Loonshots – The Craziest ideas that Work
Safi Bahcall’s Loonshots (2019) tackles a subject that has been at the crux of human progress for the past century – innovation. Right from today’s start-ups, to the mammoth organization of the 1990s, the US military, the numerous inventors of the 20th century, down to military planners of Hitler’s Blitzkrieg strategy, innovation isn’t the outcome of a single idea striking gold, but rather of out-of-the-box organizational thinking and planning.
Bahcall introduces the concept of Loonshots, ideas that seem downright crazy right up to the moment it becomes unthinkable that anyone ever did things differently. He taps into a host of historical examples that prove that there are a thousand ideas that fail before the idea that changes the way the world works.
He proves that experimentation is vital and that progress involves incurring expenses, taking risks and devoting a lot of time. These very factors spell dread for every efficiency-maximizing, risk-averse organization. Bahcall shows that there is a way, nevertheless, for these organizations to balance innovation with the concept of franchising ( by keeping the already successful parts of the organization ticking over), and keep the two separate.
Loonshots is the nursery for the creative. A protected and sheltered space for them to thrive!
Innovation Needs To Be Nurtured
Most organizations are afraid of spending time, money and resources on risky projects. While many start out with path-breaking ideas, they are left with nothing more than pipe dreams, because they are essentially risk-averse at heart. In other words, they fail at nurturing the loonshot nursery.
How can they foster innovation then?
Many consider culture or the informal rules of an organization that define innovation. However, that isn’t correct. For example, Nokia enjoyed undisputed success for three decades from the 1970s to the early 2000s, with the world’s first cellular network, the car phone, the GSM phone and the all-network analogue phone. Its innovations made it one of Europe’s most profitable businesses.
While many attributed this success to its culture, by 2004, nothing in the organization had changed culture-wise. But despite Nokia’s egalitarian ethos, the out-of-the-box thinking and fun culture, when engineers back then came up with the idea of a phone with a state-of-the-art camera infused, internet-ready touchphone, and an Appstore to boot, the leadership shot the idea down. Three years down the line Steve Jobs gave the world the iPhone, and the rest is history.
What had changed then? Well as part and parcel of growth in any organization, Nokia’s structure changed.
At the outset in most organizations, employees hold high stakes in success. Innovation and successful ideas make those employees heroes, whereas failures mean they lose their jobs! In such setups, promotions, big packages, and titles have less meaning. With growth, that changes, and while bonuses become bigger and more attractive, the individual stakes that employees hold in the company, reduce, breeding a conservative mindset. Companies then become franchise operations, focussing on protecting those parts of the organization that are already successful.
Innovation takes a backseat as leaderships start getting more risk-averse to loonshots. However, organizations can enjoy the best of both worlds.
The Unpreparedness Of the US Military In WWII
The Allies’ win over Hitler’s Germany was a historically defining moment. However, if prediction markets would have been there in 1939, the Germans would have still won. The Allies were, in fact, busy with their own ‘secret war’ as Winston Churchill named it. The race to develop more effective weapons.
While the Americans did, in fact, have the necessary naval and aerial means to win, they simply weren’t aware that they did. They weren’t at having breakthroughs while the Axis was busy strengthening new generations of tactics, subs, and planes.
Consider radar for example. Two American radio scientists, Hoyt Taylor and Leo Young, 1922, discovered that as a ship passes between a radio receiver and a transmitter, the strength of the radio signal doubles, enabling one to see that an enemy ship is on the move if they keep a watch on the strength of the receiver signal – a discovery that could potentially revolutionize naval warfare tactics. Unfortunately, the US Navy did nothing with the information that Young and Taylor gave them.
Young, eight years later, discovered that the same effect was seen while transmitting radio signals upwards into the sky. If the signal hit passing planes, it doubled when it returned, even up to an altitude of about 8000 feet. When Young asked the US Military for a grant of $500 to continue research on a prototype for an early warning system, it was again denied, because military planners opined that if a project doesn’t yield results within 2-3 years at least, it wasn’t worth it.
However, they did agree later on, but they were too late. While Young’s loonshot idea was under testing in 1941, 353 Japanese bomber planes attacked the Pearl Harbour Naval base, costing the US Military 2403 servicemen, a dozen battleships and hundreds of planes.
It was a shocking lesson about the costs of not pursuing innovation.
Vannevar Bush’s Innovative Military Planning
The reason the military planners couldn’t devote resources to Young’s radar was that they were producing more quantities of their tried-and-tested guns, bayonets and other infantry tools, or, conventional weaponry. They were, essentially, running a classic franchise organization, convinced that yesterday’s weapons would win tomorrow’s war.
Vannevar Bush has seen this very attitude at the US Navy during WWI. He believed that a civilian-run military research department, with free rein to explore and innovate, would help change the war. He is able to get exactly what he wanted after he met with President Roosevelt – The Office for Scientific Research and Development or OSRD. Vannevar understood that while he couldn’t change the culture, which was conservative, he could change its structure. Having the OSRD as a separate department would allow the Generals to continue with their strategies of war while letting the OSRD plan loonshots.
The OSRD went on to commission 19 industrial labs and 32 educational institutions for research by the end of 1940. The OSRD also got on board Alfred Lee Loomis, an eccentric investment banker who also did technological research. Loomis had gotten wind of Germany’s worrying war tactics from scientists – including Albert Einstein – who had been exiled from Europe. The moment he got a call from Bush, he dropped everything at hand and rounded up a team of physicists and engineers. The team developed a powerful radar using a microwave that could produce a wavelength that could detect objects and produce images from things as small as a submarine periscope.
Till the invention of that radar in 1943, America had lost almost 514,000 cargoes of supplies per month that were ferried across the Atlantic. These were vulnerable as German subs kept picking them off, causing the Allies worry.
The invention of the microwave radar reduced that number considerably, and as the German Admiral, Karl Dönitz admitted, Germany had “lost the Battle of the Atlantic.”
Loonshots In Business
The neglect of innovation and focus on franchise organization was turned on its heel by Vannevar Bush’s loonshots. However, loonshots can be vital in business too.
In 1907, JP Morgan bought AT&T (American Telephone and Telegraph Company). While AT&T had a glorious past being the direct descendant of the company that first gave the world the telephone, it had an uncertain future. Thousands of competitors were eating into its margins after their original patent for the telephone expired.
Morgan brought Theodore Vail, a boardroom pioneer, in to change the fate of the company. Vail had made big commitments to turn things around and pronounced that Americans would soon be able to make calls from anywhere to anywhere in the country. However, there was one big obstacle. The signal of long-distance calls would simply fade as they travelled down a line. It looked like Vail’s promises were going to soon fail.
At that time, quantum mechanics was still in its infancy as the electron had just been discovered. Vail then decided to establish a ‘fundamental research department’, and hired Frank Jewitt, an MIT physicist to head it.
It took 8 years for success, but AT&T did a public demonstration of a call from its headquarters in New York to San Francisco. The next 50 years gave Vail’s efforts a slew of successful breakthroughs such as solar cells, the transistor, The UNIX operating system as well as the C programming language. The AT&T researchers collected 8 Nobel Prizes along the way, making AT&T one of the most profitable companies!
The amazing part of this story is that during WWI Jewitt met Bush, and left a lasting impression. When Bush started the OSRD, Jewitt was one of his first and most indispensable recruits.
Bush and Vail’s ideas of balancing franchise and innovation are blueprints for many organizations even today.
The Bush-Vail Rules
Innovators are often stereotyped as loners with brilliant minds and visions of making their dreams real. However, every innovator needs champions to help carry out their ideas. These loonshot ideas need to take root and thrive. And to do that one can use the Bush-Vail rules – a few basic principles, as guides.
Rue 1: Those responsible for the early-stage ideas and high risks (the artists) should be protected from those who manage the already successful working of an organization (the soldiers). Loonshot ideas, in their nascent stages, aren’t always recognised as they aren’t often presented as obvious successful ideas. The soldiers – like the military planners – look for ready-to-roll projects and products, often ignoring these camouflaged loonshots.
For example, a prototype of Star Wars, The Adventures of Luke Starkiller, was passed on by a film studio. Star Wars went on to become one of the most successful movie franchises.
Rule 2: Soldiers are, however, as important as the artists. Apple’s Steve Jobs learnt this the hard way. While he nicknamed those working on the Mac as ‘pirates, he called the team working on the Apple II Home computer the ‘regular Navy’, as they were handling a lesser glamorous product. As tension between these 2 teams rose, both the products suffered, costing Jobs his job.
When Jobs returned to Apple 12 years later, he changed his strategy. He started supporting both the artists and the soldiers of the company. His approach gave Apple Jony Ive, the man behind the iPhone, and Tom Cook, the architect of Apple’s financial comeback!
Rule 3: Be the intermediary between the artists and the soldiers, and never micromanage the loonshots. Vail and Bush, both would keep away from the technicalities of any projects pursued by their departments. Instead, they focused on managing the weakest link in their breakthrough – the transition from creation to users.
When the OSRD developed the aircraft radar, the pilots ignored it as they found the radar boxes too complicated to use in the middle of a war. When Bush got the feedback, he immediately called for a redesign that gave way to a simpler display easy enough for pilots to use.
Changing Business Environment And Product-Driven Innovation
Changing business environments can often land product-driven innovative loonshots in trouble. At the same time, strategy is also an important factor that affects loonshot success.
Pan Am Airlines, founded by JT Trippe in 1920, started out as a taxi service, flying wealthy New Yorkers to Long Island. While it was a popular route, the repurposed WWI planes that Trippe used could seat only one passenger. As a solution, Trippe imported French engines and moved the fuel tanks outside the fuselage to add another seat to ferry couples – a tactic that he repeated over and over again.
By the 60s, Pan Am became the largest airline in the world, launching the Jet Age and the beginning of the cheap mass aviation era. Pan Am pioneered using the latest products, especially new types of aircraft engines.in 1965, Pan Am gave the world its first Boeing 747 fleet.
However, in 1965, when the US government deregulated the airline industry, the rates of everything from seats to cocktails served (which were once controlled by central authorities) were now set by the market. All of a sudden, there were competitors offering much more. While Pan Am had the best, no one wanted to fly in them. Pan Am went bust in 1991.
The business opportunities created by the deregulation gave birth to new strategies employed by other airlines. For example, American Airlines concentrated on strategic innovation rather than glam products. They introduced the two-tier pay system after the deregulation. The employees who were hired before 1978 were allowed to retain their salaries, whereas, those hired after fell into the lower ‘B-scale’ pay structure.
The amount they saved with this strategy allowed them to expand the company, buy new planes to make way for more jobs, and hence, keep unions placated. They leveraged their benefits of being a big company and closed gaps on start-ups with smaller overheads too.
The Risks Of Overweening Leadership
Another factor that can endanger the success of loonshots is leadership that refuses to take a backseat, and favour their loonshots over everything else. Such reliance on leaders is called the Moses Trap.
Polaroid established in 1937 was one of the companies that saw a series of advances in the field of photography. Edwin Land, after giving the world the sepia and black-and-white prints, instant colour printing, automatic exposure, and the SX-70 all-in-one foldable camera and sonar autofocus, enjoyed success for about 30 years. In 1977, Polaroid released the Polavision camera – a technical masterpiece that could produce high-detailed, 3-minute films in just 90 seconds, with beautifully rendered photos.
Polaroid started mass producing this crowning glory. Unfortunately, however, despite the technical genius of its make, it was silenced in the market. Why?
Firstly, the camera was expensive. As compared to the 2018 dollar, it cost $2500. Its single-use cassette films were priced at $30, proving Super 8 film and regular videotapes a much cheaper option. To add salt to the Polavision wounds, digital cameras hit the markets shortly after the Polavision launch.
According to a recently declassified US government document, Land, surprisingly knew the benefits of digital photography, and had persuaded President Nixon to use it for military purposes, as early as 1971! Why then did it take Polaroid a decade after Canon, Sony and Nikon to launch its first digital camera?
Well, that’s because Land never believed in cameras. He loved the film and pretty much flouted all the Bush-Vail rules! He literally kept the keys to the research labs and because soldiers didn’t mean much to him, never allowed an environment of encouraging the best ideas to thrive! His decisions practically overrode all team leaders’ decisions, causing Polavision to spectacularly fail!
Scientific Revolution – The Ultimate Loonshot
The rapid development of the West can be attributed to the biggest loonshot of all times – the Scientific Revolution. Just as loonshots work on a micro-organizational level, their effects can be seen on a macro level too.
Let’s go back to the Star Wars story to understand the context. How did ‘Sith’, ‘Lightsabre’, and ‘Jedi’ become household names, when there was a possibility that the franchise would never see the light of day?
The answer is simple. The scriptwriters kept going door-to-door until one opened. As long as there is a door to knock on, every loonshot idea has a chance. And this is why the context outside an organization is important.
The world is governed by universal laws which today, can be studied through experimentation and empirical research. Earlier, religious authorities and rulers defined what is ‘truth’. The change surrounding that happened when it was proved that the Earth and the other planets revolved around the sun. This kickstart to the scientific revolution can be attributed to 16th-century Danish astronomer Tycho Brahe and his assistant Johannes Kepler, and the text of his 1609 book ‘New Astronomy’.
Around half a century before, though, the Chinese scholar Shen Kuo had reached the same conclusion. However, China declined the theory, while the West made discovery after discovery.
How does context fit in here?
Both, Shen and Tycho, approached the ruling authorities for funds to support their research. Shen was, however, approaching an all-powerful ruler of an empire, whereas Tycho lived in a continent divided into smaller states, all competing with each other. When Shen’s ideas were rejected, they were quashed for good. On the other hand, Tycho simply had to knock on another door – King Rudolf II of Prague – to accept his loony ideas.
Thus, just as the internal environment is important to protect loonshots, the macro environment is as vital to ensure loonshots are nurtured.
Loonshots are ideas that seem too wild to work, but are those ideas that change the world. Such ideas have the ability to turn around the fates of nations and can show organizations success beyond the wildest dreams.
However, when organizations are risk-averse, they often miss out on game-changing loonshots because they focus on safer, already successful ideas and work to protect them. In order to thrive, loonshots need innovation and leadership that creates an environment to protect the creative, give equal importance to soldiers and trust the creatives and soldiers to steer towards success without meddling.