Note: The following essay is an excerpt from the upcoming new and revised edition of Ready, Fire, Aim. 

The Innovation Myth

Innovation has nothing to do with how many R&D dollars you have…. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.” – Steve Jobs

One of the great myths in business is that the first to the finish line is the one that gets the biggest prize. “Get this product out before the competition,” say marketing and product development executives, “or we will fail.”

The evidence does not support that rationale. The first product to market isn’t always the winner. Best sellers usually come later, in the second wave. Often these second-wave winners are knock-offs of first-generation products reinvented by Fortune 500 companies.

Of course, there are times when a small company’s timing and product mesh together perfectly and it captures not only the lead position but also the dominant position in the industry for some time. But that is rare.

Taking first place should not be the entrepreneur’s primary objective. The smart businessperson understands that long-term growth is built on multiple front-runners, none of which need to be number one.

Look back at any of history’s most popular products, from Apple’s iPods to Hublot’s Big Bang watches, and you will find that the innovations they represent were already being developed in slightly different ways by other, competing companies at about the same time. (In Apple’s case, it was portable, personalized record collections. In Hublot’s, sports watches made of high-tech metals.)

Malcolm Gladwell Got It Right 

Instead of looking to be first in the market with a new product, business leaders should aim at producing products that capture the imagination of prospective buyers – versions of existing products that have features and benefits that catch fire.

Malcolm Gladwell explained this beautifully and persuasively in The Tipping Point, his breakthrough book about social and commercial trends. Of all the marketing ideas I have heard over the years, this one has been one of the most useful to me.

It has helped me understand, in a very clear way, why some of my seemingly great ideas worked so well and why some of them were shocking failures.

It makes such complete sense because it corresponds to what every good marketer learns sooner or later: You can’t dictate to the market; you must let the market tell you what to do. All of the very successful product launches I’ve been associated with were – I realize now – evolutionary, not revolutionary processes. And all of the big failures – the product launches that lost millions – were brand-new ideas that the market had, until that point, shown no interest in.

Tipping-point products are hard to come by, but they can grow your business by leaps and bounds. They will bring you new customers at double or triple or quadruple the rate you could get by marketing ordinary things.

I’m not dismissing ordinary products entirely. In fact, in my experience, the tipping-point phenomenon follows the Pareto Principle. Eighty percent of your sales will come from ordinary products. But if you want to grow your company, you have to be able to produce at least one tipping-point product out of every five.

How do you do that?

A Lesson I Learned the Hard Way 

Early in my career in the information publishing business, I developed a product and a promotional plan that was a big success. It broke all sorts of marketing records for our company, earned tens of millions of dollars, and made me feel like I had figured the business out.

My boss gave me a sign that read “Marketing Genius.” I loved that sign. And for a while, I believed it.

If I had created one breakthrough product, I could create another one and then a third, and the sky would be the limit. All I had to do was tap into the marketing genius that was located somewhere between my ears.

I’m sure I don’t have to tell you what happened. My record in the years that followed my annus mirabilis was piebald. I had a fair number of hits, but they were mostly doubles and triples. And I had strike-outs too. What was going on?

It took me several years to realize that the great success I had with that first product launch was due to much more than me. First, it was, like all marketing coups, a combination of just the right product at just the right time. And second, it wasn’t the child of my sole genius. My boss and a marketing consultant critiqued both the concept and copy through five or six heavily blue-lined drafts.

Nowadays, I don’t even try to fly solo. I know I’ll get much better results much faster by working with a creative team. If I get an idea showering in the morning, I’ll have a “what-do-you-think” memo out by the end of the day. And that’s just to get the engine running. I am as anxious as ever to move things along, but I know that I’ll end up with a better result if I shape my idea with the help of others.

A Simple Formula for Creative Brainstorming 

I’ve developed a formula for creative brainstorming. I can’t say that I have ever seen it proved out in research, but it works for me.

1. Early Thinking

You need a minimum of three people to brainstorm. Two works better than one, but three works much better than two. The problem with two is that you often find the discussion getting into a rut. You say one thing. Your brainstorming partner says something else. You repeat your position. She repeats hers. Eventually, the conversation stalls. With three people, this seldom happens. I’m not sure why exactly. It may be that the third person represents an audience. Even if only two people are talking, having someone there to listen – even if that third person is not normally involved in brainstorming – forces you to be at your best, to work hard to present your ideas in their strongest form.

2. Getting Ready 

During the initial stages of product development, I usually limit the team to three: me and two smart people that I trust. But nowadays, working with a much larger business, it’s sometimes necessary to expand the team at certain times and for certain reasons. Most of the time, when I expand the launch team, it is after the product and the marketing plan are 90% figured out and ready to be put into action.

In The Tipping Point, Malcolm Gladwell argued that there is a limit to the number of people that can efficiently work together. That limit is six or seven. My preference is six. Since our meetings at this point are more about execution than innovation, I want the people in charge of execution to be there. But since the product is only 90% figured out (Ready… Fire… Aim), some further brainstorming is always done. Often with very good results.

3. Playing Chess 

Brainstorming is like chess. A game can take a year, a day, or just a half hour. And when it goes on too long, it can be frustrating. I have attended countless full-day and multi-day and even two- or three-day creative sessions that, in my opinion, could have been done in half the time. (I’ve always been impatient: “Okay. Great idea. Can we have it done tomorrow?”) But experience has taught me the wisdom of slowing down, so I resist the urge to set the project timer to warp speed.

However, when it feels like I am wading through the muddy waters of Lethargy Lake, I do everything I can to speed things up. And that usually works. Because if brainstorming is like chess, it’s also like basketball. After a long and sometimes fun game of back-and-forth, everything important happens in the last quarter.

4. Clarity and Purpose 

The best way to brainstorm efficiently is to be clear about what you want to accomplish at each session. Avoid the temptation to cover too many topics in one meeting. Six half-hour meetings spaced a day or two apart are likely to be 1000% more effective than one six-hour meeting because of all the chewing-it-over time participants will have.

Set the meeting’s objectives in writing, in the form of an agenda, with a time limit for each topic and for the meeting overall. I know that this is the kind of “anal thinking” that rankles some people – especially “creative” types. I used to feel that way. Nowadays, I’m all for restrictions. To me, time and topic limitations make good thinking great.

5. The Feeling

Most good product and promotional ideas don’t work. That’s a fact of business life. When I think about the hundreds of ideas I’ve brainstormed, I can retrospectively divide them into two groups: those ideas that the team was super-excited about and those that elicited a generally positive but not enthusiastic response.

About half of those that we were hyped about worked, and some of them worked very well. Only a small fraction of those that we felt moderately good about worked.

And that’s why, over the years, I developed a standard for new product and marketing ideas – an emotional standard: We don’t launch this thing unless and until we are all super-excited about it and super-sure that it will work.

That may seem like too high a standard. But it isn’t if you have the right people in the room.

6. The Right People in the Room 

When it’s time to “Fire” the launch of your new product or advertising campaign, you will have to include all sorts of good and thoughtful managers in the process. But during the brainstorming sessions – and especially the early ones – you must limit the participants to those people that are not just smart but enthusiastically committed to helping you grow the business. They should be ambitious. They will likely be competitive. Some will be contrarians. But they must be, absolutely must be, people with the brain power and the heart power to make a good idea a great one.

7. From Each According to His Brain 

Creative sessions work best when everyone contributes. But that will never happen if your creative team is divided into the smart people and the rest. The usual situation is that preference is given to the marketers and product people because it’s their job, normally, to come up with ideas. But if that were true, you wouldn’t need brainstorming sessions at all. You are all there for a reason – to generate fresh ideas. And they will come faster and be judged more fairly if everyone on the team feels like he has an equal right to be there.

8. Don’t Comment… Contribute 

It may seem counterintuitive, but the best way to encourage a free flow of ideas is to establish and maintain strict rules about the flow of communication.

The number one reason brainstorming sessions break down is because of intellectual laziness. It’s very hard to come up with a novel idea. It’s very easy to criticize one. To limit negative comments and diversionary conversations, I sometimes impose the following rules:

* Specific suggestions only. Nobody is allowed to speak in generalities or make general comments. They waste time, confuse people, and give rise to long-winded discussions.

* No specific criticism. When an idea is suggested, I will take a poll to see how many people in the group like it – but I don’t allow any specific criticism of the idea. Just tell me whether you like it or not and move on. We don’t have time to hear why.

* Be positive. I try to say something positive about every idea that is contributed, even the weak ones. If an idea gets a mediocre reception, I ask, “How could we make that better?” rather than “Here’s what’s wrong with that.”

* Encourage the meek and cut the windbags short. To keep up a steady generation of ideas, you have to be willing to control the conversation. The moment someone begins to pontificate – and you will know the second that happens – derail his speech by asking a question. Encourage the wallflowers to speak by prodding them with questions and complimenting their answers. Get the group working toward the goal of coming up with new ideas by reminding them of it over and over.

9. A Culture of Innovation 

I’ve been talking here about brainstorming new product and marketing ideas, but brainstorming is just one part of a much larger process. You can have the best creative team in the industry and come up with a dozen great ideas every week, but if your business can’t implement them well and quickly, it may do you no good.

Ultimately, you need an entire workforce of creative people in order to be an innovative company. And that includes everyone from the receptionist to the people in the warehouse to the customer service people, and so on. To grow your company, you need to develop a company culture of innovation and speed. (I will talk more about how to achieve that in my next essay on innovation.)

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“I collect human relationships very much the way others collect fine art.” – Jerzy Kosinski

Collecting Art: The Six Lessons I Had to Learn*  

If done correctly, a first-class art collection will serve as a secondary investment portfolio to fund your retirement, protect you from inflation, insure you against economic or political instability, and provide a lasting legacy for your heirs or a charity of your choice.

My education in buying the right kind of art – art that makes sense as an investment – began when I was lucky enough to wander into an art gallery owned by Bernard Lewin. I didn’t know it when I met him, and he never mentioned it, but he was the most important broker of Mexican art in the world at that time.

I spent a lot of time browsing in his gallery and asking a lot of questions… all of which he answered simply and clearly. With his help, I learned some very important lessons and made what turned out to be some very profitable decisions.

Lesson #1: Don’t Buy on Impulse 

“Fall in love, but don’t buy on impulse.” This was the first big lesson that I learned from Mr. Lewin. This advice, which I barely understood at the time, proved to be invaluable over the years.

The point is, first impressions can be deceiving. You can’t know whether a particular piece will “hold up” (sustain your interest) unless you’ve looked at it at least several times and have thought about it in between.

Lesson #2: Not All Art Is Created Equal 

Some art is, indeed, relatively worthless – just “pictures that you hang on a wall,” as Sid, my surrogate Jewish uncle used to say. Some, like antique paintings and sculpture, has definite and assessable value. And some, fine art, can be an immensely good investment.

When talking to new collectors, I suggest thinking about art in terms of four broad categories: decorator art, commercial art, amateur art, and investment-grade art. (Note: These are my own categories. They are not used across the industry.)

Decorator Art is art (paintings, drawings, photographs, sculpture, prints, and so on) that is created strictly as decoration. The images and colors are often “made to match” (i.e., chosen to blend with or complement the overall interior design of a particular space). It’s the kind of art you see in chain restaurants and budget hotels.

Commercial Art is, in my mind, a touch above decorator art and is meant to appeal to a slightly more sophisticated buyer. It is produced by artists that have developed a competency in their craft and is marketed by dealers for the general public. In other words, it is made to sell well and quickly in the kind of galleries you find in upscale shopping malls, resorts, and cruise ships.

The quality of commercial art varies widely, from pretty good to very bad. And even the best pieces have modest to no investment potential because of the way they are made and sold. The most popular images are replicated by the hundreds or even thousands, and have little value for serious collectors and museums.

Amateur Art is art produced by artists who don’t make a substantial living from their work and are rarely represented by dealers. It is the art that is produced by students and spouses and retirees for the fun of making it. In terms of quantity, amateur art is by far the largest category. You can find it in attics, basements, yard sales, and flea markets – and also in many small galleries and antique shops.

The quality of amateur art ranges from very good to very bad. Good pieces that are old (100 years or more) can be sold as antiques – and as antiques, they will have lasting value. But if it is not antique, amateur art is not good for investment because it is, by definition, produced by “unknowns.” As a result, it is unlikely to appreciate much (if at all) over the long run.

Investment-Grade Art is art that is likely to appreciate in value.

What makes a piece “Investment-Grade”?

For most people, art is all about beauty. But if you think about the history of art, you will recognize that a piece that sells for tens of millions of dollars today isn’t valuable because it’s more beautiful than similar works. It’s valuable because, for whatever reason, the artist who produced it made his way into the small galleries, then the better galleries, then the smaller museums, then the bigger museums, and finally into books on art history.

So, if you think about future historical value, rather than aesthetics, when you buy art, you will have a much better chance of developing a valuable collection. And predicting what will be historically valuable in the future is much easier than predicting what will be considered beautiful in the future.

You do it by asking yourself the following sort of questions when you consider making a purchase:

* How respectable are the critics who support this artist?

* What art-world big shots are buying his work?

* What museums are buying his work?

* What media/images/techniques of his are most sought after?

Now when I happened into Mr. Lewin’s gallery years ago, I did not have this perspective. Nor had I spent much time wondering why some art becomes more valuable over time. I was lucky that my interest in collecting art was stimulated by a gallery owner who happened to be selling investment-grade art. Had I walked into a different gallery, I might have ended up as a different kind of investor than the successful one I’ve become.

Lesson #3: Buy Only Investment-Grade Art 

The first pieces I bought from Mr. Lewin have appreciated considerably over the years. I haven’t done the math, but my guess is that I’ve realized an annualized return of more than 8%.

Considering the fact that I knew so little about collecting at the time, I’m very happy with that. So, the third lesson I have for you is this: If you want to build a financially valuable art collection, you must limit yourself to investment-grade art.

You may think that you don’t have the money for that. In fact, you probably do. One of the first pieces that I bought from Mr. Lewin was a pencil sketch by Rufino Tamayo, the great Mexican master. It cost me $750 – equivalent to about $1000 today.

You couldn’t buy that drawing today for $1000. (It is worth more than 10 times that.) But for $1000, you can find plenty of good pencil drawings by other artists whose works are in museums. And you can buy their pastels and gouaches for a bit more.

Lesson #4: Buy Unique Pieces by Established Artists 

After helping me narrow down my choices to four investment-grade works that I could afford, Mr. Lewin surprised me by telling me that he’d be happy to buy them back in the future. (This is something I’d never heard a salesman say.)

He explained that I was buying pieces that had a very high chance of appreciating nicely. He had no doubt that I could sell any of them back to him for a profit… and that he, in turn, could eventually sell them for even more.

“You see,” he said, “you are buying original pieces by established masters.”

He picked up the Tamayo sketch. Pencil on rough paper. Hardly a masterpiece, but still one of a kind.

“For the same price,” he said, pointing to a print leaning against the wall, “you could buy that limited edition print of one of Tamayo’s paintings. But,” he said, holding the sketch up to the light, “there is one – and only one – of these. And there are 199 additional versions of the print. Which do you think will be worth more in the future?”

Lesson #5: Buy the Best Pieces You Can Afford… Then Trade Up 

Another one of my early purchases from Mr. Lewin was a watercolor  by José Clemente Orozco. It wasn’t the best Orozco Mr. Lewin had in his gallery, but it was better than some, and it was the best I could afford. I paid $18,000 for it, and it’s recently been appraised at between $125,000 and $150,000.

Fact is, better-quality pieces tend to appreciate more and faster than inferior ones. So, had I bought a lesser Orozco, I suspect I might not have gotten that same return. And that brings me to the second part of this lesson…

As you develop your collection, gradually sell off the mediocre pieces and use the proceeds to buy better ones that are likely to give you a higher ROI. (This, by the way, is the same strategy I use with my real estate properties.)

To develop the sort of collection I want, I need at least two or three major pieces by each of the Central American masters that I’m now focused on. Right now, for example, I have about 15 works by the great El Salvador master Carlos Cañas. Half of them are fairly minor works – smallish drawings or pastels on paper. A few are good, medium-sized paintings. And two are masterpieces, the sort of paintings that the Museum of Modern Art would display to show Cañas’s genius.

I’m happy to sell all of my mediocre Cañas pieces and a few of his good ones. But I will never sell the two masterpieces. I intend to enjoy them – and watch their values rise – as long as I live.

One Final Lesson…

If you do an internet search for “art investing,” you will find many articles and essays by dealers that eschew buying art as an investment. Instead, they say, you should “just buy what you like.”

This is not good advice… for several reasons.

First, it is illogical. It presumes that there is a difference between an art object that you like and one that has investment potential.

Second, it is harmful to the novice collector. It presumes that the art you are likely to “like” as a novice investor will continue to please you after you’ve been at the game for some time. And that is not, usually, what happens. Novice collectors like art that they see as “beautiful.” But what is beautiful to the inexperienced eye often looks derivative and obvious to the experienced eye.

You might, for example, absolutely love the $5000 Peter Max you bought when you were on that Caribbean cruise. But 10 years later, you may be embarrassed to have that thing on your wall. And then when you discover that you can get – at best – only $2000 for it (after 10 years), you’ll feel doubly duped.

Third, the statement itself is disingenuous. Dealers usually throw it in as a sort of disclaimer after pitching you on a particular commercial-grade artist or work of art. It translates to: “If this doesn’t appreciate as I’ve led you to believe, don’t complain. At least you like it.”

So why are all those “experts” telling you to buy what you like?

Here’s the thing about buying what you like: Tastes mature. The more exposure you have to art, the more sophisticated your tastes will become. Your goal as an art collector is to buy pieces that you like now and will likely still like in 10-20 years. And guess what? Most investment-grade art has that durability.

* This series of essays gives you an advance look at a new book that I’m working on, based on my experiences over the past 40+ years as a collector and investor in fine art.  

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