Paul Witkay in Smart Business: “Where Do Breakthrough Ideas Come From?”

May 01, 2011

Since founding the Alliance of CEOs in 1996, I have searched for the secrets to generating breakthrough ideas on a consistent basis. CEOs constantly seek ideas to improve, but incremental ideas don’t change the course of a company or an industry. I gain the greatest satisfaction when a CEO experiences that “aha moment.”

What is a “breakthrough idea”? Some people think that innovation applies primarily to new products like the iPhone or HDTV. However, I believe CEOs can innovate in virtually every aspect of their businesses. Michael Dell didn’t invent personal computers but gave us a way to buy them directly. Howard Schultz sold us coffee at five times the price by creating a better experience at Starbucks.

What are some other examples? Jim Cook, an Alliance Director, was on the founding team of NetFlix when the idea to deliver DVDs through the mail and not charge late rental charges was considered crazy. Larry Page and Sergey Brin didn’t have a clue how they would make money when they started Google. They simply wanted to help people find information on the Web for free. Herb Kelleher questioned the need for the hub and spoke airline system and created Southwest Airlines, which was profitable when other airlines were going bankrupt.

So what are the keys to finding those breakthrough ideas? There are several:

Diversity. The bestselling book, “The Medici Effect” by Frans Johansson, discusses how breakthrough ideas are generated at the intersection of diverse ideas, concepts and cultures. The Alliance of CEOs intentionally brings together CEOs with experience in different industries, markets, skills, philosophies, education, problem-solving techniques and cultures. CEOs who run very different companies feel free to ask all of the “dumb questions” that create an environment for fresh insights and new ideas. It’s critical to talk to people outside of your own industry — even your customers won’t offer breakthrough ideas. A Harvard Business Review article titled “Bottom-Feeding for Blockbuster Businesses” found that the contrarian approach of looking for “customers that others don’t want” resulted in companies that created new business models, such as Paychex, Schwab, Progressive Insurance and

Challenging. Patrick Stahler of Fluidminds says that the only way you can rock an industry is to “challenge the hidden dominant logic of the industry.” He calls it the “unlearning phase.” Every industry works on a set of assumptions that rarely get challenged. Cars are rented by the day and music is sold by the album — or at least they were until ZipCar and iTunes came along. No individual or company can challenge each of their basic assumptions every day — they’d go crazy. However, I recommend that CEOs make sure that their own assumptions are challenged on a regular basis. I have found that more breakthrough ideas are created when CEOs think about other industries and how they would change them “if they were the CEO.” It’s typically easier to see changes that other companies should make and, as a result, you naturally think about how similar ideas might change your own company.

Focus on the big picture. Too many people focus only on problems and trying to fix them. They never find time to ask the biggest questions such as: “What business are we really in?” or “What do our customers really value?” or “What if we started the business today from scratch – would we build the same facilities, hire the same people, provide the same products or services with the same distribution channels, price them the same way, etc.?” Disruptive new companies are not constrained by the infrastructure and processes that burden current industry players. To have a chance, industry players must think like they’re working with a blank slate — what would they do if they were starting today?

Patience. Breakthrough ideas rarely happen overnight. They evolve over time, as someone questions whether there is another way to do things than the way it’s always been done. Questions and ideas often have to ferment awhile until they come together. If the big ideas don’t come immediately, relax. The subconscious mind continues to work on the idea while your conscious mind relaxes. However, keep engaging with people who offer different perspectives than your own.

I hope that all CEOs have the opportunity to experience a breakthrough idea that propels their businesses to the next level. I’d love to hear about your next aha moment.