Fri, Jan 19, 2018
Innovation theory teaches you that the value of innovation outcomes follows a typical normal/bell curve distribution: Some ideas turn out to be crap, most are okay, and a few are positive outliers which turn into the disruptors of their respective industries. These outliers create what investment managers call “alpha”: The return you receive from an investment which is above market rate.
Your job as a founder and/or CEO of a company is to create a product or service which creates alpha. And just to be clear: Your return can be financial but also impact – my dear friends at Mana Nutrition or Nexleaf Analytics for example might not create all that much financial alpha but have outlandish impact alpha.
Now – if your job is to create alpha and the way to do so is, by creating innovative solutions which are at the edge of the innovation distribution curve, your focus must be on finding and/or creating the positive outliers which get you there.
Which is hard, hard work.
Going all the way to the edge requires you to deeply understand the problem space, the existing solutions, the customer pain points – and probably most importantly: It requires you to be able to leap beyond the “common wisdom.” To do so, you either need to surpass the current state of the art (create something which is 10x better/faster/cheaper/… to whatever existed before), create something new by convergence (bringing things together which weren’t put together before) or to create something truly new.
All of this is incredibly hard. However, it is also the only way I know how to create alpha.