The Original Haystack Observatory was founded in 1970 and occupies 1,300 acres of hilly woodlands in the towns of Groton, Tyngsborough, and Westford, about 40 miles northwest of the MIT campus in Cambridge, Massachusetts. A group of 100 scientists, engineers and technical personnel conducts the Observatory’s research programs and operations.

The World is a haystack of problem-solution fits with a few needles in it. Building your own Haystack Observatory will increase the possibility of discovering those needles.

If your organisation spends all its time looking for interesting trends and technology or all its time chasing existing and potential customers, you will miss out on most opportunities. If you do neither, same result. A balanced and integrated approach is the best way to navigate the infinite pool of problem-solution fits available.

Any innovation effort – big or small – aims to put good ideas to use. There are two ways to do this:

• Top Down Innovation: You define a relevant problem and look for technologies that can solve it.
• Bottom Up Innovation: You explore technologies and digital platforms and then search for relevant problems they can solve.

In larger organisations Top Down and Bottom Up Innovation should be weighed meticulously against each other. Our experience with designing innovation programs has shown that the difference between the two approaches is not fully understood, that the two ways are rarely combined in a structured format and are often competing for the same resources.

Top Down vs Bottom up Innovation at the Haystack Observatory

Most organisations today claim to be user-centric when doing innovation. In reality, few are organised around the user and rarely deliver what the user truly needs at the right time. Thus, a deep understanding of user needs combined with perfectly timed and scalable technology should be the purpose of any innovation effort.

Defining the right problems and then look for technology, i.e. top down innovation, takes place at the top of the Haystack Observatory where a desire to seek what can’t be formulated guides the time spent gazing at the World (and occasionally outer space). People working at the top of the Haystack Observatory should keep asking why something happens (at least 5 times) in an aggressively non-judicial way to uncover hidden truths or needs. Subsequently focus on what the impact of fulfilling this need might be rather than jumping straight into problem-solving mode. Ultimately, this part of the haystack observatory will align on which problems are the most important ones to solve rather dictating directions or solutions. If you don’t know where to start, pick and combine one element from each of the four levels of the value pyramid below and describe how this would be perceived in user terms.

…or follow the advice of Baudelaire: “Review and scrutinize whatever is natural; and you will find nothing but frightfulness.”

At the bottom up end of the haystack observatory, preferably the basement, time is spent understanding technology that is already democratised and initially indistinguishable from magic (e.g. AR/VR, drones, AI etc.). Bottom up Haystack Observers care less about Hype Curves and Gartner Quadrants and more about exploring technology to the point where it stops being surprising.

Beyond exploring technology, Bottom up Haystack Observers also test digital platforms that successfully enable either Sarnoff, Metcalfe or Reed’s laws:

Again if you don’t know where to start, let the technology choices be defined initially by Funktionslust: the pleasure of doing what one knows how to do well. Or look to Silicon Valley, Tel Aviv, Berlin or Paris for much the same reason the famous bank robber Willie Sutton robbed banks: “That’s where the money is”.

At Innovation Lab we seek out insights on technology and trends across these ecosystems – often acting as the bottom up Haystack Observatory of our clients. We then sprint to find the needles by prototyping and testing solutions that match unmet needs.

How to set up a Haystack Observatory

What is needed: A physical place where Haystack Observers meet to share user insights and technology perspectives. Ideally, somewhere close to real users in order to build and iterate rapidly. Both Top Down and Bottom Up Haystack Observers should be non-conformist generalized specialists with a high degree of fluid intelligence, i.e. “the capacity to reason and solve novel problems, independent of any knowledge from the past”. Fluid intelligence wears off around the mid 20’s unless it is trained. So if your company lacks fluid intelligence, invite or hire people that have it on a quid-pro-quo. Quid being their time and most creative powers, quo being food and access to resources and interesting people and challenges. The Haystack Observatory has its own drumbeat, i.e. a time schedule designed for Top Down and Bottom Up Observers to meet with the sole purpose of combining insights with technology until a needle is found. When a needle is found, Haystack Teams will deliberately start doing the right thing badly and then better. Haystack Needles are built much the same way crusades were planned by justifying the cause (“Why is this so important”), followed by propaganda (“Tell the World”), recruitment (“Get team members on board”), finance (“What is needed”) and logistics (“Plan”). Not the other way around!

The Haystack Observatory should also host in-house innovation sprints and open hackathon-style competitions and facilitate Beers’n’Demos to spread the word on insights and projects. On rare occasions, middle and top management are allowed to bring strategic issues into the Haystack Observatory.

To sum up:

Balance top down and bottom up innovation initiatives
Host both under one roof close to users.
Invite/hire people with fluid intelligence
Use agile innovation formats for combining user insights and technology

If you are considering strategic innovation initiatives and want to know more about weighing top down and bottom up innovation efforts or plan to build a Haystack Observatory, please contact Anders Sahl Hansen.

Some of the frequently asked questions we get from our clients at the moment are:

• How do we design and implement an innovation unit?
• What is the future of content?
• What is the best response to the unbundling of banks? And more specifically:

And more specifically:

• Should we sell B2C in addition to B2B or transition completely to B2C?
• Do we need to move from selling products to enabling peer-2-peer marketplaces?
• How can we leverage AI and IoT to deliver data-driven subscription models?

Since technology is cheap and digitalization have democratized access to new markets and financial resources, most organisations have responded by heavily investing in digitalization – unfortunately, digitalization does not necessarily lead to innovation.

In this short article, we propose 5 different ways innovation efforts can be organised today, ranging from Bricolage to Outpost Labs. But in order to present these 5 different ways, we first need to establish what innovation is and how it can be measured.

Innovation is highly relative on an individual level, but innovation in an organisation, as opposed to business-as-usual, means: “Putting into use ideas that create value for users.”

Innovation may require new technology by addressing new user groups in radically different-from-before ways, but at its core lies value creation. To measure value from innovation efforts in organisations, we should focus on the work we choose to undertake, as well as the projects we reject or abandon. Efforts can be further subdivided into two categories: successful and unsuccessful projects (as measured by value creation and/or learning to organisation). Below is an approximative equation describing how to measure the value of innovation:

Very often, we tend to forget to account for the unsuccessful projects we successfully reject and the ones we did not reject or abandon in due time.

As with species in Nature, organisations need to adapt to changes in their environment, e.g. new technologies, business models, competitors, legislation etc. Some species of organisations are better at this than others. In the wake of the financial crisis, most organisations chose or were forced to lessen the type and amount of innovation projects in exchange for fewer low-risk but big-budget projects. The illustration below visualizes two very different reproduction or innovation strategies from Nature:

1) Oysters: 500M offspring/year, low survival rate, no parental care, short gestation and time-to-reproduce

2) Gorillas: 1 infant every 5th year, high survival rate, extensive parental care, long gestation and time-to-reproduce

All industries feel greater uncertainty regarding the future, so a need to build organisational capacity to answer questions fast arises. Using nature as an analogy we should thus increase the oyster-to-gorilla-ratio. How do you do that? By organizing for agile innovation.

Below we have generalized our research and experience into 5 different organisational models. There are no right or wrong models as long as they reflect internal and external conditions 12 months ahead. In general, though, organisations will evolve from left to right with mounting pressure and often end up combining elements from different models to stay relevant.

Bricolage is what happens in start-ups, maker spaces and garages around the world. Resources are limited so you make-do with what’s at hand and care less for processes.

R&D Department-style innovation efforts perform basic research in core business domains to achieve long-term innovation advantages. Less focus on applications and business models.

Intrapreneurs across divisions will seek to collaborate to push ideas into use by bundling resources and skills around common business problems.

The Strategic Innovation Unit is funded by C-level management to run strategic innovation projects, build innovation capabilities and deliver insights from across industries.

Outpost Labs aim to provide self-sustainable and radically new business abiding by very few rules – sometimes detaching itself completely… much in the same way Inspector Clouseau of the Pink Panther movies hired Chinese manservant Cato to attack him when he least expected it to keep him alert.

The most important building blocks of any innovation effort are great people and ad hoc resource allocation but secondly, you need formats for producing solutions. We have developed a catalog of innovation formats that you can download here:

AIM Catalogue on Slideshare

Determining how to design the innovation efforts in a large organisation would benefit greatly by assessing which agile innovation must-win-battles are important and to which degree you want to change them in the next 3 years.

If you are considering organizing or re-organzing your innovation efforts, feel free to contact us for an informal meeting. If you already have a killer innovation (or the other way around) program, we would also love to hear from you as we are constantly looking for new cases and best practice. Meanwhile, you can always take a look at our Hackathon how-to guide here.

If you ask the most influential New Bizz trendspotters like Harvard and Forbes, the answer is clear: No! The reason? They are not designed for innovation. When a company reaches a certain size, in which it has found a specific model for achieving its objectives, structure, frames, and processes are formed around this model. Which will work fine – for a certain time. Because of the rapid change in the world of business, both technically and in the ways we work, the once effective model quickly becomes outdated in an environment in which taking risks and embracing innovative ideas coming from within, is necessary for businesses to survive.

Meanwhile, the risks can’t be avoided. Actually, the saying goes: the bigger the company, the larger amount of interested stakeholders, the higher vulnerability to the surrounding environment. As for now, the common view of taking risks within big organizations has a rather negative connotation. Even though risk-taking, higher flexibility and disrupting your own company has proven successful numerous times, still, most larger companies view it as something to be avoided at all needs. Hence, the terms “risk-management” and “crisis-management” are often merged in most of the existing material on the field.

However, doing the same over and over again, not promoting risk-taking within the organization, is at the cost of innovation. Which, in the end, is at the cost of growth. The decline of Kodak is a salient example of this. Once a global powerhouse of technology and innovation, and the original developer of the digital camera, Kodak is the often cited example of how a business can fail to effectively innovate and respond to disruptive technology.

Redefining risk

Things are changing, though. More larger companies has started to embrace, what the leading business developers has pointed out as a necessity for years – they have redefined risk. Classic examples of larger companies doing so are actually quite a few when the term is put in a global context. For example, Adobe has invented a Kickbox toolkit for their employees. The toolkit contains $1000 along with some printed materials about six steps, which Adobe wants people to follow in developing ideas for new products and services. Also, there is a Starbucks gift card and a candy bar, because we all know, that two of the four main food groups of innovators are caffeine and sugar. But that’s a whole other story.

Another great example of risk-taking comes from the established beverage-brand Coca-Cola. With roughly 140 years in business, the company has been practicing a “70/20/10-rule” for some years now. About 70% of their marketing investment is in what they call “now”, or established and successful programs. Then, 20% goes to “new,” or emerging trends that are starting to gain traction. Finally, the remaining 10% goes to the “next”, ideas that are completely untested. Moreover, those 10 are actually considered failures according to existing parameters – but could be successes according to new.

Finally, the global mass media corporation, AOL, has created a program called “Area 51”. The program is designed to empower top employees within AOL by providing an innovative environment within the company’s ecosystem. The employees committed to the program, get up to six months of funding, mentorship and accelerated development with an open door to resources, tools, and support from the talented AOL team and mentors. In other words, the employees get to act like a startup, with AOL giving them the time needed to bring a disruptive idea to life.

And these are just a few examples of ways, in which planning for internal innovation and rewarding the risk-takers, can be done in established and well-grown companies.

Injecting startup culture

One of the more radical moves, a company could do in order to disrupt their own internal culture with the goal of innovation in mind, is injecting startup-DNA directly into their already existing culture. The reason for that is simple: a startup has an extraordinary culture for innovation. According to research by the Harvard Business School, at least 75 percent of all startups fail. Yet failure is integral to the success of those that survive. By accepting the risk of failure, and taking risks anyway, startups are truly free to innovate. Basically, they see risk-taking and the chance of failure, as a necessity to improve their product and/or business. A positive outcome of that mentality is, that startups gain fast insight in the external environment, and are able to constantly tweak, pivot and iterate their business model, design, product or service to fit their market and create customer value. So, the remaining question is, how to implement the startup culture in total and not only in (impressive) steps like Adobe, AOL, and Coca-Cola?

There’s a start-up in the White House basement – and it’s pretty awesome

My favorite example of a company that has done so actually stems from one of the most established institutions in the world – The White House. The US Digital Service (USDS) is an 18-month old startup, located in the basement of The White House. The newly created in-house startup is staffed by some of the country’s best designers, engineers, and product managers. Many are employees of tech giants like Facebook, Google, Amazon, and Twitter, who sign up for “short-term tours of duty” to help fix government systems and services. Their tasks include finding ways to giving veterans quicker access to benefits, smoothing out the process for immigrants to apply for a replacement green card, and simplifying student loan paperwork. In doing so, The White House has dared what most established companies still somewhat hesitate about – they have invited people, who have no connection or profound knowledge to the field, which The White House operate within, into their culture

The results, however, are already showing, with the USDS pulling some early victories. A six-person USDS unit has helped create an online platform to replace the United States’ once-onerous paper-based immigration application process. Before they stepped in, the US Citizenship and Immigration Service had already spent $1.2 billion over 6 years to develop an online portal that never launched. Moreover, the USDS has recently released a web design style guide to help government agencies fix hard-to-navigate websites.

Hayley Van Dyck, a co-founder of the United States Digital Service, has given a super inspiring Ted Talk about the new start-up in the White House – go see it here.

With Adobe, AOL and Coca-Cola injecting some of the dynamic, agile and innovative core of a startup culture, and The White House being the Ferrari within the field, one learning lesson from this must be that innovation no longer is a buzzword. More than ever, it is a critical element in fuelling business growth and maintaining market share. Facilitating room for innovative processes by redefining risk and implementing elements of startup culture in the company DNA has proven to be beneficial for companies worldwide. Let me end this blog post by asking you a question. How many new inventions have come from saying: “How can we do exactly what we already do – just better?”….