What is a loonshot? A loonshot is an idea that changes a company, industry, or even society by presenting a radically innovative product or solution to a problem. A loonshot is often seen as “too far out of the box” by established players in an industry and fails to receive funding and adoption.
Examples of loonshots include smartphones, statins, ride-sharing applications, and even social media. Those who successfully capitalized on these ideas made billions, while those who rejected the ideas found their organizations losing market share.
In Loonshots, author Safi Bahcall presents research on how organizations can best develop systems and a culture that successfully nurtures and productizes loonshots. In their early years, companies are loonshot hubs. Daring, innovative, willing to take on risks to try and land on the “next big thing”. As organizations grow they become more defensive. They slow down and become more risk-averse. Their aversion to risk and general lack of artistry cause them to miss the most important ideas. This point is made well in the book Good To Great through an example with Walgreens.
One of the biggest examples of an organization sealing their own fate through their inability to nurture loonshots resides in the story of Nokia. Years before Apple brought the iPhone to the market a team of engineers at Nokia came up with an idea for a touch screen smartphone that could be used to run mobile applications. Does the idea sound awfully familiar?
Nokia engineers had essentially invented the iPhone years before Apple. At the time, Nokia was the dominant player in the mobile space and had ample resources to put behind the idea. Instead of embracing it, Nokia executives dismissed the idea as “crazy” and failed to act. A few years later Apple released the initial version of the iPhone and Nokia watched its mobile market share begin to plunge. The organization has yet to recover. This point is further solidified in the legendary book Innovator's Dilemma as well.
Safi explores the idea that there are two different kinds of people and organizations. The “loonshot” based organization and the “franchise” based organization. Loonshot organizations are made up of artists. Artists dream incredibly big, love working without structure, and tend to enjoy highly creative, exploratory work.
Franchise organizations are made up of soldiers. Soldiers like structure and establishing systems and processes that scale. As an idea moves from a loonshot (the first-ever touchscreen phone) to a franchise (the 10th iPhone) the idea transitions from being created by artists to being managed by soldiers. The iPhone is no longer a loonshot idea for Apple, it is now an established franchise. A great book on the kinds of people in organizations is Traction.
Safi makes the point that as organizations grow in size the artists tend to lose influence, while the soldiers tend to gain influence. Eventually, there are no more artists left and the organization finds itself in the position of a Nokia, rejecting the next greatest idea. Further reading on identifying great ideas can be found in the book Alchemy.
This book doesn’t just present problems, it gives solutions. Here are three of the most important ways organizations can nurture loonshots according to Safi:
One of the toughest things to manage about loonshots is the fact that they don’t always work. The ideas are crazy by design. For every iPhone that generates trillions of dollars of revenue, there are 20 ideas that don’t pan out for a variety of reasons.
An organization that embraces outcomes rather than processes will naturally reject loonshots as they carry a higher failure rate. Safi makes the argument that organizations should strive to analyze the decision making processes that lead to outcomes, rather than the outcomes themselves. A good process can result in a bad outcome and a bad process can result in a good outcome. The book I Love Capitalism! talks about this related to the building of Home Depot.
By embracing the process rather than the outcome, companies can help ensure that loonshots aren’t passed over simply because they have a lower probability of success than franchises. A new VR play is going to be less likely to succeed than the iPhone 11, but it is still vitally important that Apple be willing to take risks with new products and technologies. A great book that talks all about being different and trying things is Sticky Branding