Next week I’ll  be speaking at Arizona State University’s p.a.v.e. program–the performing arts venture experience, one of the few arts incubators in the country. The program offers “arts entrepreneurship classes,” financial ($1-$5k), in-kind (space & materials), and [...]]]>

Next week I’ll  be speaking at Arizona State University’s p.a.v.e. program–the performing arts venture experience, one of the few arts incubators in the country. The program offers “arts entrepreneurship classes,” financial ($1-$5k), in-kind (space & materials), and other support (faculty mentors) for “student initiated arts based ventures,” and lots of speakers, workshops, and symposia open to the public. Any ASU student can apply to the program, typically in cross disciplinary groups of 3-5, and are incubated for 7 months. Funded projects can opt-in to allocating 5% of future revenues to the p.a.v.e. program, but so far most of the funding seems to come from the Kauffman Foundation. Previous seed grant recipients include a film festival by for and about adults with disabilities, the Rehearsal Assistant software product, a web-based comic book, and a mobile app that tags artistic content with location metadata.

I am fascinated by the way the arts and other industries think about developing new products, new ideas, and new teams, and was stoked to be invited to speak at p.a.v.e. because it gives me a great opportunity to write this post, which I’ve been meaning to for far too long now. First, the landscape of incubators, which come in a wide variety of flavors:

Stages of product development:

• Hackathon–go from nothing to prototype in a day. Foursquare has a global hackathon going on this weekend. Arts examples include CultureHack and (sort of) 14/48.
• Startup Weekend–go from nothing to prototype + business plan in a weekend. No real equivalent in the art world.
• Founder Labs–find a team, validate an idea, prepare to apply to an incubator, over the course of 5 weeks.
• Incubator–take your fully formed team, prototype, and business plan, and prepare to launch a product during demo days to an audience full of hungry venture capitalists, over the course of a summer/semester. Incubators tend to offer greater (optional) access to business services, check out all of the perks offered by TechStars.  Y Combinator calls itself not an incubator, but is by far the most prestigious of the bunch. Instead of a shared-spaced model, Y Combinator offers weekly dinners, office hours with smart people you should know, a demo day to match venture capitalists with start ups, and the most well connected alumni in the known universe.
• Accelerator–relatively similar stage as an incubator, but greater focus on the product launch phase, and less focus on building organizational capacity. 500 Startups is a model here.
• Co-working spaces–in theory meant for any stage of product development, but seems to be most useful for teams who have already hit their groove, but may not be large enough yet to justify having their own office space. Value here often comes not just in subsidized office space, but also the networking with other entrepreneurs, who end up integrating your product with their product in novel ways. Dogpatch Labs is one of the oldest (tech) co-working spaces in NYC, and New Work City is one of the newest.

Of course then there are all of the support services that surround the world of incubators–from educational classes at General Assembly, to the mashup of companies spawned by co-working spaces and invested in by Betaworks; from the “Made in NYC” branded community to the incentives to encourage entrepreneurs offered by Venture for America; office hours with famous founders to the insanely engaged commenting communities of Hacker News & AVC.

Sometimes these programs have a defining niche:

• Regional affiliation–like North Carolina for LaunchBox Digital 
• University affiliation–like the Yale Entrepreneurial Insitute
• Internal incubators–like Facebook’s fbFundRev for Facebook Apps, or Widen + Kennedy’s 6 different labs
• Industry specific incubators–like ImagineK12 for education, or the Unreasonable Institute for entrepreneurs addressing social issues.

No matter their focus, no matter what you call them, or where they’re located, incubator-type spaces share some combination of access to:

• Serious investors in the short term
• A network of serious investors and potential partners for the long run
• Mentorship by other entrepreneurs, founders, and investors
• Business support services: think lawyers, bankers, real estate brokers, anyone else who helps you get business done
• A considerable reputation boost via your association with the incubator & their alumni
• Perhaps most importantly, simply the time and space to sit around for several days, weeks, or months with other really smart, driven, entrepreneurial people and brainstorm together, fail together, learn together.

Certainly the arts aren’t devoid of incubator-like spaces, I’ve in fact worked in some capacity for or with many of them:

• Flashpoint here in DC offers space and business support, but more in the model of a co-working space
• ART/New York and Fractured Atlas in New York City offers similar space & business support, as well as fiscal sponsorship and a ton of learning opportunities.
• p.a.v.e. at ASU, discussed above
• And over the past year I’ve heard of a handful of arts related startups take residence in the more traditional, aforementioned incubators, including: Art.sy at General Assembly, LetGive at the Entrepreneurs Roundtable, Scoopola at 500 Startups and Artsicle at 500 Startups
• And there’s a long list of places calling themselves arts incubators, but they all sound more like co-working spaces or even simply community arts centers.
• There’s even an Americans for the Arts monograph from 1997 explaining the idea behind Arts Incubators, but again it focuses almost exclusively on “offering low-cost or subsidized space and services.”

But there are a few rather key qualities I’ve yet to find in (m)any of these so-called (and in some cases, not called at all) arts incubators.

Industry Mentorship. The brightest, best, most interesting, most well connected, successful, professional entrepreneurs dedicate their time, free of charge to supporting these incubators. They offer “office hours,” speak at networking dinners, offer advice on prototypes, invite these startups to partner with their more established product for some limited engagement, attend demo days, and generally talk up the startups to all of their industry friends. Where is the incubator support from Barry’s Top 25, or from Diane’s list of artists?

Business Model. Tech incubators tend to take some percentage of equity stake in their startups as part of their revenue model. Most arts incubators tend to charge subsidized rent combined with foundation/government grants as their revenue model. Why couldn’t an arts incubator ask for 5% of all future revenues from one of their “startups”? For an internal incubator, in the model of fbFund Rev, why couldn’t the parent company (Steppenwolf? Roundabout? Actors Theatre?) ask for “artistic equity” in the startup, whether that looked like a commitment of an artist’s time & talent, or right of first refusal on a production, or something else entirely.

Demo or Die. Not launching a new product is not an option for the tech startups, yet most of our current models for arts incubators are “we’re here to support you in however much you get accomplished for however long you’re here”. Sometimes I think we’re too forgiving, too nice. Why aren’t their more project-based arts incubators?

Alumni Network. While I have heard people drop into conversation with me, for example, “I used to be in residence at Spaces @ 520″ I don’t get the sense there is a strong concept of an alumni community once you’ve “left the nest.” Nor does it seem (to me at least) like an arts company gains legitimacy for being in residence at one of these spaces, or that one of these incubators has a distinct brand over any other. While I could certainly be wrong about, or at least ill-informed, on all of those points, why don’t arts incubators list “alumni” on their websites, or host networking events for their “graduates”?

Collaboration Between Startups. Here’s where I’m probably least sure that this doesn’t already exist. Certainly I’ve heard of arts orgs associated with Fractured Atlas for example talk about how getting to know the other arts orgs under fiscal sponsorship helped shape some sort of partnership–a co production or sharing of some other resources. But I haven’t heard much from arts orgs in these spaces that they’re sitting around, trying to help each other solve difficult business problems together. So what could arts incubators do to foster more of this type of collaboration? 

I don’t mean to imply that the arts are doing it all wrong, or that tech incubators are doing it all right. But I’m interested in the idea that the two concepts of incubators between these two industries are so different. Perhaps they’ve evolved to be ideally suited to the types of companies they’re trying to support. But are there any arts companies out there interested in joining a new model of arts incubator? Any funders interested in creating one? Anyone have ideas about how to make this concept better? I’d love to discuss…

This is the story of 3 people (and organizations) who taught me 13 incredibly important lessons about innovation. Take a moment and get to know them, and then I’ll jump into the lessons learned.

The Players

Mercy Corps is pretty cool. [...]]]>

This is the story of 3 people (and organizations) who taught me 13 incredibly important lessons about innovation. Take a moment and get to know them, and then I’ll jump into the lessons learned.

The Players

Mercy Corps is pretty cool. They describe themselves as, “a team of 3,700 professionals helping turn crisis into opportunity for millions around the world. By trade, we are engineers, financial analysts, drivers, community organizers, project managers, public health experts, administrators, social entrepreneurs and logisticians. In spirit, we are activists, optimists, innovators and proud partners of the people we serve.” Full disclosure: Mercy Corps’ CEO is a Yale SOM grad.

Nick Macdonald is the Partnerships for Innovation Team Leader at Mercy Corps. Talk about an impenetrable title. Basically, he’s worked in conflict zones, disaster relief, and far flung developing countries to “produce locally tailored interventions.” Last month, Nick came to speak in the Innovator class, for which I was a TA, and blew me away with his insightfulness, resourcefulness, and genuine love for what he does.

Yale School of Management re-imagined its MBA curriculum four years ago to better address the real world challenges that managers face. In the first year, after a quick “Orientation to Management” which covers a lot of the basic technical skills MBA’s need (everything from accounting and statistics, to career management and problem framing), students launch into “nine integrated courses that are structured around the constituencies a manager must engage and lead.” Visually, it looks like this:

Rodrigo Canales co-teaches the Innovator course (along with Barry Nalebuff, of Honest Tea fame). In my first year, Rodrio bravely co-lead a group of 40 overly eager MBA’s, including me, to Egypt and Ghana to chat with leaders of business and society. We met with an amazing array of folks–from faculty at the American University of Cairo to an economic development corporation in rural Ghana, a billionaire hotelier overlooking the pyramids to a pineapple plantation owner whose farm had been in his family for generations, the former (and quite eccentric) President of Ghana to just as fascinating Egyptian and Mexican ambassadors. Rodrigo’s academic research focuses on the role that individuals play in changing institutions, or more pointedly, how middle managers create pockets of innovation within bureaucracy.

Evacuteer.org launched last summer with the help of one of my MBA classmates, Guillermo Olivos, who happened to be on that same journey to Egypt and Ghana. Evacuteer is deeply routed in the New Orleans community, training local volunteers to rapidly and effectively respond to the inevitable. It’s as much a just-in-case plan as a community building organization.

Guillermo is one of the most committed, gutsy, and sweet guys I’ve ever met. He spent two years in post-Katrina Biloxi, in his words, “gutted houses, demolded houses, shingled roofs, managed a grant, wrote a grant, conducted the largest in-field mold remediation experiment in history, collaborated with the housing authority, confused President Bush with talk of allergens and mycotoxins, bored Usher with talk of upper respiratory illness prevention, dug ditches, built a park, ran heavy machinery, fell in love, publicized borate treatment, invented a large-scale music tournament, adopted a hurricane puppy, chopped wood, and drank wine on a deserted golf course.” Now he’s working on a memoir to recount these several years. As the wordcount climbs each day (as noted via his legendary Facebook status updates), I get more and more excited to see not only what he’s done, but what he’s going to do.

The Task

It was with Guillermo (and admittedly, Haiti) in mind that I suggested trying to address more social innovation issues throughout the Innovator course. That initial idea was shaped and re-invisioned by my fellow TA’s and Rodrigo to include a section of the class where students would attend an out-of-class lecture by Guillermo and Gregg Friedman (another SOM alum, and consultant for international humanitarian and development organizations), read a collection of articles about innovations in development and disaster relief, pitch ideas about innovations that would address one of these issues, and ultimately write a business case about how to further develop the product or service into a viable social entrepreneurship venture. Greg and Nick were both instrumental in providing feedback about those initial ideas. Nick came to class on our final session to discuss what he’s learned in a lifetime of doing this, and what we learned over the course of our 2 month journey into innovation’s role in disaster relief and ongoing issues in aid organizations.

The Lessons

I’m going to have to quote out of context a bit here (from someone who of course  didn’t know I’d be quoting him), and from some sketchy notes I took exactly one month ago. But here’s what I learned about why Mercy Corps is so interesting, via Nick:

1. Consider staving administrative capacity so it doesn’t become a monster you have to continuously feed. What’s this mean in practice? Hire slightly fewer people to run the organization that you actually currently have the budget for. Have no fear that things will get done–people who choose to work for development organizations care passionately about what they do and will work themselves silly making sure it all gets accomplished. This certainly flips the idea that we are all over-worked and under-resourced into a positive constraint on the organization.
2. Promote the folks at headquarters back into the field. This alleviates some of the potential animosity between administrative versus on-the-ground camps. It will re-energize the people who’ve been in the office over-worked and under-resourced. In academia, this is called a sabbatical. Call it whatever you want, but remember that most manager and leaders of nonprofits started their career, and fell in love with their particular area of expertise, in the field. Eventually there will be few distinctions between these two “sides” of the organization. Practitioners will be managers, and managers will be practitioners.
3. A defined organizational chart might be preventing people from making new relationships across departments. So those detailed job descriptions you’ve been meaning to get around to, but haven’t had the chance? Those clear lines of communication you’ve been trying to formalize? Not to worry. This was the hardest of the lessons for me to swallow. I think it takes a special kind of person to function well in this kind of environment. But actually, this is exactly what Mercy Corps values–that employees have a high degree of “fit” with the organization, regardless of how quirky both might be.
4. There aren’t any good predictors for employees who will be successful in the organization. Other than, “we want you to do XYZ, and in the past you’ve done at least X and Y.” The good news is that Mercy Corps understands predictive measures, has tried to capture their value in the hiring process, but ultimately found them not to be useful. The bad news is they’re probably missing out on folks who might be successful, even if they don’t have directly correlated experience. Though, one could argue in a relief and rescue organization, the stakes are too high to risk on maybies. There are also 16 core principles employees are evaluated on every quarter (!). Unfortunately, the data appears not to be predictive across situations. Thus, more often than not, employees are promoted based on their reputation. And reputation is established through the ideas they bring to the table.
5. They don’t bother much with trying to improve efficiency because the problems they’re trying to solve will never be solved, even if they scale by several orders of magnitude. This one was pretty revolutionary to me. It’s roughly equivalent to a theatre saying, there’s no way everyone in our community will have their life changed by art, so let’s skip the dramatics about shaving another 3% off of our budget/time to market, and instead just make the best art we can. Understanding the importance and limitations of scalability has been one of the greatest take-aways for me in business school.
6. Short term trial projects and crowdsourced competitions yield the most diverse and potentially-successful collections of innovation. So MercyCorps has an investment-fund-like arm called MPower that funds trial projects based on donor requests, and runs an annual ‘Innovator Contest’ from each country office with prizes awarded to employees who come up with new ideas on how Mercy Corps can address its most pressing issues. People are promoted up the organization based on their ideas (rather than their tenure, theire “hard work,” etc.). But when your shiny new mousetrap breaks, there are consequences.
7. Data isn’t trustworthy, but we have to look at it anyway. Collecting data in the middle of a war, a hurricane, an earthquake, a genocide, or a riot is close to impossible. But even incomplete, slightly incoherent data is better than no data at all. Look at what you’ve got, estimate the range of variability due to these negative externalities, and make an informed decisions. This is the point in class where I started beaming. Of course your data isn’t going to be perfect, no such thing exists. But until you start collecting data, start looking at it critically, and start comparing it over time, place, and topic, you’re just taking a stab in the dark.

So that’s it. I don’t know if I quite captured how articulate, interesting, and perceptive Nick was. But suffice it to say that I was highly impressed, and I’m a pretty hard lady to impress. So now on to Rodrigo & Barry’s final thoughts on Innovation as a Process.

1. Most new ideas are not good, good ideas are not new. This was proven to be even more clearly the second time around in the Innovator class–as I saw first years struggle through the idea generation and revision process with many of the same ideas my classmates and I had also thought of in our first year. I continue to be surprised by the number of ideas we all came up with last year that have already made it into the mainstream (demonstrating that we were clearly not the first to come up with these ideas). From a re-designed crutch, to a tablet textbook, to video resumes.
2. Most successful, established organizations are remarkably bad at handling innovation. When a new product or service is introduced, it is often of lower quality than what it aims to replace, and  threatens to destroy the value of that original product or service. So an organization that is incredibly successful at producing X (say, for example, the Wall Street Journal) will scoff at the new invention (blogs anyone?), deriding its inferiority, until said new invention surpasses the minimum quality standards, and eventually kills its predecessor. When that predecessor is a money-making-machine, it’s awfully hard to convince management to give up on it during that early period where the new innovation is of lower quality and lower profitability.
3. There is a funnel of innovation from idea generation, to modification, filtering & refinement, testing, and finally, implementation. Spend more time early on to generate more possibilities. Experiment with a “rough, rapid, and ready” mentality. Fail early and often.
4. Organizations capture knowledge in routines, but for innovation to happen within the organization, routines must be broken. This is a paper I’ve mentioned previously, but it bears repeating. Barbara Levitt and James March’s Organizational Learning (pdf) was a seminal turning point in my education. As briefly, and coherently as I can, organizations develop a “code” (think of it like a piece of computer code) for operating efficiently. Every new person entering the organization changes that code just a little bit, and is themselves often changed by the code. For organizational learning to occur, that is, for the code to change significantly, there must be enough substantial deviation from the code. There must be new entrants to the organization who challenge the code, who take longer to adapt to the code themselves. But if there are too many of these ‘deviants,’ the code will quickly become messy and unstable. In more certain terms, organizational learning (one of the most interesting applications of innovation in my mind) is a form of artificial intelligence in a chaotic environment with pourous boundaries between self and company. Buy me a beer and I will natter on about this for hours.
5. Middle managers can create pockets of innovation within a bureaucracy. To do so, they need a small pool of spare time and resources. They can use the “make a little, sell a little” method of incremental change. They’ll need to share information and resources across unexpected boundaries within the organization, “stealing” slack resources from colleagues. They should use data effectively to persuade upper management, which means they’ll need to be well versed in rigorous experimentation methodology, data collection, and analysis. They can build networks of institutional influence by building on other people’s ideas, and advocating on behalf of their colleague’s ideas. They should act as buffers between front line employees and upper managers, knowing when (and how) to best break the rules.
6. “Should we move on to the next stage” should replace “Should we do this whole project.” Don’t forget there is financial value in learning new information, even if the experiment fails. Think of each new stage as an option on future success. An option being something that gives the holder the right, but not the obligation, to exploit some underlying value at some point in the future. Which means, evaluate each stage of the experiment/project independently from the overall project’s success rate/financial costs. I actually think this is the way most of us are thinking about “social media” these days, by focusing on discrete platforms, dipping our toes in the waters, and remaining skeptical throughout.

Mercy Corps’ mantra, “be the change” echoes Gandhi’s “be the change you wish to see in the world.” All three of these guys changed my world (view). Whose world are you going to change today?