Wednesday, November 13, 2013

Is “8 steps to innovation” approach predictive or non-predictive?

“The Black Swan” fame Nassim Taleb calls authors of books with titles such as “8 steps to innovation” charlatans1. It means people practicing quackery or similar confidence tricks in order to obtain money, fame etc. Taleb has two main objections to n-steps-to-xyz-approach: One, such an approach tends to be predictive in situations which may be inherently non-predictive. Two, it gives positive advice and only positive advice exploiting peoples’ gullibility and sucker-proneness. As a co-author of “8 steps to innovation” I thought, let me reflect on how we fare as charlatans. More specifically, I would like to explore following two questions: Is “8 steps” approach predictive or non-predictive? Does it give positive advice only?

Predictive vs non-predictive approaches:  A predictive approach tries to predict the future and based on the prediction arrives at a response. Imagine you run an educational institute. You may analyse the trends using a predictive approach and come to a conclusion that video-led online learning is going to be an important part of the education system five years from now. As a result, you may decide to explore various platforms available in the market which enable online education.

In an alternate scenario, you may ask yourself, “What do I enjoy doing?” And your answer may be “creating short animation videos”. So you end up creating one-or-two minute videos and upload them on the Internet. Over a few weeks you realize that your videos related to Physics are getting watched more often. Slowly you focus on Physics related animation videos. You narrate this story in one of the parties you attend. A week later you get a call from a guy you met in the party and he offers to sponsor your video series. Your business has started – without predicting anything about the future.

A non-predictive approach has three characteristics: (1) It has means-driven rather than goal oriented action (2) it uses affordable-loss rather than expected return as an evaluation criterion (3) it treats each surprise as a potential sign-post2.

8-steps, a soft-predictive approach: Here is how 8-steps approach typically gets used. An organization that has intent to become more innovative does a self-assessment on the 5-levels of innovation maturity. Depending upon its current level, it decides its course of action in terms of building pipeline, improving idea velocity or enhancing batting average. Similarly, it identifies whether the problem primarily that of Rider (lack of direction) or Elephant (lack of motivation / habit). For example, here is how a bunch of managers assessed the situation in their groups using the navigation matrix.

While building the pipeline, the ideas may come as a response to a wave like Big Data (predictive) or it may come from an employee’s passion for data visualization (means-driven, non-predictive). 8-steps approach doesn't prescribe any policy using which ideas should be selected. However, 8-steps approach puts emphasis on low-cost experimentation. This makes 8-steps approach soft-predictive. It suggests that you can start with a prediction but not to take it too seriously. Build confidence only through experimentation.

Negative advice: Step-8 in the 8-step approach is “Margin of safety”. It is only about what can be done so that you don’t get crippled when you fall. Throughout the book, we use the Elephant-Rider model to warn the reader of slippery slopes of our decisions making process.

In summary, 8-steps approach is soft-predictive. It says, “By all means, predict. But don’t take your prediction too seriously. Perform low-cost experiments to validate your assumptions. And make sure you build a margin of safety”

2.     A good source for the comparative study of predictive vs non-predictive approaches to strategy is: “What to do next? The case for non-predictive strategy” by Robert Wiltbank et. al., Strategic Management Journal, vol. 27, 2006, pages 981-998.
3.     Image source:


  1. Vinay,

    Nice thoughts. I think it is also important to look at a time frame in terms of decision making. In the short run, a non predictive, effectual might work and even be tolerated in the real world. But in the long run a predictive approach is unavoidable in mordern day organizations. Also the nature of activity that an organization is involved in needs to be considered. It is useful to think in terms of "exploratory" and "exploitative" nature of activities, terms used in the literature.
    For activities that are exploratory in nature, where one is not sure of ways to achieve goals or not even sure of goals a more effectual approach may be appropriate. While activities that are "exploitative" might warrant use of a
    predictive approach.

    Can you think of an innovation activity that is "exploitative" ? Are all innovation activities "exploratory" ?


  2. Great inputs, Jay. I agree with you that predictive decision making is part-and-parcel of organizations. Hence, any idea pipeline is likely to have both kinds of ideas - those that come from predictive approach and those from non-predictive. Business planning template typically enforces prediction - projection of revenue / profits / cash flow.

    If you take potentially game changing trends - Massively Online Open Courses (MOOC), 3-D printing, Nano-technology etc., ideally there should be non-predictive ideas being experimented with (exploratory). Not sure how many corporates end up doing it.

    If you take smart-phone apps as a technology, I would consider it "proven". Hence, ideas where you exploit the technology for an existing Internet application (say, taxi cab booking in Indian cities) would be exploitative. Wouldn't it?

    Anyway, hope to discuss this more with you when we meet. Thanks again for your inputs.