I’ve been riffing for a few years now that creative firms should adopt a different business model. I don’t think billing by the hour is a very good way of sharing risk/reward. And I don’t think that splitting up innovation between engineers, designers and marketers is likely to get the best results. And, most companies are geared towards operation, rather than innovation. So many do need the help of outside firms to help them with the process.

One company I’m a big fan of, Fahrenheit 212, is doing just that. They run entire innovation projects, and deliver everything from a working proto to the marketing strategy and business model. Their compensations depends on the success of the venture, and they are even willing to co-invest. Here’s a recent article in Fortune magazine that profiles their way of working, and some examples of their work.

One of the F212 partners, Pete Maulik, sent me an article he recently published in Chief Executive magazine, aiming to help CEOs run successful innovations in their company. The full article is here, but I’ll give you one of Pete’s most interesting pointers as a teaser:

Step One: Break out of business as usual

Whenever you’re setting out to change the game, define the outcome you want to achieve and then assess what must be true to get there. Working backwards ensures you stay focused on the big goal and becomes a useful filter as you’re defining the challenges and key success factors that actually matter. A great example of this came from NASA in 1961. When President Kennedy proclaimed that the US would be on the moon by the end of the decade, the lead scientist at NASA said something along the lines of “We know where the moon is, we know where the earth is, everything else is just details.” Genius.

Incidentally, the McKinsey Quarterly just published ‘the path to successful new products‘ about–you guessed it–how to innovate well. Their suggestions:

1. Keep it focused – Whenever project requirements were clearly defined and communicated to teams before kickoff, the project had a greater chance of success.
2. Nurture a product culture – [when] the device maker gave senior team leaders ownership of projects from beginning to end, as well as authority over staffing, personnel reviews and, in some cases, profit-and-loss responsibility, the new structure encouraged leaders to make better decisions, resolve conflicts quickly and reduce delays.
3. Talk to the customer – More than 80 percent of the top performers said they periodically tested and validated customer preferences during the development process, compared with just 43 percent of bottom performers. They were also twice as likely as the laggards to research what, exactly, customers wanted. That made them better able to identify and fix design concerns early on, minimizing project delays.

What’s most interesting to learn from all this is that it’s not so much who’s doing the innovation or how they’re doing it (although it matters), it’s mostly the atmosphere they’re doing it in that defines the quality of the outcome. Having a project oriented culture, a workspace that promotes free flowing ideas and also welcomes a critical look, and having people of various disciplines work together rather than in succession seem to be the key to great innovations. Innovating is not a capacity to be acquired overnight.

Another great point made by mr. Maulik: “…many CEOs don’t have the people hard-wired to come up with game changing ideas. And even if they could, the very nature of “game-changing” is incredibly dangerous because it could quite literally change the game.”

And so it’s clear that not every company is going to be good at innovating, just as most innovators won’t be as good at keeping business-as-usual running super efficiently. Which brings me back to the opening statement: as innovation firms begin to take a more fundamental role in the business landscape, I think the typical consultants’ business model of billing by the hour is the first thing that needs some reinventing. We need models that share the risk at the beginning, but also the potential future upside of a successful project.

Before I start – By giving this essay once again a title referring to food (for which I’m sorry for!) I’m participating on this little experiment that Wouter started out. We want to subliminally manipulate all Klatergoud.com readers to eat stuff while reading an article on this site. Question is – is it working?

Ok, all jokes aside – a brief history lesson before I start:

Schumpeter popularized and used the term above (Creative Destruction) to describe the process of radical innovation. In Schumpeter’s vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power.

Personally I’ve been following every move of a certain Dutch brand of apparel goods since the very start, some 16 years ago. I happen to pitch for this brand right now – therefore I’ll have to be discrete and not call it by its name. You’ll have to excuse me for this.

Anyways, I can’t help it – I’m truly fascinated by the growth this brand generated (due to Creative Destruction) over the years and likewise the problems it’s in right now (due to Destructive Creativity).

The brand has followed a classical catastrophically path in the last three years, with all the familiar ingredients: a spoonful of erroneous financial management and a slow approach toward market changes. Cook and boil this for a while and Voila! “Fondue de Catastrophe.” Shit, that even sounds good with bread!

However, what fascinates me is the cause of this downturn. The thing that makes it unique: the enormous creativity the brand has on board! Yes, its own human capital! A fast and experienced majority of hungry creatives whom are eating the business from the inside out! And guess what’s on the menu?

While every self-respected brand guru is preaching the same nowadays: the only way out of a huge pile of shit (read: credit crunch/crisis) remains using a creative approach on things. So – innovate people, innovate!

One has to be careful with creativity! As it can be extremely dangerous for the brand.

The thing with creatives is that they need space to develop great things. Space to come up with ideas and concepts that will enhance your venture. They might feel quite threaten by any form of organization or structure that blocks this space.

Strategy and long term marketing approaches are such things, along with well sought out long term concepts and clever and engaging consistent campaigns.

All these things can literally destroy a good ‘Fondue de Catastrophe’, and most important: they all block creative space. Creatives feel that consitence and long term perspective block their freedom to operate, so they sabotage every attemp made by a marketing manager to engage in such a strateggy. Resulting in the company and brand getting nowhere!

The word is out: protect yourself from hungry creatives! Recognize them before you take them for dinner! Here are some characteristics of creatives that will help you recognize them:

In his book: Creativity: Flow and the Psychology of Discovery and Invention, Prof. Mihaly Csikszentmihalyi (last name pronounced as: ‘cheek-sent-me-high-ee’) distinguishes at least three different individuals that can legitimately be called by its name: Creative.

The first type is wide spread in ordinary conversation. It refers to persons who express unusual thoughts, who are interesting and stimulating — in short, to people who appear to be unusually bright, a brilliant conversationalist, persons with varied interests and a quick mind, may be called creative in this sense.

The second is referred to people who experience the world in novel and original ways. Individuals whose perceptions are fresh, whose judgments are insightful, who may make important discoveries that only they know about.

The final designates individuals who, like Leonardo da Vinci, Edison, Picasso, or Einstein, have changed our culture in some important respect. They are the creative ones without qualifications.

Prof. Csikszentmihalyi’s book covers a 5-year study of 91 individuals over 60 years old, who had a creative impact on the world.

So I ask: which of these creatives are mostly like to be found in your company? Or did you – like me, recognized yourself in one of these types? If so – beware, keep an open mind and don’t get too hungry! You might end up destroying what you created!

It has been emotional,

Alfredo P.s. Yes! I bought the book!

My graduation mentor and friend Erik (also featured in this interview)  has posted a very clear and concise presentation to slideshare explaining the interface between design and branding, a concept he calls Brand Driven Innovation. I think it’s one of the most powerful ideas in business, this slideshow very neatly explains the crux of his idea: why a brand should inform design on a very deep level, rather than as an afterthought.

Erik, if you’re reading this, what would you say the role of ‘meaning’ is in design? I would expect it to exist somewhere on slide 40…