What is Innovation? With Curt Carlson

Join MINDWORKS host Daniel Serfaty as he kicks off Season 4 with a special series on the nature and practice of innovation. 

In Episode 1, Daniel talks one-on-one with Curt Carlson, Founder and CEO of The Practice of Innovation and a pioneer in the development and use of innovation best practices.

Transcript

Daniel Serfaty: Innovation. What is innovation? In the age of generative AI, self-driving cars, robotic surgery, commercial flights into space, the word innovation is everywhere. But what does it truly mean when we say technology, a product or an individual is innovative? To answer this question, this new season of MINDWORKS, we are going to take a deep dive into the nature and practice of innovation, especially in light of the omnipresence of generative AI. And kicking off this season, I'm especially honored and truly delighted to have with me today, Dr. Curt Carlson, who is an internationally recognized innovator, some would say legend and a thought leader on the practice of innovation.

Let me tell you a couple of words about Curt Carlson. Any sentence I would share with you would be good enough to finish a resume. But in his case, his accomplishments are really pretty extraordinary. Under his 15 years leadership as CEO of SRI International in Silicon Valley, SRI became a global model for the creation of high value innovations worth tens of billions of dollars, such as high definition TV, intuitive surgical for robotic assisted surgery, and one innovation that many of you have on your phones, Siri. Curt is currently a professor at the Worcester Polytechnic Institute and at Northeastern University when he teaches value creation and innovation. He's also WPI trustee emeritus and WPI Hall of Fame Luminary, something that's been given only to two dozen graduates in the school 155 year history. He served on President Obama's National Advisory Council on innovation and entrepreneurship. And with the National Academy of Engineering, Curt helped develop improve U.S. research and development and innovation practices and policy for the National Science Foundation. In addition, he has served on many commercial and government boards, including the prestigious Air Force Science Advisory Board.

Curt's current consultancy called the Practice of Innovation, which we'll discuss with him today, works with companies, universities, and governments to improve innovative performance. These practices are used worldwide by leading companies and government agency, including Sweden, Finland, Chile, Singapore, Japan, and Taiwan. Recently, he has incorporated generative AI as a key mechanism to increase and accelerate value creation for all these organizations.

Curt, welcome to MINDWORKS.

Curt Carlson: Hi, Daniel. It's great to be with you again. Thank you for this opportunity to talk to you about our favorite topic, which is how do we do a better job at value creation and innovation. And it's a particular pleasure being with you because you run a superb company that's been recognized in many different ways, including one of Inc's best workplaces in America. That's quite a tribute, because I know you, I know why that happened. It's because of your management style.

Daniel Serfaty: We could end the podcast at this point, I think. Thank you very much, Curt.

Curt Carlson: It's all true. It's all true.

Daniel Serfaty: This podcast is about you sharing some of your insights and secrets and that all this experience with innovation has given you, and our audience is very eager to learn about that. Please introduce yourself in your own words. What are your own experiences as an innovator, as a leader, as a teacher of innovation?

Curt Carlson: Well, it's interesting how I got here. I got my PhD at Rutgers and I became a research scientist at RCA Laboratories and worked my way up. And then at one point I was running the high definition television program and what would've been the first internet company in the world, [inaudible 00:04:16]. By all measures of corporate research, I was in a very good place and everybody wanted to talk to me for obvious reasons. And then we were bought by GE, and then we were sold to SRI International. So overnight, I went from a company where they were giving me millions of dollars to spend to one where I had to earn millions of dollars to make a living. And I discovered that that's a different thing.

And in fact, being in big companies, I had not learned how to create value. Most companies don't teach you how to be a value creator or an innovator, and that was quite a shock. But fortunately, I had a very smart friend in Norman Winarsky. When I say he's very smart, I mean he's really, really smart. He graduated first in his class, University of Chicago in pure math, went to the Princeton Institute. And a really, really nice guy, a great partner. And he came to me and he said, "Curt, it's like everything else we have to learn." So I said, "Okay, how are we going to learn?" Well, it turns out I had played violin professionally when I was in my teens, and there's a thing called a masterclass where you get together and you share ideas. There's multiple people giving presentations or playing their instrument.

And so we said, "Well, let's set up something like that for our team and we'll learn from each other." So every Monday, every other Monday from five until nine o'clock at night, my team, which was about probably 50 people at that point. They would come and we'd have pizza and coke, and we'd all stand up and give short presentations on our value proposition for what we were working on and then get feedback and then share some idea we've learned. So during this process, we read every book, we talked to everybody we could, and nothing worked. Literally nothing worked. Most things were too complicated. The team just refused to do them. Even things that are very well known, which we might want to talk about, they refused to do because they were too complicated and they didn't address all the issues.

And because we didn't know anything for about two years, we had essentially no success. It was pretty painful from going from this corporate person who everybody wanted to talk to all of a sudden that this person that nobody wanted to talk to. And they were right because I didn't know anything. I should also say that at the time, the senior vice president for marketing for this new company, SRI, the part of it that I was in, came to me and said, "Curt, we don't think your technologies have any future. So you're on your own." Not only did we not know what to do, we had no money.

Daniel Serfaty: So for our audience to place that, we're talking about the mid-two thousands or something like that, and you are there arriving in this SRI International, which is a very prestigious place, a bunch of very smart people doing project. You're meeting them every Monday night to try to share and give feedback to each other, but you're not making progress.

Curt Carlson: No, because we didn't know anything. Very big companies don't teach people the fundamental skills they need. And so we were on our own. I had money for pizza and Coke, that's all the money I had. And we started to learn. I was at a different part of SRI than Silicon Valley where I am now. We had a big laboratory in Princeton, that's where RCA Labs was, and SRI is still there. So I was meeting with my teams there and bit by bit we started to be successful and we figured out the principles we're going to talk about, and we started to grow. And eventually I pretty much was taking over the company, because every time a team would get in trouble, I'd bring them into our process, we'd teach them the fundamentals of value creation. And eventually they made me CEO to get rid of me, because otherwise there's going to be a problem with everybody reporting to me and not having me be the CEO.

So I went with the knowledge that we had developed, the team had done this. It was this iteration process that we went through to learn. When I went to SRI in Silicon Valley, which is the headquarters, it is an organization that was close to bankruptcy. It had been failing for 20 years. Buildings were falling down. We had obviously no money. And the grudges and the dislike among was just terrible, because when you're failing, you don't blame yourself, you blame other people. So again, with no money, we had to bootstrap our way out of this. We grew three and a half times and we were systematically creating one multi-billion dollar business after another with the same people who had been failing for 20 years. But what we did is we gave them this gift, this gift of knowing how to create value for others. And that's really the theme, Daniel, that we're going to talk about.

It's not just solving problems. All smart people can solve problems. And we've worked with thousands of brilliant people from Harvard, MIT, Caltech, Stanford, Berkeley, Oxford, you name it. But the people who stand out are those in our business who can create value for others, and creating value for others is a separate discipline that is very rarely taught to people, not only in universities, but in companies. Even though it is our job, every position we have in our companies is you and me, starting with the two of us, everything we do basically is to address a need of people either inside or outside the company. And of course, it starts with satisfying your outside customers because that's what lets you survive.

Daniel Serfaty: So this is fascinating because the sentence is very simple, finding values for others. That's not something typically that we learn in graduate school of engineering or science. We are trying to basically, being given problems, solve problems, get to the next problems. So there are two keywords here, one of them is value and one of them is others. So let's unpack that a little bit for our audience, because I think this is really at the crux of everything that not only you've done, but you've shown again and again can lead to extraordinary success.

Curt Carlson: You're absolutely right. It starts actually with just those definitions of, what are we trying to do after all? What does it mean? And when I do workshops, I've done this with thousands of professionals. I start off by asking them for the definitions of what's value creation, what's the definition of value, and what's the definition for innovation. And remarkably enough, there's only been one professional who actually remembered to say that innovation had to have some kind of business or sustainability model. So everybody says, it's new, it's something novel, it's something people want, but it must also have a sustainability model. And it's just a little indication that people are not thinking comprehensively about what it means to be an innovator.

And then you ask people, "Well, what's the definition for customer value?" And they give you, "Well, it's things that people want," and they're not necessarily wrong, but the definition actually is, benefits over costs. And benefits and costs are subjective, they're only determined by your customer, not by us. They come in all different forms, and our job is basically to maximize the benefits and minimize the costs. Again, you would think that this is obvious, but you ask these professionals and they don't answer this, it doesn't mean it's going to stop them, it obviously it doesn't stop them.

But what it does prove to me is they're working inefficiently and ineffectively, because if you don't share the language of your job, you're probably miscommunicating a lot of the time. If you think that innovation is about creating something new, well, yes, but that's not enough. New, have value for others, we're back to the others part, because they determine our value. And there has to be some sustainability model at least enough to pay back the ROI on the investments that are made. So some organizations are a little bit a of tower babble, they don't share this common language, and so what you find is they're very inefficient and very ineffective. Those were a couple definitions.

Daniel Serfaty: This is terrific. I am guilty of that sometime because we don't always ask, and I would love for you to unpack that for our audience, the third notion. I mean, I had prepared a question for you about the difference between being creative and being innovative, but first you say the word sustainability, could you expand that a little bit? What does it mean for an innovation to be sustainable?

Curt Carlson: So let's give an example here. It turns out there are 5,000 mousetraps. So then you ask people, "Well, how many of them can you buy?" "I don't know. Maybe a dozen. Yeah, it's about a dozen." "Well, okay, what are those 5,000 mousetraps, if people don't buy them?" "Well, they're inventions." So they're new. You can build them. They didn't violate the law. They are inventions. They got a patent, but nobody wants them. So people have to buy them, and there has to be a sustainable way for them to continue to buy them. So typically that in the world we're in, that typically means a financial model that will produce enough revenue to sustain the production and distribution and buying of the product.

But there are lots of ways to have a sustainable model. So for example, you could have the government support you, that's a sustainable model. Or you can have a nonprofit organization where there are donations. Wikipedia basically is a volunteer organization. So whatever it is, if it's not available in the marketplace and people can access it and want it and have it, then it's not an innovation. It's probably going to be an invention and not an innovation.

Daniel Serfaty: Got it. So could you share a recent example or even an example from your time ad the CEO of SRI, of some innovation that made you go, wow? Because it will fill, basically not just it's new, it has value, it has value for others, and it is sustainable, but eventually you shaped it into a wow, or you observe it from the outside, you said, "That is going to be a success." What comes on your mind when I ask that question?

Curt Carlson: Well, the first thing that comes to mind is that every innovation should surprise you. If it doesn't surprise you, it's probably not new enough to really matter. So here's a trivial example. You remember what ketchup bottles used to look like, right? There was normal bottle, and I don't know about you, but to get the ketchup out, you had to pound on the end of the bottle, and sometimes it would splash all over your plate and maybe on the table or if you're unlucky on your partner. So that's the way it was. And then one day, now it's over a decade I guess, but one day I see a ketchup bottle and it's turned upside down, and I think, what, what just happened?

And then you discovered that somebody had invented a nozzle, a remarkable nozzle actually, that allowed the ketchup bottle to be turned upside down without leaking, and yet when you squeezed on it, the ketchup would come out. And I literally went, "Whoa, that makes perfect sense." It's not the biggest innovation in the world. This is not inventing the internet, but it solves a real problem that we have. And I think now that almost all ketchup is sold with inverted ketchup bottles. So it's an example.

Daniel Serfaty: Let's wait for our audience, because that's an example that doesn't involve, as you say, inventing the internet with some fancy artificial intelligence, but it still provided value. It is sustainable and provided value for others, which are the customers in this case.

Curt Carlson: It was worth hundreds of millions of dollars. So it was financially successful as well. Now, I would recommend to everybody, if they want to see an actual wow, watch the original presentation of Steve Jobs when he announced the iPhone. So those who remember there were things called smartphones from Nokia, which were, they had little buttons and they weren't convenient, they were small. And obviously with limited numbers of buttons, you couldn't search the internet very well. So Steve Jobs wanted to transform that. So he came up with the idea of a very small computer, which allowed for an infinite number of icons. So you could have an infinite number of buttons. So he solved that problem. But the thing that really made it spectacular was what he called touch, the fact that you could magnify or diminish the images with your fingers, and so you didn't need a stylus. The stylus was a terrible way to interact with the device. He found a way to interact with his fingers. So that changed everything, right?

Daniel Serfaty: Yes.

Curt Carlson: Now, when he demonstrates that in the video, the video is the best presentation of business concepts I've ever seen in my life, he touches every base.

Daniel Serfaty: With that qualification, audience, please go and watch that video, because if Curt is impressed by it, you will.

Curt Carlson: Well, in fact, with Daniel's team, we actually recommended the entire team watch that and then compare it to the things that we teach in our programs. The point I wanted to make was, when he demonstrates this touch feature to this audience of a thousand people or so, the audience literally goes, "Wow." And then he says, "And we patented this upside down and backwards." Now, Daniel, I don't know about you, but if I was the CEO of Nokia at that point, watching this, and he shows that, the audience goes wow. And he says, "We've patented this upside down and backwards," that CEO is thinking, "It's over." And it only took seven years and Nokia was gone.

Daniel Serfaty: That's amazing.

Curt Carlson: It's a great wow moment. It's what you want to do. It's critical that at some level you surprise your audience, if you're going to have an innovation that's going to last.

Daniel Serfaty: And it's not just in the presentation actually, because you may be impressed when you see that on the screen, the direct manual manipulation of information basically, but then it caught and everybody wanted that. That was a basic expectation for any device going forward.

Curt Carlson: Exactly right. So when I bought my first iPhone, I was equally surprised, and I actually ran into the senior vice president at Nokia shortly after I got my phone. And I said, "What do you think of this phone?" He said, "It's a terrible phone." I said, "But don't you think it's more than a phone?" He said, "No, we're going to kill them." "Okay." So I ran down the hall and I saw my friend Norman. I said, "Norman, do you own any Nokia stock?" He said, "No." I said, "Good, because if you did, I'd tell you you need to sell it very fast." So that's one of the rules.

Now, you asked another critical question, though. It's coming up with these solutions that quite kind of a wow with the customer, but the hard part of value creation is actually identifying what people need. They don't often know what they need. They have dissatisfaction. It's often called, there's a pain point. Dissatisfaction, things don't really work well, like on the smartphone. Well, you need to really identify that, and that's not so easy. That's the hard part. And the lack of the ability of identifying the actual need in an important area and then coming... If you get that, that's the starting point. That is the failure point for almost all the things that don't make it. It's a 99% failure point, and it starts right there. So identifying the needs of others in a significant market is the starting point, and it turns out to be really, really hard.

Daniel Serfaty: I think it's tremendously important to, because it recasts, the way you frame, not just the definition of innovation, but what's important recasts a lot of things we take for granted. And how people who've been in the tech industry all our lives, I wish I had had these perspectives 30 years ago as opposed to be charmed by the newness of something. Just the newness of it and defining that as innovation, it's necessary, but certainly not sufficient.

Curt Carlson: Yes. One of the biggest mistakes people make is they see a problem and they jump to a solution, and it's almost always wrong because they fall in love with their idea. There's a lot of behavioral science that determines how we respond to things. One of our mistakes is we often will see a problem, we'll jump to a solution, and then once we've jumped to it, we tend to stick to it. So we use a technique called reframing to look at this problem from different points of view, look from the points of view of different end users, the stakeholders, the buyers. Keep on looking at the problem from different points of view to figure out what's really going on. I can give you a fun example.

Daniel Serfaty: Yes.

Curt Carlson: So Daniel, I'm going to give you a promotion. Can I give you a promotion?

Daniel Serfaty: I'll take anything at this point, yes, thank you.

Curt Carlson: Okay. Okay. So you're now in charge of the Massachusetts healthcare system, and you're the person who runs the MRI facility. And it turns out that young children are coming in and crying, a terrible situation, and it's costing the hospital a great deal of money. And you've been given the assignment by the governor who's horrified at these crying children, you have to fix this problem immediately. So you have a week to solve this problem. So we ask people, "What are you going to do?" You got a week to solve this problem of children who are sick, young children with brain tumors and terrible diseases. They need an MRI and they can't get them into this horrible machine. So we ask people, "What you going to do?"

I'm not going to torture you with this because it can take a bit. But typically people jump to the machine and say, "Well, okay, we'll quiet it down." "Well, you can't quiet it down." "Okay, well, maybe we can put headphones on." It turns out that doesn't really work either. "Well, maybe we can, I don't know, somehow we have to do something about the environment." Well, it's an example where people typically jump from the problem to the device, the MRI machine. What can they do with the machine? But the machine's not the end user in this case, the child is the end user. It's not the doctors, it's not the technicians, it's not the nurses. It's the children who are crying. They have a need, they have the pain, they have the dissatisfaction of being horrified at this big ugly machine, that when they go into it makes this terrible noise.

So somebody, actually a guy from GE, he was there when a child was going through this, and he said, "I have to do something about this." And he got the idea of distracting the children by turning it into a transformational experience, like Disney World.

Daniel Serfaty: A ride, basically.

Curt Carlson: Like a ride. So yes, exactly right. If he can transform the experience for the child into something that's enjoyable for them, maybe he could come up with a solution. So just distracting the children was not enough. The genius of his idea was, we'll paint it like a rocket ship, you're going to Mars. And when the noise happens, that's when the rockets are kicking in to take them on the journey. So not only was it a distraction, it was a complete story that justified the entire aspects of the MRI machine. So this is an example of people jump from a problem to a solution, it's not right. They don't think enough about the end user. They have to reframe the problem. It's not just distracting the children, you've got to do more than that if you want to do this.

Now, of course, this solution doesn't work a hundred percent of the time, but it works, I'm told 70 or 80% of the time. Now, the thing about this story is, the previous solution was to sedate these children. Now imagine your 7-year-old daughter with a brain tumor is coming in for an MRI and the first thing they do is sedate her. Daniel, are you going to be happy?

Daniel Serfaty: No. And not as a parent, and not certainly as a healthcare worker there, as a nurse.

Curt Carlson: No. It's horrifying.

Daniel Serfaty: Yes.

Curt Carlson: So here is your thousand dollars paint job, now it's solved the problem for most of the children, for the nurses, for the technicians, for the doctors in the hospital.

Daniel Serfaty: Amazing.

Curt Carlson: It's an example of also different kinds of value. So for the hospital, there's financial value. For the children and the parents, there's emotional value. And it proves that value is a subjective thing. It's not just something you can measure. I mean the things you can measure, but a big part of value has to do with these subjective factors as well.

Daniel Serfaty: That's a wonderful story. You're anticipating all the questions I want to ask, which is wonderful, so I don't have to ask that. So you're an innovator or you claim you are, not you, but I mean a person in our audience, an engineer, a manager or scientist, a worker, and they think of themselves as being in the business of innovation. The example you just gave is wonderful, because it displaces the focus from one part of the problem to even redefining the problem. What's your advice then, in terms of the qualities or in terms of the behavior you would advise an innovator to have in order to have that ability of redefining in a sense the need or the problem to begin with? And then perhaps there finding a whole space of new solution you never found before. What do you need to be? How do you need to behave?

Curt Carlson: Well, let's start with what is the task and what does it require? The task is trying to understand this thing. You've seen a problem and you need to understand it. You need to understand the problem, the ecosystem. You're in a hospital. You have to understand all those things first. So you have to be curious about that. The chances that you're going to come up with a solution yourself is probably pretty low, because we all fall into our own little traps, so we don't know enough. I mean, everything you do in your company is interdisciplinary. It's not just one kind of discipline, sometimes it's three, four, it can be six, it can be Siri with 10 different kinds of technology. We all had to come together. So somehow you've got to be able to synthesize all these pieces together as well.

So what kind of people like to do that? Well, they're curious, they're adventurous. Some, they want to interrogate people, they want to understand it. They want to make a contribution. So it goes beyond just being smart. Oftentimes, these characteristics are more important. I mean, we all know most of the people we hang around with, they're super smart. But this is a different set of attributes where they're really curious and they can somehow work with other people to pull ideas from them and synthesize them together.

So as you know, we've developed a process to help facilitate that and make it go faster. But when I hired, I had a lot of people, obviously, I was looking for people who would start to brainstorm and create with me almost immediately. If they're sitting there and expecting me to give a pitch for how wonderful they are, we're probably not in the right place. I expect to start having a dialogue and creating, like with you. By the way, just for example. Just take a local example here is, I first met you, and we immediately started to discuss things because we're both curious about them. So that's what I looked for.

Daniel Serfaty: I like very much this notion, having witnessed and participated in some of your workshops. The method itself by which you start exploring the space and redefining and iterating a very large number of time, to the point of pain sometimes to the point of, "Ah, I haven't gotten it right yet." But the method of listening to feedback provided by your peers in a very vulnerable way, but you absorb it and then you decide, "Okay, I'm smart, I'm innovative, I know all these things, but it's time for me to reorient my definition of the need out there." Which is actually the first letter in your approach of NABC. We'll talk about that a little more. It's this notion of defining and redefining and re-re-re-re-defining the need until I get it right. Again, for a scientifically trained mind, it's such an unnatural exercise to be, and then it becomes a very enjoyable exercise. At some point, you really derive joy and pleasure from it, not just, I got to go back and do my homework again because that's not the best.

Curt Carlson: Yes, that's funny. My brother says, my middle name is iterate, iterate, iterate. Daniel, it comes from the basic insight of, what are we trying to do? We're trying to identify others. That's a hard thing to do. We're full of behavioral problems, confirmation bias, all kinds of bias. We tend to love our own ideas too much, and we don't have all the ideas. So somehow we've got to bring people together to collect those ideas. We know it has to be a positive environment, otherwise people don't collaborate. I mean, nobody's going to work with you if you treat them badly. So it's got to be a positive, supportive environment. You have to figure out, well, what are we trying to do? We're trying to answer some fundamental questions.

So what's the minimum? Let's start with the minimum questions and let's build up from there. So what we're talking about is basically the principles of complexity analysis or systems thinking, which is if you're working in a complex environment, which is what innovation is. You're dealing with a situation that's unknown, many variables, many interacting with each other. There are all kinds of things going on, and we're trying to give ourselves the best advantage we can to sort out what's important by doing these fundamental learning and value creation methods to give ourselves an advantage. I don't think people understand, Daniel, is, how powerful these ideas are and how ineffective the alternative is.

I'm talking right now with a very large company in Silicon Valley. You would know them. I'm not going to give their name, but their senior vice president said they've had seven incubation processes over her career at the company. None of them produced anything, even though they're full of brilliant people. Again, the best people from the best universities, all the money in the world in an area where there's endless opportunities.

Daniel Serfaty: What is an incubation process? I'm sorry to...

Curt Carlson: It's like the value creation stuff we do, where you bring these people together and then you incubate the idea. You iterate and do the things we're talking about. I'll give you one example of the kind of mistake people can make. So as you mentioned, we start out with a very simple framework. Just four questions need, what's the need? Because everything has to start with there. What's the approach for the offering in the business model? Those are the two things we defined as being an innovation. So your job is to create that. The third thing is, what are the benefits for cost? We also define that, that's the definition of value, and of course it's got to be valued for the end user and also for the enterprise. And how does that compare to the competition or the alternatives? So just four questions, need, approach, benefits to cost, competition.

So we ask people, "Do you have to answer those four questions for everything you do for others?" So for example, if you're taking your spouse out to dinner, do you ask her or him what the need is? What alternatives they would like? You're thinking about what's the benefits, the value of that particular approach, and there's always competition or alternatives. It's the kind of thing we do subconsciously. If you buy a car, you answer those four questions. And every innovation starts out that way. So imagine you have an enterprise, which is what we had in SRI, where everyone understands those four things. Why? Because it's the job of everybody from the guards up to the CEOs of the companies we hired. They all have to know how to solve problems for others. And if everybody understands that simple little rubric, that everything you do starts out with the customer, I can't tell you how transformative it's be.

We've already talked about this endlessly, but it is, it's transformative because it just changes the whole conversation and focus of the enterprise. People would often say, "Curt, you don't mean the guards did this?" I said, "Yes, the guards did do this." They couldn't. It was everywhere. And they got into it, and they had fun because people would come to them with problems and they would go through and start saying, "Well, how can I help you," and say, "what's your real need?" They'd do this stuff, and they had a wonderful time doing it. And it created to the atmosphere in the company of, we're all in this, we're all doing this. It's fun. When we solve a problem that has meaning for others, it's just a sense of achievement and reward from that by itself. So we start with the basics and then you build it up.

So the methodology, we have developed it based on these fundamental principles. So just in brief, what do we do? As we bring four to six teams together, they start off by, we give them two minutes to answer those four questions. Need, approach, benefit to cost, competition. We add a hook to it, so tell us a story about what you want to do and then tell us an action at the end so we know what you're going to do next. We'll give you two minutes and then you'll be quiet. And then we'll give you feedback from the different points of view of the stakeholders. What was good, what could be improved, eyes of the end user, eyes of the investor, eyes of the enterprise, eyes of the partner. So if there's some stakeholder that's important, we can go around the room. And the person's quiet, because we want them to listen to it, and we're calling on the people that give the feedback at random because we want them to be paying attention of thinking about how do you solve these hard problems.

So if I just gave the answer, they would not learn. The reason they learn is, we're asking them to continuously solve this problem. And we do another thing, which I don't think people appreciate how magical this is, because the framework they're doing is very short and they give very short presentations, and there's one presentation after another. They do a thing called comparative learning. Inevitably, somebody will do a good job on some part, like the competition. They'll name the competition specifically, they'll know what they're doing, and everybody in the room is watching that and they go, "Oh, that's what it looks like. When I have my turn, I'm going to do better than that." So they're comparing one against the other, and they're competitive people. I mean, it's all positive, but they're noticing who's doing a good job and they all want to do better than that when their turn comes up. And they do, they learn from that.

And then this reframing thing that's going on by asking them to make the improvements, you're getting them to think very intensely about what did that person do that made it better. So in the educational field, this called metacognition, you're thinking about the process of thinking and in the process you develop better thinking practices. So we built, that's the academic stuff, but we built that into the program. So we get people in a positive way to learn faster, reframe, add new knowledge in a way that can get to solutions faster. And the thing is, at SRI we did this and created multi-billion dollar businesses with no money.

Daniel Serfaty: I'll go back to that in a second with my next question, but I've seen the power of this collaboration and friendly competition, in a sense, when you work in a group like that. Because once you collaborate and you provide feedback to another innovator, in a sense, you have agency of sorts over that innovation, you own part of it, and I think that really is very mutually reinforcing. I've seen the magic work with my colleagues and it's pretty powerful to watch. You mentioned SRI, and in the introduction I said SRI was able to create very high value innovation and the billions of dollars multi unicorns, basically companies over the years you were at the helm. I mean, here's an application that everybody is familiar with, Siri. Can you describe what it took to take Siri from basically a pretty powerful, government sponsored, academic-based technology, to the product it even became eventually? Is that where actually you honed that approach or you practice that already there, how did that go?

Curt Carlson: It was always the same thing whether it was high definition television, which is the thing that I was actually the leader of for a long, long time. So I was CEO when we're doing Siri, but it was always the same thing we were doing, we called these value creation forums. So all through SRI, there were teams that were getting together every two to four weeks or six weeks depending on what it was, and they would stand up and give their value proposition to get feedback. So that's how we ran the company, all based on these very simple but fundamental ideas. It made the organization transparent. I could walk around and I could see what people were doing and see our progress.

We had different value creation forums for different functions. So obviously we did a lot of basic research. So there'd be ones that'd be focused on that. Then there'd be ones that would focus on the ventures formation. So we had one that was focused on that, and we'd bring in both our own people and outside experts because now we had a way to do that. So the whole idea is synthesizing knowledge faster than anybody else. For example, Daniel, if you were doing something and you were the world expert in it, I would try and get you to come and tell us knowledge that we didn't have.

So the way we ran SRI was basically using these same fundamental principles for everything, because everything we did was to create value for others, internal, external. So it didn't matter whether it was finance or HR or whatever. We basically all stood up, including me by the way, I was always working on some new innovation of some sort as the CEO. And I would stand up and get feedback from my colleagues, because I don't have the solution, well at that point, to practically anything. I was an expert at one point, but not then. And yet I had to come and visit people like you and be able to have a good conversation with you. So what was the best way to learn? Well, I'll put together half dozen of our most brilliant people in your domain and have me write down on one piece of paper a value proposition for what I think I need to know with my proposal, and then have them give me feedback.

So this is going on. So imagine with Siri, Siri took a long time. It's not a new idea. I mean, the movie Al was all about having a personal assistant. By the way, the first name of our project was Al. We decided that was not a good thing. But basically it's, can you have a computer who would act like a personal assistant? So that was the idea. It's not a new idea. High definition television was not a new idea. People were dreaming about that in the 1910 or so, we're going to have movies in the house.

So these aren't necessary new ideas, but we started the process at SRI where we started building up the technologies. So as I said, there's a family of technology. So the team started to say, "What's the big issue here that if we could address it would make this possible?" Now, the big one was disambiguation. So when you type in the word, well, the phrase, give me a restaurant in Boston at seven. Well, your assistant knows you're in the Boston in Massachusetts, and she knows you means seven in the morning in this case, and not seven at night. The computer didn't know that, solving that problem was the key issue to making it possible. So we call that the key insight.

If we can solve that problem, we can probably pull together all the other technologies and we can make a proposal, which we did to the government to help us develop this technology. But we had to prove that we had a viable option for solving that disambiguation problem. There were a hundred Bostons in America, they all have restaurants. They all helped at one seven the morning and the evening. Until we solve that problem, we couldn't solve it. But that wasn't ultimately the last big issue. The last big issue was we didn't have a business model. So we actually could have built it at least a year earlier, maybe two years earlier, but without a business model, we would just be throwing our technology out the door and then having a crash and burn and go away.

So we actually built up the discipline at that point to not build the product, but to actually have the discipline of coming up, working on solving that problem. And only after we figured we had the technical issues under control and risk mitigated. Then we had a risk mitigated business model that we actually formed the team, spin the company out and birth Siri. So we were very disciplined about that. So just here's another mistake people make all the time, because everybody wants to jump from a problem to a solution and build their wonderful thing. There's an idea called the minimum viable product. Daniel, what is a minimum viable product? Do you have any idea what that is? What's minimum viable mean?

Daniel Serfaty: The MVP? What viable to what, to whom?

Curt Carlson: Well, exactly right. Now, suppose you haven't answered these questions about the customer's need, the actual need, like in the MRI example, or you don't have a business model and now you're building this thing. What's the chance you're going to be right? It's not very high. And we see this in the companies we work with. They'll spend 40, $50 million and all of a sudden they discover, "Oh, we forgot to do this. Well, they didn't forget to do it." They knew it was always there. They just kept on saying, "Well, we'll get to that later." So since we didn't have any real money at SRI, our approach was very different. We call them minimum viable experiments, and the idea is if you take risk out, the value goes up. Well, if you can take a lot of the risk out without spending a lot of money, then you can raise more money, take more risk.

Daniel Serfaty: But it takes a form of courage actually to stop there in order to do those experiment and not rushing to products.

Curt Carlson: It does. It takes also a deep understanding that spinning something out and failing is a disaster. Now forget about the money. I'm talking about the people. It's what it does to them to work for 10 years and spin something out and then look back and know you just made a classic blender, you didn't answer the most fundamental questions before you spun it out, and then it crashes. So SRI, before I got there, it spun out, I don't know, over a hundred companies, and they all crashed and burned.

Daniel Serfaty: A hundred companies?

Curt Carlson: A week. There's a list of them on Wikipedia that goes on and on and on, but none of them were formed properly. They all went out too soon. The technologists always think the world is moving faster than it is. Most of them had no business model. Their attitude was, we'll figure it out later. Well, what you want to do is figure it out rapidly and take the risk out of it, and don't think you can just postpone that. So the thing that changed a lot at SRI is the discipline of our people knowing that we could mitigate the risk without a lot of money, and that we could answer these questions. And if we did, that the chance of success was very high. So that was a big mindset at SRI that never would've happened in the old SRI. You wouldn't have seen any of these things.

Daniel Serfaty: No, this is a terrific insight, because many folks, you have all kinds of numbers in the popular literature about the number of failures that a lot of startups have, etc. And people rarely analyze them in the way you just analyzed. Not all failures are attributed to that, but many are. When you have a solutions, but you don't have a problem that is actually a need out there. And I think it's terrific for our audience to understand that you can eliminate that risk quite a bit if you swim a bit upstream before taking the jump.

Curt Carlson: For me, and it's hard to communicate this, but people say, "Curt, you say everything starts with NABC." I say, "Well, yeah, you can change the words. But those four concepts, if you can get everybody in the company to just understand those four concepts, it's transformative. Because it means everybody's going to be profoundly more customer focused. And if you can eliminate the mistakes that are made by not having a customer, it's not a little thing. It's actually a very big thing."

Daniel Serfaty: So Curt, you seem to indicate that this whole orientation towards the value for others and understanding the need and redefining the need in order to refine the innovation itself is more just than a process. It's really a culture that eventually permeates all aspects of an organization.

Curt Carlson: Yes.

Daniel Serfaty: How do you get started? How do you get even started to think in that direction, whether you are a single person, a major corporation, a medium-sized, a small-sized company?

Curt Carlson: Yeah, it is the question, isn't it? It's the big question. So as you mentioned, I teach at two universities now. One of them is called Worcester Polytech, and they've agreed that they're going to add value creation and innovation to the education of all their graduates. And so people say, "Well, what are you actually doing at WPI that's different?" And what we want to do is change the mindset of students. You use the word culture. I think of culture as really changes in behavior and mindset. That's what it is, just a word for that. So as we talked about, I mean, these are great students. They can solve problems when they graduate and they do projects today. So they're a little more sophisticated in terms of doing things for others than a lot of schools where they don't do lots of projects.

But having the mindset of not just solving problems, but solving problems for others is a shift in perspective. It's a very big shift. And again, it doesn't happen just from a lecture or a book. It comes from doing it, because it is a behavior and it's a mindset, and you don't change those things from books, but you have to actually do it. The WPI is actually a unique school in the sense that since the students do multiple projects, you can actually insert these ideas in a very kind of low cost, low impact way to help reinforcing this notion, we're engineers and we're scientists, most of us are going to be solving problems for others, so let's start behaving that way.

So in the company, it's the same thing. So we mentioned NABC just as a simple framework, and the first thing that's on the list is, what's the need. So you start saying that all the time. What's the need? I'll tell you one funny little story. We hired a brand new PhD from Stanford, and we're in a meeting, we're going around, and I jumped from the problem to the solution. Oh boy. So this brand new PhD said, "Curt, I thought at SRI we always started out with a customer need first." I thought, "We've won. We've won." Even the brand new PhDs are coming in with this mindset.

So the way we started at SRI was you don't convert everybody on day one. I had partners who I worked with who helped and supported me, and my friend who I started all this with, Norman Winarsky came and became our vice president of ventures. But mostly we just started inserting these ideas everywhere we could, and we found early adopters. We found some people who wanted to work this way, and they became role models for other people. We may patent disclosure, you had to use the NABC framework because that describes a good patent. What's the need? Most patents don't have any value. So we inserted it there. Our investment funds, we asked them to ask these questions.

So it wasn't a lot really for most people, but it was everywhere we could. And we again, kept on supporting early adopters who started to be more successful and realized they could do bigger things. They could work with better people, they could make a bigger impact if they work this way. And so bit by bit, it probably took us realistically three years before we started to see significant change. Remember, these people had been used to failing for 20 years. So this is actually a big deal. And I would say after five years, we basically had pretty much won.

Daniel Serfaty: That's phenomenal to explain that transition from a company that is trained or an organization that is trained to come up with solutions, the company that is trained is defining the value and the needs of the target user, the customers, the others. A big transformative thing. I don't know yet how, I call it a thing right now, that I know from previous discussion with you, you've been using, practicing, imagining the way by which it's going to disrupt our lives, in a good way, perhaps. Is generative AI. People know about ChatGPT or GPT-4 or other application like Bing and Bart by different vendors from OpenAI, all the way to Google and others and Microsoft. Can you share with our audience how you think it is transformative? Has it been transformative for you in your own work, but also some speculation about the future impact it'll have on all our work

Curt Carlson: Yeah. Well, obviously we're all trying to figure this out, so I've asked you the same question, is like, "How do we all think about this?" But the way I would start to think about it is to go back to those fundamental questions we started with. Which is, our job is to create value for others, what are the ingredients that have to go into that? Well, we need to collect ideas. We need to synthesize ideas. We need to reframe them. We need to do all these things. And the faster we can do them, the bigger competitive advantage we have. So the reason we designed the value creation forums the way we did is we can actually make that go typically 10 times faster than what would go on in a normal company, or maybe even infinitely faster. Because unless they bring the teams together in some way, they're not going to be successful anyway.

So if you think about that, then you think about, well, what does Chat do for you? It can't really solve your problem, but what it can do is, first off, it can give you frameworks for what solutions look like in your domain. So you do all kinds of things, most companies do all kinds of things. So if you're doing an IT example with education is different than you're going to do with the Department of Defense. But with Chat you can actually ask it to answer typical kinds of questions to learn the language in the background in that field. So it's a template of performance.

The second thing it does is it allows an iteration partner, so you can put your idea in, which by the way, I put the MRI example in and it took a few iterations. So you give it a template, answer these questions, and I had to ask Chat to look at it from the emotional point of view of the end user. So I actually asked it, and eventually it came up with, we need to find a way to engage these children. So you can put it in, and then you can say, "Simply improve this idea. Give me another version of it," or, "Reframe this. Reframe this from an emotional point of view. Reframe this from a financial point of view." You can just do these iterations in real time. And again, it doesn't answer your question, but it gives you exemplar of what to do.

Daniel Serfaty: I love it because you described here something that you know is very near and dear to my heart. This whole human AI partnering or teaming on work in general, and that iterative framing and reframing in order to work with that particular brand of AI is a wonderful example in which you use your expertise, perhaps a consideration of certain variables, and then ChatGPT works with you on that. It's not an either-or, it's a together and that's a beautiful example that you described.

Curt Carlson: Yes, I call it an iteration buddy or an iteration partner. And I got to tell you this, it's funny though, because I'm sure you've had this example, it's a bit shocking sometimes to type in what you think is a new idea and discover that what comes back is better than your idea. So this is the scary part of it. If you're a new graduate today, it's, what is this going to look like in 10 years? And it's funny with some of my university partners who have a harder time getting feedback, obviously. And so you have to be very gentle with that.

In this case, you can start an engagement with someone and say, "What's your idea?" Put it into Chat, and then you ask it to answer the questions, a bunch of questions, and it comes back. And oftentimes the person, it doesn't matter whether it's a professor or not, just anybody, but the answer that comes back is often better than what they imagined. So what it's doing is it's setting a minimal competitive framework as well. So yes, it's an exemplar, yes, it's an iteration partner, but it's also setting the minimum levels of performance that people have to do better than. And Daniel, that is a scary thought, because this version of Chat that we're using is not even up to date, and it's not nearly as powerful as it will be. So imagine how that's going to amplify competitiveness across the world.

Daniel Serfaty: Help us imagine that. 10 years from now, how does this whole thing look in terms of that variable of competitiveness around the world?

Curt Carlson: I think it's hard to imagine, but it's for all those three things I mentioned, templates, iteration partner, and a baseline competitive analysis are by themselves, they're not 10% effects. They're two to 10 times effects. They're huge factors. When we did the glass workshop with your team, I didn't really have this thought out, and I didn't have good templates for your teams, but I think we can just improve the process we're using with you by at least another factor of two, I think even more than that. It's going to be, I think, fascinating to watch the next iteration of this, using this tool comprehensively from the beginning to the end. So for example, with students at WPI, we had them submit their proposals using Chat. So instead of having to explain all this stuff to them, we said, "Here's a tool. Here are the questions you need to answer. Do this 12 times and then come to the workshop." So the barrier for getting them involved went almost to zero, right?

Daniel Serfaty: Yes.

Curt Carlson: The other thing that people say is, "It can't be creative." And for the reason we've been talking about, I don't accept that because again, creativity is, an innovation is typically by synthesizing different forms of knowledge.

Daniel Serfaty: I couldn't agree more. Yes, exactly.

Curt Carlson: And again, that's why we run the program we do to get the teams together, so you can provide the inputs and blah, blah, blah. Alan Kay has a famous quote, which is, point of view is worth an extra 80 IQ points. Which is true, if you're solving a mathematical problem and you have a buddy who's the world's expert at Maxwell's equations or something. It might take you two years to learn all that stuff and solve the problem, where he can solve it in an hour. He just says, "Oh yeah, that's this transform. This is one we've done." Okay. This is going to be that kind of a tool too. It's going to help us solve a lot of those problems, like having an expert over our shoulders.

There's another problem that I have people solve. It's called the slow elevator problem. It's like the one with the MRI. So you're a manager of a slow elevator and you've got to solve it, or your tenants are going to leave. So if you ask people, they jump to the elevator, the algorithm doesn't work, we're going to do something. Well, again, who's the end user? Well, it's the people who are waiting. What's their need? What's the discomfort they have? What's their pain? Well, they're annoyed. Okay, well, people are often annoyed. How can you solve that problem. Well, so you can go through this drill and eventually one of the solutions is putting up a mirror. Just put up a mirror, and people come in and they adjust their tie, and they comb their hair and they look at themselves and they entertain themselves, monkey faces. So it's not a hundred percent a solution, but as soon as you say this, see mirrors all over the place.

So I put this in the chat and I said, solve this problem. So it comes back with, it focused by the way, it has the same human mistakes we do. It focused first on the elevator, which I thought was amusing. It couldn't get itself away from the elevator. So I had to give it a few more instructions, take it from a different point of view, blah, blah, blah. It finally came up with a mirror. One of the examples came up with a mirror. I thought, "Wow, this is cool." So then I said, "How can we make this better?" And it said, "Okay, well, it could be a TV screen and you could show videos that are more entertaining." "How could you make that better?" "Oh, well, you could connect that to some kind of a wifi system. So the entertainment depends on who the person is watching."

"Oh, that's cool. How could you make that better?" "Well, now that we know who the people are and we have the TV screen, then we could tie that to the elevator and we could adjust, when the elevators show up for different people." "How could you make that better?" "Oh, you could, this customer could know who the person is, so they could take pictures of the person and send pictures with their buddies waiting in the..." I'm sitting there going, "This is amazing." This just took me 10 minutes and this whole world of possibilities just came together out of this crazy device.

Daniel Serfaty: This is a wonderful example, showing how you can demystify a little bit what you said, what is, at the end of the day, a wonderful device that you can get the most of by the proper interaction. The proper reframing and asking to improve.

Curt Carlson: Daniel, I think the world we just described, which is obviously going to be profoundly more competitive, but also it's going to advance society a lot. But I think a big question for society is, what kind of education will be preparing the kind of people that we work with and everybody, but particularly STEM scientists, engineers. What kind of education will be uniquely valuable in the world we're going into? And the one thing that Chat can't do is, it will give us all this ideas and open up all these possibilities, but someone still needs to have the perspective of creating value for others. So I think those skills, the perspective of not just solving problems, but solving problems that have meaning for others will become the essential life skill of professionals going forward in this time.

Daniel Serfaty: What a wonderful insight. I'm sure it answers or it addresses many questions that our colleagues and audience members have had. Curt, I want to thank you for a wonderful, too short a time to explore all the components of innovation, the implication of it, the transformation of innovation itself, with your last remarks about how we can leverage generative AI, but also all the wonderful experiences that you shared with us through your own experiences, your own practices and beliefs. So thank you so much.

Thank you for joining me today. As always, the MINDWORKS team welcomes your comments and feedback as well as your suggestions for future topics and guests. Send them to us, we'll use them. You can email us at mindworkspodcasts.gmail.com, we love hearing from you. MINDWORKS is a production of Aptima Incorporated. My executive producer is Ms. Debra McNeely, and my audio editor is Ms. Chelsea Morrissey. To learn more, please visit aptima.com/mindworks, thank you.