic.
Instead we have to teach them how to be detectives — people who use facts and evidence to back up their assertions about how customers are going to behave.
Think that people are going to rush to buy your product when it’s complete? Then let’s pre-cell 20 of them before we even start production.
Think they’re going to pay 49.95? Then let’s set up a simple landing page where we see how many people click the Buy button at that price point.
If we want to create real companies, ones that survive more than just business plan tournaments, we need more than hope that they’re going to be successful. We need proof and a reason to believe that the assertions they’re making about their customers are more fact than fiction.