Innovation isn’t nearly as mind-boggling today when compared to what startups were doing in the late Seventies/early Eighties when I started working with them.

That’s not surprising when you consider who gets funded these days.

A recent Reuters report found that the majority of Silicon Valley startup founders that receive Series A funding come from the same pedigreed cohort: either they previously worked at a large, well-known tech firm, a well-connected smaller tech company, they previously created a successful startup, or they come from one of three universities—Stanford, Harvard, or MIT.

Not surprising when you consider the attitude of Valley stalwarts like Paul Graham of Y Combinator, who publically stated that he would be unlikely to fund someone with a strong accent or a woman.

It’s been 15 years since I first wrote about the proclivity of managers to hire people like themselves and more over the years showing it leads to homophily and the negative impact that has on a company.

It seems it’s no different for investors.

They are funding people like themselves who were raised, educated and worked along paths similar to their own who they either know or are introduced to them by a friend.

“Like a lot of the investments [Instacart] that have come our way, a friend of a friend talked to us about it, and told us about it, and encouraged the founder and the CEO to come and chat with us. One thing led to another.” –Sequoia partner Mike Moritz

When you fund from a homogenous group, no matter where they are, creativity and innovation are watered down, because those groups tend to be insular and badly interbred talking mostly to each other.

If you’re fishing from a pond of rich white guys, you’re only going to get ideas that address the needs of rich white guys.

AKA, people like themselves.

Flickr image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Two questions:

1. Are you working to build a culture of innovation in your startup?
2. Do you live the startup mindset of 100 hour weeks, all night hackathons, 24/7 availability and no time for vacations?

If you answered ‘yes’ to both you’re in trouble, because a yes to the second sooner or later will nullify the first.

According to Marc Barros, co-founder and former CEO of Contour, there are five actions you can take to avoid killing off your golden egg, i.e., your culture of innovation.

Here they are, with my caveats (follow the link to read the originals).

1. Offer Unlimited Vacation: while this isn’t always possible, and may not even work, making sure your people, including founders, take real vacations, which means no email, texts or emergencies. They should last a minimum of three days, but a week is much better. And if having you/them gone for that time will really crash and burn the company you have bigger problems than you realize.
2. Let Employees Work Remotely: in addition to working remotely physically whenever possible be sure to provide an environment that promotes mental remoteness. In other words, they don’t have to think/work/act like you to achieve the desired results.
3. Ditch the Meetings: make sure that those you do have are short and productive.
4. Nix Department Goals: goals at all levels—department, team, personal, should always focus on what needs to happen to achieve specific, major, annual company goals (never more than three).
5. Give Plenty of Feedback: just don’t make giving constant feedback an excuse or cover for micromanaging.

One of the biggest actions that Barros doesn’t mention, but is implicit in what he does, is trust.

If bosses don’t believe that their people really do care that the company succeeds and trusts them to make it happen then they will be unable to implement any of this.

In the comments section, Mick Thornton, who worked at Safeco Insurance (definitely large and definitely old-line), talks about the success of the team he was on.

The biggest keys to success for our team was a manager that understood broad goals saying things like “Here’s what we want the end to look like, now go figure it out. Let me know if things start to slide or go south, otherwise work how you want to meet the deliverable.”

Image credit: HikingArtist

Twice a week Adam Bryant interviews CEOs from a myriad of companies, large and small, across the industry spectrum, for his Corner Office feature in The New York Times.

As with anyone who spends time talking with CEOs about staying competitive the constant theme he’s found boils down to one word—culture.

Now Bryant has distilled the knowledge and insights gathered from hundreds of interviews into a new book, “Quick and Nimble: Lessons From Leading C.E.O.’s on How to Create a Culture of Innovation”

The six key tenets identified should come as no surprise,

• A Simple Plan
• Rules of the Road (corporate values)
• A Little Respect (embedded in the culture)
• It’s About the Team (performance and accountability, trustworthiness and dependability)
• Adult Conversations (frank discussions to work through disagreements and misunderstandings)
• The Hazards of Email (ease of misunderstanding)

Not new and certainly not rocket science, but worth reading (at the very least read the article).

Good information to help you improve nimbleness and innovation in your own organization.

And a great gift if you happen to work for bosses who don’t see the point.

Flickr image credit: Joanna Lee Osborn

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Intelligently sharing information, commenting or arguing in 140 characters or less is challenging, but can you sum up your life, career, mood or tell a story in just six (real) words?

When challenged to tell a story in six words, Ernest Hemingway came up with “For sale. Baby shoes. Never worn.”

Since 2006, Smith Magazine has challenged readers to write their memoirs in six words and the effort is still going strong. Here are three examples from the Smith site,

Ecstatic, elastic, eccentric, electric, ever-changing existence!

Dreams diverted; life proceeds. Embracing detours.

Lesser people would’ve given up already.

A while back I wrote Birth, death, fun and happiness in-between, because that’s what I’ve always wanted and got from life—including obstacles and detours.

The great advantage six words have is to focus deeper thought, creativity and clarity upon the subject.

It’s fun to read through the Smith website and share your own thoughts, but much better to create your own version of it for your company.

Whether you do it digitally, on whiteboards or create a scrawl wall, it’s easy to set up a place for people to post their six-word thoughts.

In six words your people can

• describe your culture;
• spark creativity and innovation;
• facilitate bonding;
• clarify projects and goals;
• strengthen the team; and
• much more.

Analyzing the differing descriptions can go a long way to making sure everybody is on the same page.

It’s also a great tool to provide you with insights and a heads-up, so you can address molehills before they become mountains.

Image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

KG Charles-Harris, EMANIO founder/CEO, sent me a link about GitHub’s lean, “DIY management strategy pulled from the open-source world” and asked me what I thought.

So I read the article.

Open source lends itself to a great culture with a few caveats.

• All of the approaches and actions described are based on 100% superlative, open, honest, direct, no-game communications, with no exceptions, which aren’t typical of the human race.
• Millennials are impatient and will vote more quickly with their feet; HOWEVER, that may change as they marry and take on mortgages, kids, etc. High risk is more acceptable when you have little to lose.
• The larger/faster a company grows the more difficult to keep hiring for cultural fit; and
• the more difficult it is to keep the micro cultures that form under each leader (whether manager or not) aligned.

There is an underlying problem with stories about cultures like GitHub’s even with in-depth explanations of how and why they work.

Too often, founders who crave the results will try to implement the strategy without taking time to lay the groundwork.

Without the right cultural MAP (mindset, attitude, philosophy™) in place, a deep understanding of their own MAP and a good hiring process that ensures cultural fit, the results will probably be disappointing.
Image credit: Hiking Artist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

The last founder who asked me how to build a stronger creative culture seemed to find it naïve and hilarious when I suggested he admit his errors, show some vulnerability and stop trying to convince his team and investors that he was infallible.

And it’s not the first time I’ve gotten that reaction.

So in the interests of helping founders who prefer to act invulnerable and stand on their dignity I thought I’d share the comments of Neil Blumenthal, co-chief executive of Warby Parker.

It’s through vulnerability that human beings create connections. The more vulnerable we can be with one another, the more that we’ll trust one another and the more we’ll be able to collaborate effectively.

How do you create a culture of innovation? The first way is actually asking for innovation. A lot of companies don’t expect or ask their team members to come up with ideas, but we demand it. It’s just everybody’s responsibility.

One other thing comment from Blumenthal that’s worth remembering…

I think that covers everything and from a source with unarguable credibility.

Flickr image credit: Hiking Artist and Alexander Johnmann

Everybody has a box.

And no matter how hard you try you’ll never really think outside it.

But you don’t have to.

As with most things, the good and bad of boxes rests with how you view them.

It’s not the box that matters, but its size and how you address that.

Steven Spielberg’s box is immense, far larger than most, yet he is constantly enlarging it, as did Steve Jobs.

And therein lays one of the secrets of a creative organization.

It’s not about encouraging your people to “think outside the box,” it’s about helping each to understand his/her own box and how to enlarge it.

Because that’s how it works.

As soon as you step outside your box, a new one forms. Once you totally use up its content and find its sides you go outside that box, a new one forms and the process begins again.

It takes work, but the process can continue throughout life—although some never start and some get comfortable in a certain box and retain it.

There will always be a box, but with effort it can be enlarged enough to encompass galaxies—and even entire universes.

Sharing this knowledge with your team and providing a culture in which they are encouraged and helped to expand their box is the hallmark of a great founder.

Flickr image credit: Mr. T in DC

When I lived in San Francisco I always found it a point of hilarity that the those in tech assumed that everybody everywhere were as tech-centric as they were and I know from friends that that attitude hasn’t changed.

It was/is also a given that innovation is hottest in the Bay Area/Silicon Valley closely followed by places like Silicon Alley in New York City and similar areas around the world.

And the greatest myth of all is that innovation is hottest in startups; especially those started in a college dorm.

Large public companies must innovate or lose the faith of their investors and the tech-centric world always points with pride to giants like Google, Apple and Amazon as innovation leaders.

But are they?

Not according to Hal Gregersen, Senior Affiliate Professor of Leadership and Innovation at INSEAD, and Jeff Dyer, Professor of Strategy at Brigham Young University, co-authors (with Clayton Christensen at Harvard Business School) of the bestseller The Innovator’s DNA.

To compile the list, we use what we call the “Innovation Premium,” which is calculated by:

• Projecting a company’s income as expressed in cash flows from existing businesses;
• Determining anticipated growth from those businesses;
• Comparing the net present value (NPV) of those cash flows with the firm’s current market capitalisation.

We require at least seven years of financial data – a feature that for the moment excludes companies such as Facebook Inc. – and only consider firms with  a market value greater than $10 billion. We also use a “research and development” screen, which requires qualified companies to make some investment in R&D.

Using those criteria to compile a list of the 100 Most Innovative Companies, Google is number 47, while Apple is in 79^th place, both well below number 30 P&G; Amazon is number seven and Salesforce.com is first for the third year in a row.

Facebook hasn’t been around long enough to qualify and there’s no telling if it will be.

Our list illustrates investors’ appreciation of these companies’ potential as innovators for the long term.

That’s the same reason VCs and angels invest in startups for the short term.

Image credit: Insead

I attended my first AlwaysOn Innovation Summit this past week and I was really impressed with the companies, ideas, and technologies highlighted during the summit.  We often read about new companies launching products that are merely a twist on the social network, e-commerce, or the latest industry deemed “ripe for disruption.” The companies highlighted in the Summit certainly had more to offer.

As a capitalist and a social entrepreneur, I believe in the power of technology to improve lives across the socio-economic spectrum.  There are significant economic opportunities in providing solutions to real problems faced by families in the US and the emerging world, that are often overlooked for some reason or another.  The AO Innovation Summit highlighted many companies with technologies and ideas with the potential to change economies, alleviate poverty and, most importantly, save lives.

We heard from Mike Cheiky of V-Grid Energy Systems, whose company focuses on providing cheap energy to help connect the rest of the world to the internet.  More impressive still, the by-product of their process is a fertilizer that can be used in those same regions to improve agriculture and alleviate food-security issues.  Children go hungry every day, and governments have been overthrown as a result of food prices.

The panel on the changing landscape of education stood out for the immense potential impact that technology is having in this area.  We heard from Daphne Koller of Coursera, a company with a mission to provide free and open access to elite education.  In a world where the cost of education is raised beyond the reach of most families, this will undoubtedly improve lives both domestically and abroad.  Imagine a kid in Haiti learning to code on Coursera and creating the next great technology firm.  Speaking of which, Tim Draper, founder of Draper University, is doing what most people say can’t be done – teaching entrepreneurship.  Draper University’s 8-week program fosters skills and provides the kind of experience that can help set-off the light bulb for the next generation’s Steve Jobs or Elon Musk.

The future of fashion will not simply be about the designer on the label, it will benefit from beautifully designed technology solutions that improve our daily lives.  At the AO Innovation Summit, we were treated to a new wave of wearable technologies that will help us be more efficient, assess our health, and provide critical insights.  Dave Icke of MC10 demonstrated their ground-breaking technology that allows parents to monitor their sick baby’s temperature with a simple patch.  Now imagine the infinite possibilities of such a technology and its ability to lower the infant mortality rates in the emerging world.

From discussions with a variety of companies at the Summit, it’s clear there is a cultural shift within our industry.  Businesses should have a lasting positive impact on our community, as well as prove to be sound investment for our partners.  For too long those propositions have been polarized.  At the AO Innovations Summit I was pleased to see more businesses sharing our vision of the future.  I am not saying these solutions will solve all of the world’s problems, but it gives me hope that our best and brightest are tackling real world problems and not merely catering to the latest fad.

Jerry Nemorin is Founder and CEO of LendStreet Financial Inc., a social lending platform whose mission is to help people get out of debt, rebuild their credit, and get a fresh start.

Yesterday we focused on the importance of, and managers’ responsibility for, continually building their people, so they are ready for the challenges their company will face in the future, as opposed to firing them for having the wrong skill-set.

Later on I was discussing the whole terminate vs. develop thing with EMANIO CEO KG Charles-Harris and he made an interesting comment.

There is no question that creating a good culture is essential and underinvested in.  However, there are cultural biases in the US that are different from some other countries.  And while there is something to be said for the extreme success of American business, my background is in Sweden, which has the highest number of multinationals per capita. Clearly there is something that a country of 9 million is doing right.  

While there are plenty of companies that do it right and studies to prove that doing it right is good for the bottom line, US companies are infamous for short-term thinking driven by Wall Street’s quarterly mentality.

Even when the right culture and supporting policies are in place managers at all levels need to monitor and make sure that the managers under them are encouraging their people to take advantage of them and often that doesn’t happen.
Further, great culture isn’t self-sustaining; it needs thought and TLC so it can grow and change as the company grows and changes, without losing the traits that make it great.

But if a culture that supports building people pays off, why doesn’t it happen more often?

The simple, but sad, answer is that building and sustaining a great culture that develops its people, as opposed to considering them expendable, is work—and people are lazy.

Flickr image credit: Yarik. OK