There are countless books, blogs, articles, cases, and conferences dedicated to identifying techniques that drive innovation. Most offer the same tired ideas – hire good people, empower employees, reward risk, embrace innovative culture, create a progressive work environment, etc. While these suggestions are all reasonable, they are anything but radical. If companies want radical innovation, they should look at exploring more radical solutions. What would happen if your eradicate HR from your company? Will you innovate better if you require all employees to take an IQ test?

1. Radical Rules For Radical Innovation
ILIYA RYBCHIN
Bloomberg LP
@rybchin
Digital Strategy
Innovation Summit
New York | 20 Mar 2014

2. Radical Rules For Radical Innovation
ILIYA RYBCHIN
Bloomberg LP
@rybchin
Digital Strategy
Innovation Summit
New York | 20 Mar 2014

3. 3| ILIYA RYBCHIN
INTRODUCTION
It seems like innovation is the most important topic in business
51% of companies
have increased
funding for
innovation in 2013
93% of companies
say their long-term
success depends
on their ability to
innovate
But only 18% of CEOs
say their innovation
investments are
paying off

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INTRODUCTION
Everyone claims to be an innovation expert

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INTRODUCTION
Most “experts” offer reasonable and pithy advice
Hire
diverse
staff
Empower
employees
Promote
experimentation
Embrace
chaos
Cultivate
entrepreneurship
Invest in
startups
Reduce
bureaucracy

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INTRODUCTION
However if you want to DISRUPT, you need to be bold
Innovation
§ The introduction of
something new
§ A new idea, method, or
device
Disruption
§ Change that has meaningful
business consequences; new
business, service, or product
concepts that have positive
financial impact
§ New ideas that fundamentally
change the basis of
competition within the industry
Disruptive innovation requires much more than…
§ …making incremental improvements to your products/services
§ …acquiring an early stage startup
§ …hiring a Chief Innovation Officer
Faster
Horse
Car

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INTRODUCTION
Being bold is dangerous
§ These innovation rules are not meant to be
followed literally
§ Without appropriate safeguard, these rules
can be dangerous
§ These rules do not reflect the opinions of
any past, current, or future employers

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Let’s Begin

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ERADICATEHR
• A company with an HR department
larger than 5 people will struggle to be
disruptive
• HR’s very reason for existence is to
maintain order, enforce bureaucracy,
foster inefficiency, tolerate mediocrity,
protect antiquated culture, etc.
• The key to radical innovation is to not
treat HUMANS as RESOURCES
• Resources are raw materials that are
used up until all value is sucked out of
them
• Humans are the living beings that offer
creativity, inspiration, passion, energy,
loyalty, etc.
RULE 1: Eradicate HR… IMMEDIATELY

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ERADICATEHR
• Is it easier to book a $10,000 trip to Asia than to hire a temp contractor to build
prototype?
• So you re telling me I can trust you to give you a company car and to have
you responsible for tens of millions of dollars, but I can t trust you to dress
appropriately? – Mary Barra, CEO General Motors
• Think about why firms need to establish innovation groups OUTSIDE of the
corporate offices – what are they really escaping from?
DIAGNOSIS: HR drains innovation potential from an organization

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ERADICATEHR
SOLUTION: Treat your employees… like humans
• Assume your employees are rational,
motivated, and talented human beings
who know the difference between right
and wrong, are capable of thinking,
and making decisions,
• Outsource everything administrative
(payroll, benefits, recruiting, etc.) and
condense your employee manual to
one sentence:
DON’T BE STUPID

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ERADICATEHR
• When employees are unshackled by the burdens of pointless
process, baseless bureaucracy, and constricting structures, they
can innovate
• They take risks
• Their thinking is not constrained
• They will act in the best interests of the company
• Essentially, you need to strip away “corporate stupidity”
RESULT: Empowered employees who care

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TESTIQ
• A good manager can foster/nurture
risk-taking, creativity, problem
solving, and technical skills. S/he
can't make someone smart
• Radical innovation requires rapid
action and exceptional intelligence -
decelerating your progress hurts your
ability to innovate
• Organizations often optimize for the
lowest common denominator
RULE 2: Hire based on IQ

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TESTIQ
When Mihaly Csikszentmihalyi studied geniuses for his book “Creativity - The
Psychology of Discovery and Invention”, he realized something fascinating
about IQ:
No one who changed the world had an IQ under 130 —
but the difference between 130 and 170 was negligible.
DIAGNOSIS: Brilliant ideas do not come from mediocre minds
Worst
Drivers
Poor
Drivers
Be-er
Drivers
Best
Drivers
If something as
simple as driving
ability correlates
to intelligence,
what does that
say for highly
complex tasks
your employees
perform daily?

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TESTIQ
SOLUTION: Don t level the playing field… hire better athletes
The mere act of assessing
intelligence gives you
valuable insights about your
potential employees:
• Creativity
• Problem solving
• Ability to deal with
ambiguity
• Ability to deal with stress
• Even personality

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TESTIQ
or
RESULT: Brilliant employees beget brilliant innovation
Who is most likely to come up with the next genius idea
that will transform your company, reshape your industry,
and change the world?

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UNDERCOVERBOSS
You can’t innovate if your key employees
have never (or rarely)
• Taken calls in a call center
• Stood on a sales floor and tried to sell
your product
• Worked a factory line and assembled
your product
If you want to disrupt a market, you need
everyone to spend more time in the market
RULE 3: Mandatory “Undercover Boss” for ALL managers

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UNDERCOVERBOSS
• Innovation can be
correlated with how
frequently management
is “among the people”
• Why pay expensive
firms to do ethnographic
research?
DIAGNOSIS: Contact with customers is a religious experience

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UNDERCOVERBOSS
All employees should spend:
• 1 day per quarter at a call center
• 1 day per quarter selling (at retail
on in field)
• 1 day per quarter building/
packing/shipping
• 1 hour per month meeting
customers
…or they don t get their annual
bonus/raise
SOLUTION: Connect compensation to “field work”

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UNDERCOVERBOSS
How many kickstarter campaigns came from a customer frustration
with existing products/services?
RESULT: Profound market awareness yields profound innovation

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EMBRACEMIGRANTWORKERS
• Finding an employee who worked at
one company for 10+ years is not
always a good thing
• The longer an employee s tenure the
less likely they will be the source of fresh
ideas
• Think back to your first week at your last
job… how many fresh ideas did you
have that week?
• Would you rather hire a CTO who
worked at IBM for 15 years or who
worked at 5 interesting technology
companies in a variety of industries?
RULE 4: Embrace migrant workers

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EMBRACEMIGRANTWORKERS
• Employees desirable to multiple
companies should be desirable to
you
• Employees who actively manage
their careers are ambitious
• New roles = new experiences, skills,
and knowledge
• Job switchers are not risk averse
DIAGNOSIS: Resume gaps are good

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EMBRACEMIGRANTWORKERS
• It’s not about someone who switched companies… strategic jumps within the
same company are just as compelling
• Higher compensation and bigger title (by themselves) are not sufficient
reasons for switching jobs
• Look for the employees who seek out new challenges, new experiences, and
growth opportunities
SOLUTION: Find employees who hopped for the right reasons

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EMBRACEMIGRANTWORKERS
Inherent diversity involves traits
you are born with, such as gender,
ethnicity, and sexual orientation.
RESULT: A truly diverse workforce with original ideas
Acquired diversity involves traits
you gain from experience
Companies that have BOTH types of diversity are 45% likelier to
have grown market share over the previous year and 70% likelier to
have captured a new market than peers
SOURCE: Harvard Business Review, 2013 - How Diversity Can Drive Innovation

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GETHELP
• Not all the smart people work for us
- Bill Joy
• Come to terms with the fact that
there will always be more
intelligence, innovation, creativity,
and general bad-assness outside
your company than inside your
company
• Innovation is an ego-less endeavor
• Drop your hubris / arrogance and
seek help
RULE 5: Get help

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GETHELP
Even if you do have a dramatically
disproportionate amount of
exceptional talent, they will always
benefit from external perspective,
fresh ideas, and industry expertise
DIAGNOSIS: External expertise may be just the fuel you need

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GETHELP
SOLUTION: Hire the RIGHT external advisers
What is the stock price,
gross margin, and
hurdle rate of your
biggest client?
Have you ever
managed a business,
product, and/or service
P&L?
If we develop a plan for
a disruptive business,
are you prepared to
invest?
If they can t demonstrate
unquestionable mastery of
critical business issues
facing a client – then they
are not capable of
understanding the business
consequences of
innovation.
If fewer than half their team
has proven operating
experience – then they are
not capable of executing in
the real world.
If they do not immediately
say yes – then they are not
a real long-term strategic
partner.
These are idea people
Ideas are the easiest part of
innovation, you need advisors
who understand your business
These are the theory people
HBS case studies and new
frameworks/paradigms don t
always translate to reality
These are the project people
They simply want to sell you
consulting engagements and bill
you for time
Three questions to weed out noise and mediocrity:

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GETHELP
• Cross-function, cross-industry,
cross-level, and cross-market
insights
• Deep focus on one problem
• Subject matter expertise
• Limited political constraints
RESULT: Combining what’s inside with fresh outside perspective

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CONCLUSION
Every practice has a set of rules
which governs it.
Innovation occurs at the point
of intelligent and creative
rebellion against them.
-Fiel Valdez
Ultimately, these rules are not meant to be followed

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CONCLUSION
Everyday, deep in your organization you will have
people who…
• … work on projects
• … make choices
• … allocate time
• … manage budgets
• … hire other people
These are the ingredients for innovation – how you
assemble them will determine your propensity for
innovation
It s all about the people

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Thank you
ILIYA RYBCHIN
Bloomberg LP
@rybchin
Digital Strategy
Innovation Summit
New York | 19 Mar 2014