A Fusion of the Fantastic

Mehrdad Baghai, Managing Director of Alchemy Growth Partners and co-author of best-seller The Alchemy of Growth, is an authority on innovation and growth.

Outlined in The Alchemy of Growth, Mehrdad thinks of innovation in terms of horizons.

 

Horizon 1 is innovation around incremental improvements around existing elements. This may be improving quality, extending an idea or perhaps looking at ways of taking cost out.

 

Horizon 2 is a more substantive innovation such as a new product idea or looking at selling an existing product to a completely new group of people.

 

Horizon 3 is when things start getting exciting! This is disruptive innovation where people come up with ideas and technologies or ways of doing things that are so powerful that they entirely change the rules and shift the game.

 

Context

 

For the past decade, Mehrdad has led and advised major growth programs. As Chairman of the Commercial Executive Committee he headed up the development of CSIRO’s growth strategy and designed a new model for managing the $1 billion science investment portfolio. Before that, he was a partner at McKinsey & Co where he co-led the firm’s worldwide Growth Practice. And now he is consulting to Deloitte.

 

Besides the wealth of experience Mehrdad brings to his innovative thinking, he has a diverse Ivy League education. Originally trained at Princeton in electrical engineering and computer science as well as public policy, Mehrdad later continued his education in public policy at Harvard and completed a JD from Harvard Law School. With a technical background he tends to think analytically, but “I try to be open to creative ideas too.”

 

Growth, innovation and the long haul  

 

“Innovation is critical to growth and growth is critical to business success – they go hand-in-hand,” Mehrdad says.

 

He can’t emphasize enough how critical innovation is to the survival of businesses. “McKinsey has done some interesting analysis on companies over multiple business cycles, and what you find is that companies that pursue performance without growth, as opposed to performance through growth, have six times higher death rates over two business cycles.

 

“It’s pretty evident that innovation and growth are critical to long term health for businesses. You can do cost cutting and performance improvement to drive value for a few years but it’s not a long term solution.”

 

People, persistence, passion for all

 

Mehrdad has learnt over many years in the business, successful innovation ultimately comes down to people. “It really is about whether people persist with their ideas and endure the ups and downs that it takes for an innovation to actually come to market. So persistence is important but there’s also an element of luck involved.”

 

Mehrdad is quick to point out that innovation isn’t exclusive – it is something everyone can do and everyone should be a part of. “Some people are better at more visionary ideas and other people are good at incremental innovations – there isn’t a single job where some degree of innovation isn’t helpful. Part of what I try to do with my view on innovation is for everyone to realise it plays a role in what they do and not just to think about innovation as wild and crazy ideas.”

 

Idea generation: numbers count

 

Idea generation is important to the whole innovation process because innovation is a statistical game. Not every idea is going to make it. It’s like a funnel. There are lots of reasons why ideas fail so if you want to get an idea across the line you have to have hundreds to make sure that you’ve got enough to have something at the other end. Volume is critical.

 

It’s easy to say that big numbers of ideas get big results, but what strategies can be used to tease the big fish out? Mehrdad has a number of good tips on how to bring idea generation into your daily business.

 

Teasing out the big fish

 

“The Deloitte Innovation Zone is a very interesting, compelling and powerful approach. In general incentives are important but it’s much more about culture. At Google for example 20 per cent of everyone’s time is allocated to thinking up new ideas and testing them. There is a culture there where that is appropriate. There are of course other places where time dedicated to idea generation would be seen as productivity loss and that doesn’t work.

 

Engineer meets entrepreneur meets chairman

 

Another of Mehrdad’s top tips is in many ways reflective of his own character, where lawyer meets engineer and entrepreneur meets Chairman.

 

The collision of different points of view is really important to idea generation. If you look at the most interesting innovations they are at the intersection of different disciplines. Try to think about when scientists from different fields collaborate. Often when different systems come together interesting ideas come out. It’s important to try to get people from different service and disciplines and competencies to come together and collaborate.

 

For example Dr Robert Kane, CEO of Solar Sailor, collided his knowledge of anatomy, sailing and physics to build his solar powered ferries.

 

Why and why not?

 

You get the idea when Mehrdad describes this juxtaposition concept. There are questions you can ask that force people to think in different ways. Mehrdad finds asking ‘Why and Why Not?’ questions helpful.

 

You may be working with a healthcare client on what the future of hospitals is going to be and as a thought exercise you could ask what would happen if Qantas ran the hospital or perhaps Hyatt Hotels.

 

Or if you’re trying to do banking you might say what if a branch was a school, or a restaurant, or a toy shop. You put two very different ideas next to each other and get a new idea of what a hospital or bank could become.

 

Permission to play

 

Encouraging employees to generate ideas is one thing, but Mehrdad warns that businesses need to learn from companies like Google and Deloitte to give people the time and incentives to innovate.

 

Innovation needs to become part of the culture. But once the ideas are in, he stresses the importance of acting on them. If you generate ideas and nothing happens, no one is going to continue to generate them. You have to have the ability for the ideas to get somewhere.

 

Crystal ball

 

So looking into his crystal ball, Mehrdad believes:

 

• the pace of innovation is going to continue to increase
• the challenge is that it’s going to be harder and harder for each innovation to make it
• more and more innovations will build on each other
• there will be more disruptive earth-shaking innovation
• and even more smaller innovations around them.

 

“We’re getting very good as a planet at innovating around each others ideas.”

 

The big picture

 

“I think there’s no limit to what the human race can come up with – good and bad – over the next century. We’re going to have the capacity to solve all the biggest problems in the world from poverty, development, disease and water.

 

“There’s nothing we can’t solve. On the other hand we’re going to have an unparalleled ability to destroy the planet.

 

“We’re at this crossroads where in the next century humanity is going to have to decide how we can use our innovative power for our collective benefit.”