Datawocky

Creating a Culture of Innovation: Why 20% Time is not Enough

Google has garnered a lot of attention and some success with its "20% time" idea, which enables every engineer to spend one day a week working on projects that don't fit in their job description. In my observation, just announcing that every engineer is expected to spend a certain fraction of their time on innovative ideas won't magically lead to innovation. Plus, it's very hard to implement the 20% time model at a startup: most startups just don't have the luxury of 20% excess engineering capacity.

At my (startup) company Kosmix, we take a somewhat different approach to create a culture of innovation, which I described to Taylor Buley of Forbes in a recent video interview. I think the video is terrific, and encourage you to watch it (it's also embedded at the bottom of this post), but there's only so much that can be said in a 90-second video. So I collected together some of my thoughts into this blog post.

At Kosmix, we don't specify a set fraction of time for people to spend on new ideas. Instead, we have focused on creating a culture that engenders new ideas and rewards innovators, encouraging them to tackle new projects above and beyond their 100% contribution to mainline company execution. The three key building blocks that we've used to create a culture of innovation at Kosmix are Team, Environment, and Incentives.

Team. It always starts with the people. At Kosmix we are fortunate to have a team of rock-star Computer Science graduates from top universities; it's hard to throw a brick without hitting a PhD. Since CS skills are taken for granted, the interview process emphasizes creativity, problem-solving skills, and teamwork skills.

Very importantly, many Kosmixers are multi-dimensional people with interests and passions that extend well beyond work. For example, one of our Operations gurus has a deep interesting in (hold your breath) knitting, and runs knitting classes at work (they're called Knitting Knights). Our office manager also happens to teach Art History.

Environment. There's something about the graduate school environment that seems to bring out great ideas. Many of the great technology companies (e.g.,Yahoo and Google) have been created by graduate students. We have strived to maintain a grad school environment at Kosmix. Wall around and you'll hear plenty of heated hallway discussions and intellectual free for alls; nerf gun fights erupt over details of relevance algorithms.

When I was a grad student, I used to get ideas for whole new lines of research by attending talks by other students and faculty. The Infolab, the research group I was part of Stanford, has a tradition of Friday lunches where a student leads a discussion on their ongoing work. We have copied this model at Kosmix: every Friday, we have a communal lunch gathering, and a Kosmixer leads a discussion -- either on something cool they've been working on, or on some topic that's just cool but completely unrelated to Kosmix -- such as muscle cars, alternative fuels, or astronomy.

Incentives. Given the right environment, the next piece is incentives for people to go above and beyond the call of duty. At Kosmix the biggest reward is peer recognition through a system of awards:

• The Kosmix Kreed award is peer recognition at its purest. Any Kosmixer can nominate any other for doing something interesting and inventive that helps Kosmix users, or for going out of their way to help out another team or person on working on a different project. Giving this award is as easy as sending an email to HR, with a clear description of the achievement that merits the award.
  
• The Just Do It! award is given by management, and recognizes an individual who did a substantial project that goes above and beyond their job description. We stole this idea from Amazon.com, where some of us used to work. For example, one recent awardee dreamt up, designed, and implemented the feature that allows users to customize the Kosmix homepage, without any directive from management. Another implemented the ability to edit any topic page on Kosmix.

We also have other awards that recognize teams that execute really well on their core priorities. These awards are read out at monthly company meetings, to warm applause in front of the entire Kosmix team. Each award is also posted on the internal Kosmix blog, which is read by everyone at Kosmix. Awards carry nominal prizes, such as gift certificates; but the real prize is the peer recognition, which acts as a terrific incentive in a high-octane team.

One of the big successes of the Kosmix culture of innovation has been Meehive. A while back, a Kosmix developer thought it would be cool to take Kosmix's core categorization technology and apply it to the problem of filtering news and blogs. He worked on it for a bit to create a first version, which convinced management that this was important enough to create a full team around. We then staffed an official Kosmix project to create Meehive, a personalized newspaper, which we launched last month. You can specify your interests very easily (I have over 40, including technology and cricket), and Meehive scours thousands of newspapers and millions of blogs to create your own personalized newspaper. Early adopters love Meehive; I now use it as my main source of news every day. Check out what people are saying about Meehive on Twitter.

Oh, and by the way, the most recent Just Do It! Award went to a developer on the Meehive team who took it upon himself to create the Meehive iPhone app. It's now rising in popularity among News applications in the app store, and has been a bigger success than any of us imagined. Best of all, no told the developer to do it.

Reboot: How to Reinvent a Technology Startup

Three years ago, Odeo was a struggling startup on a path to nowhere. Odeo's core offering--a set of tools for users to create, record and share podcasts--was facing serious competition from Apple and other heavyweights. The management team made a radical decision to "reboot" the company, and Twitter was born.

As I read the Twitter story, narrated eloquently by Dom Sagolla, I can't help but look back over the many startups that I've been associated with over the past twelve years.  In my various roles as a founder, an investor, a board member, and an advisor to startups in Silicon Valley, I'm constantly fascinated by the mechanics of reinvention. Which approaches to reinvention succeed and which ones fail?

Startups flounder for countless reasons. Perhaps the market opportunity is not as big as imagined, or perhaps there is a mismatch between the technology and the market. Maybe the world changed in some significant way, invalidating the key assumptions on which the startup was based. For example, an established company such as Google or Microsoft might enter the market. Or perhaps the deepest recession in recent history dried up demand for the original product or service. In these cases, the founders and management team have to ask themselves the question: should we push ahead, assuming superior execution will win the day against long odds? Or should we change what we're doing? 

Companies that decide to reinvent need to acknowledge the bad news first: most startups fail, even the reincarated ones.  Those are just the odds. The good news is that certain approaches to reinvention work better than others, and companies can increase their chance of success by carefully calculating their reboot strategy.

Every technology startup has four core components: team, technology/product, market, and business model. Rebooting involves changing at least one of these components, while leaving the other factors unchanged. Let us look at each component in turn:

1. Team. Reinvention usually leads to changes in the team. To qualify as a reboot rather than an entirely new company, however, there must be at least part of the team -- and usually at least one of the founding members -- who continues to remain with the company through the transition. In my experience, one model that usually does not work is when VC investors replace the entire founding team with new management. I've never seen a startup with none of its founders remaining succeed.

2. Market. Many startups try the most tempting option: to keep the same technology/product and look for a new market.  After all, the investment in product development has already been made.  Unfortunately, while this approach seems the most logical, it is also the least likely to succeed. Why? The hardest part of a startup is understanding the requirements of the market, not building the product. After the dot-com bust in 2000, many consumer internet startups tried to reinvent themselves as enterprise technology providers (remember Chemdex?). The startup junkyard is littered with the carcasses of dot-coms that took this route and failed.

3. Business Model. A very attractive strategy is to keep the same product and market, but change the business model. In my experience, this is the most likely option to succeed. For example, enterprise software companies can reinvent themselves by open-sourcing their software and providing consulting services, or a premium version. A software vendor can reboot as a software as a service (SaaS) provider on the Web. Consumer websites can move to a subscription model from an advertising model, or vice versa.

4. Product. Another smart reinvention approach is to addressing the same market (or a closely related one), but change the product or the business model. This option works best when the market need is real, but the product does not adequately address the opportunity. I've found that the key to success is to throw away the old product completely and start from scratch, using the hard-won learnings about the market acquired from the first iteration. In some cases, it makes sense to move the old product to "maintenance mode" and reassign the bulk of the team to developing the new product.

I've applied this particular model of reinvention to both companies where I have been a founder -- Junglee in 1997 and Kosmix ten years later, in 2007.

We started Junglee in 1996 to create virtual databases that integrated data from multiple websites. Although we had some initial success, we quickly realized that the architecture of our first product limited our ability to deal with rapidly-changing information, a key success factor in certain markets. We completely rebuilt the product from scratch in 1997, and created the world's first comparison shopping service.  This service was enormously popular and led to Junglee's acquisition by Amazon.com in 1998.

We introduced Kosmix as a vertical search engine, initially in the health sector.  Our idea was to find a better way to help users understand open-ended queries such as "diabetes", which have no single right answer; that is, explore topics rather than find the needle in the haystack. We'd planned to take a vertical-by-vertical strategy, launching sites named RightHealth, RightAutos and RightTrips. Very soon, however, we realized that the vertical approach carries severe limitations, because it's hard for consumers to remember to go to different sites for different topics of interest. We decided to rewrite the product from scratch, and we relaunched Kosmix.com as a horizontal site.  Kosmix lets you explore any topic and gives you a 360 degree view of anything than interests you -- including information from the Deep Web that is inaccessible to the usual search engines. This transition from vertical to horizontal was much harder than it sounds; it required us to rewrite our technology from scratch. But we did it because of our passionate belief that the problem is real and the market opportunity is vast.

While most startup reboots involve rethinking only one or two of the four core components, in some rare cases it makes sense to go the whole hog. Sometimes it pays to be bold: go after an entirely new market opportunity, create a new product, find a new business model, and make large-scale team changes. This approach is fraught with risk; but there have been a couple of spectacular successes. One clear example is Twitter. Another is Twitter's cousin SMS GupShup, a similar service in India. SMS GupShup was born as Webaroo, a company that wanted to create offline copies of large parts of the web so you could browse while offline. A couple of engineers there launched the SMS GupShup service as a lark and it took off; once the management team saw the traction of GupShup, they re-oriented the company around the new idea.

Some startups are born great: the right team starts with the right idea at the right time, and the rest is history. Some have greatness thrust upon them: the right conjunction of market forces propels an unlikely startup to dizzying heights. Other startups, not so lucky as those in the first two categories, need to earn their greatness. And sometimes that requires a reboot.