What do Renaissance scientists charting the movement of the planets, military planners battling Hitler’s U-boats and an American airline getting to grips with a newly deregulated market have in common? Well, their successes were the result of pursuing loonshots – ideas that seem downright crazy right up to the moment it becomes unthinkable that anyone ever did things differently.
But here’s the thing: for every world-changing idea, there are dozens – if not hundreds or thousands – that don’t pan out. As Thomas Edison once put it, progress is measured in failures: each defeat rules out one possibility and brings you that much closer to the solution. On the one hand, that makes experimentation vital. On the other, it means that real progress is expensive, time-consuming and ultimately risky.
Those three words fill every risk-averse, efficiency-maximizing organization with an eye for the bottom line with dread. That’s why they often end up missing out on the next big thing. So what’s the answer? Well, there is a way to balance innovation and what the author of Loonshots, Safi Bahcall, calls franchising – keeping the already successful parts of an organization ticking over. The secret is to separate the two activities and provide a sheltered, protective space for creatives to work on their ideas. Think of it as a loonshot nursery.
Innovation takes time, money and work. The greatest ideas fail a thousand times before they succeed. But here’s the rub: organizations often get cold feet before path-breaking projects ever get off the ground. What could have been the next great thing ends up as little more than a pipe dream. In other words, they fail at nurturing loonshots – ideas that seem positively unhinged right up to the moment they turn the world on its head.
So what’s the right way to foster innovation? Well, it’s sometimes argued that it comes down to culture – the informal rules governing organizational life. There’s a problem with that explanation though: it’s wrong. Take Nokia. The Finnish multinational enjoyed a three-decade hot streak between the 1970s and the early 2000s. Its innovations included the world’s first cellular network, car phone, all-network analog phone and the GSM phone, making it one of Europe’s most profitable businesses.
Experts attributed the company’s success to its culture. Magazines like Businessweek ran features on Nokia’s egalitarian ethos while the CEO put it down to the fact that employees were encouraged to have fun and think outside the box. Fast forward to 2004. Internally, nothing had changed. In fact, the engineers behind all those hits had just had another eureka moment: an internet-ready touchscreen phone with a state-of-the-art camera and an online app store to go with it. Nokia’s leadership shot the project down. Three years down the line, Steve Jobs unveiled the iPhone. The rest is history.
What went wrong? Well, Nokia’s structure had changed. That’s often part and parcel of growth. When organizations start out, employees have a high stake in success: if a small biotech firm produces a wonder drug, for example, everyone involved won’t just be incredibly rich – they’ll be heroes! Failure, on the other hand, means they’ll be out of a job. Perks like fancy titles and promotions don’t mean very much in such a free-flowing, high-stakes environment.
As organizations grow, that changes. Those bonuses become ever more attractive, and individuals’ stakes in projects decrease. That breeds a conservative mind-set, and companies become franchise operations dedicated to protecting the parts of their businesses which are already successful. The outcome? Innovation falls by the wayside as decision makers come to view loonshots like Nokia’s proto-iPhone as intolerably risky. But that isn’t a law of nature – organizations can put structures in place that encourage innovation. Let’s see how.
The Allies’ victory over Nazi Germany was a century-defining moment. But if there’d been prediction markets in 1939, the odds would’ve favored Hitler. Why? Well, the Allies lagged behind in what Winston Churchill called the “secret war” – the race to develop more effective weapons.
That wasn’t because they didn’t possess the necessary know-how. In fact, the Americans held the key to winning the great aerial and naval battles of the future decades before they entered World War Two – they just didn’t know it. Unlike their Axis counterparts, who were developing a new generation of submarines and planes, they weren’t nurturing breakthroughs.
Take radar. In 1922, two American radio scientists named Hoyt Taylor and Leo Young made a remarkable discovery: when a ship passes between a radio transmitter and a receiver, the strength of the radio signal doubles. Keep an eye on the strength of the signal you’re receiving, and any radio receiver will tell you an enemy ship is on the move. This had the potential to revolutionize naval warfare, and Taylor and Young told the US Navy about their findings. The answer? Silence!
Eight years later, Young was still experimenting with radio signals. During a field test, he noticed that transmitting radio signals upward into the sky had the same effect: when they hit passing planes, the signal that returned to earth was doubled. Incredibly, that worked on planes at an altitude of up to 8,000 feet. Young wrote to the US military and asked for a $5,000 grant to pursue research into his prototype for an early warning system for enemy aircraft. It was denied.
According to military planners, a project that couldn’t be expected to yield results for at least two or three years wasn’t worth their time or money. They did eventually thaw and took a gamble on Young’s loonshot, but the delay proved fatal. On December 7, 1941, the warning system was still being field-tested when 353 Japanese bombers launched a surprise attack on the Pearl Harbor naval base in Hawaii. Dozens of battleships and hundreds of planes were destroyed. All in all, 2,403 servicemen lost their lives.
It was a shocking lesson in the dangers of complacency and the cost of failing to pursue innovation. Real shame.
So what were military planners doing that was so important they couldn’t free up resources to pursue research into radar? Well, they were running a classic franchise organization: producing ever-greater quantities of tried-and-true conventional weaponry. Generals were convinced that tomorrow’s wars could be won with yesterday’s tools – infantry, guns and bayonets.
That was an attitude the engineer Vannevar Bush had seen firsthand while working with the US Navy after the First World War. Nothing, he believed, was more damaging to the nation’s long-term interests. His answer? A military research department run by non-military men like himself and given free rein to explore the seemingly bizarre. After a meeting with President Roosevelt in June 1940, Bush got what he wanted: a new, civilian-led unit called the Office for Scientific Research and Development or OSRD for short.
Bush’s stroke of genius was to recognize that he couldn’t change the military’s conservative culture, but he could change its structure. Establishing the OSRD as a separate department was a way to nurture loonshots while letting the generals get on with what they knew best: marshaling the ranks and fighting the good fight. And it worked. By the end of 1940, the OSRD had commissioned 19 industrial labs and 32 academic institutions to carry out research on its behalf. Even better, it had recruited an eccentric investment banker called Alfred Lee Loomis who dabbled in technological research.
Loomis had heard about Germany’s worryingly advanced weapons development programs from exiled European scientists – among them Albert Einstein – who’d visited his private laboratory. When he got the call from Bush, he dropped everything and assembled a crack team of engineers and physicists to help the Allies catch up. Their goal? To develop a portable radar system using microwave, a radio wavelength that produces radar images so precise that they can be used to detect objects as small as submarine periscopes.
That was valuable in solving one of America’s greatest logistical headaches in the war with Germany: keeping supplies flowing across the Atlantic. Allied convoy ships were regularly picked off by German submarines, with 4.3 million tons of cargo lost to sub attacks in 1941 alone. By 1943, 514,000 tons were being lost each month. But that number dropped decisively after microwave radar was deployed – just 22,000 tons per month were lost between March and June of that year. As the German Admiral Karl Dönitz admitted, Germany had “lost the Battle of the Atlantic.”
Vannevar Bush rescued a large organization whose focus on its franchise operations and neglect of innovation had landed it in an existential crisis. But nurturing loonshots isn’t solely about winning wars – it’s as vital to success in business as it is on the battlefield.
Take it from Theodore Vail, a boardroom pioneer who did for a struggling telecommunications giant what Bush would later do for the US military. But before we get to that, let’s rewind a little. In 1907, the financier JP Morgan bought the American Telephone and Telegraph Company, or AT&T. A direct descendant of the world’s first telephone company, AT&T had an illustrious past, but its future was less certain. The original patent for the telephone had expired, and thousands of competitors had eaten into its margins.
Morgan hired Vail to turn things around. Vail hit the ground running, making the bold promise that Americans would soon be able to call anyone anywhere in the country. But long-distance calls faced a seemingly insurmountable obstacle: electric signals faded as they traveled down a line, and no one understood why. The electron had recently been discovered and the science that held the answer – quantum mechanics – was still in its infancy. It looked like Vail was setting himself up for an epic fall.
Undeterred, Vail established a new department to pursue “fundamental research” and hired the MIT physicist Frank Jewett to head it up. Eight years later, AT&T astounded the world with a public demonstration of a call from its New York headquarters to San Francisco. But that was just the beginning. Over the next half century, Vail’s brainchild presided over a stunning run of breakthroughs. The transistor, solar cells, the Unix operating system and the C programming language, were all developed within AT&T. Along the way, the company’s researchers picked up eight Nobel prizes and made their employer one the most profitable corporations in the United States!
And here’s where our stories intersect. When the two men met during the First World War, Jewett made a lasting impression on Bush. Once Bush had set up the OSRD, Jewett was one of his first recruits, and his experience would prove indispensable to the war effort. But how do the ideas of Bush and Vail complemented each other and provide a blueprint for other organizations? Coming up in the next post.
Check out my related post: Why does your mind wander?