Friday, March 28, 2008

Innovation and Card Counting are not so Different

What can we learn from Sony’s latest picture “21”? Card counters base their decisions in casinos on probability as opposed to statistics. Innovations within organizations are usually statistic-based and not probability-based. I came across this article

written by Stephen Shapiro that compares these two different innovation models.

Here are the two approaches according to Stephen:

Innovation Model #1: Big Bets”

This approach is most commonly used across industries; it is statistics-based. You invest a large chunk of money on a few innovative projects based on data that has been already collected. Stephen describes it as “putting all of your money on 35 black on the roulette table and crossing your fingers”. This can be detrimental, especially if your losses outweigh your gains.

“Innovation Model #2: Learn As You Go”

This approach involves investing in MANY low-risk low-cost innovation projects instead of allocating all your resources on just a few. Then you can eliminate a big percentage of projects that don’t show any promise, and invest further in the ones that show some potential. In the process, you end up eliminating many ideas that will not work, and you would not have spent as much money.

So what have we learned? By following the first approach you are assuming that the innovation projects will be successful according to data presented. In the 2nd approach, you’re eliminating many bad ideas, while raising your chips with the good ideas. Seems simple enough doesn’t it? Let’s get the ball rolling and start implementing probability-based innovation strategies within our organizations…

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