Little Bets

By: Peter Sims



In his research, University of Chicago economist David Galenson has identified two basic types of innovators: conceptual and experimental.

Conceptual innovators tend to pursue bold new ideas and often achieve their greatest breakthroughs early in life. Think of Mozart for example and all of the great classical pieces he created as a mere boy. In the wider world, there is a place for such creative geniuses but in business as we all know, prodigies are exceptionally rare.

More common are experimental innovators. These creators use iterative, trial-and-error approaches to gradually build up to breakthroughs. Experimental innovators are persistent and willing to accept failure and setbacks as they work toward their goals.

Thomas Edison famously said, “If I find ten thousand ways something won’t work, I haven’t failed. I am not discouraged, because every wrong attempt discarded is just one more step forward.” Edison was an experimental innovator.

Instead of trying to develop detailed plans to predict their success, experimental innovators do things to discover what they should do. They attain extraordinary success by making a series of what Peter Sims calls “Little Bets”.

Little Bets is based on the proposition that we can use a lot of little bets and certain creative methods to identify possibilities and build up to great outcomes.

Amazon’s culture breathes experimentation. Employees there are encouraged to constantly try things and develop new ideas. It’s such an important goal of the company to provoke this that whether or not employees are doing so is a part of their performance reviews.

Jeff Bezos, Amazon founder, president, Chief Executive officer and chairman (wow!) often compares Amazon’s strategy of developing ideas in new markets to “planting seeds” or “going down blind alleys.” They learn and uncover opportunities as they go.

Amazon use little bets.

Lesson 1: Affordable Losses

The predominant approach to management that evolved during the industrial era, known as scientific management, broke jobs down into specific, sequential tasks, which could then be allocated appropriate times for completion to optimise efficiency.

It was these methods that allowed Henry Ford to streamline automobile production, first revolutionising manufacturing and then the service business. But the emphasis on linear systems, control, relentless efficiency and eradicating failure leaves little room for creative discovery and trial and error.

Unfortunately, most of what we would like to be able to predict is unpredictable and uncertainty is becoming ever more common with the accelerating pace of technological change. Thus, a key flaw with the top-down, central planning approach is how it limits our ability to be flexible and discover new ways of doing things.

No-one can take their eye off core business or responsibilities, but everyone can spend a portion of their time and energy using little bets to discover, test, and improve new ideas. In trying out new things, successful entrepreneurs tend to identify what they are willing to lose, rather than calculating what they expect to gain. Using Little Bets aligns to the affordable loss principle. It lets us incrementally build on success as we progress with an idea. Of course the subject of affordable losses highlights a key issue with the little bets approach—it inevitably involves failure.

Successful innovators tend to view failure as both inevitable and instrumental in pursuing their goals and approach these with a growth mind-set.

Lesson 2: Growth Mind-sets

Sims, tells us there are two types of mind-sets. Fixed mind-sets cause people to be over concerned with seeking validation and they focus on grades, titles, or recognition. Conversely, those with a growth mind-set believe their abilities can be grown through effort and view set-backs as opportunities for growth.
Watch our summary of Mindset by Carol Dweck to learn more about this topic.

Having a growth mind-set is not about not caring about failure. We can teach ourselves to think differently about failures and mistakes, seeing them as opportunities for learning and growth. Practicing Little Bets frees us from the belief that we should know everything we need to know before we begin. Focusing on doing, rather than planning. Learn about the risks and pitfalls rather than trying to predict them with precision.

Lesson 3: Experimental Prototyping

The use of prototypes, often the rougher the better, also greatly facilitates overcoming the blank-page problem, that feeling we get when faced with a demand for innovation – writers block.

Though the use of prototypes our Little Bets approach allows us to test out the suitability of our product or service. It allows us to fail fast. If we haven’t invested much in developing an idea, emotionally or in terms of time or resources, then we are more likely to be able to focus on what we can learn from that effort than on what we’ve lost in making it.

But finding ways to fail quickly, to invest less emotion and less time in any particular idea or prototype or piece of work, is in itself a challenge. Sims gives us three key approaches:

Plussing, Playing and Smallifying.

Lesson 4: Smallifying:

“Constraints shape and focus problems and provide clear challenges to overcome.” Marissa Mayer, VP, Location and Local Services, Google.

Productively creative people use constraints to limit their focus and isolate a set of problems that need to be solved. Constraints also help provide structure but that doesn’t make their use easy. Being able to effectively use constraints takes some doing.

In some industries such as architecture, constraints are clearly imposed from the outside. In other industries, the possibilities seem limitless. The key is to take a larger project or goal and break it down into smaller problems to be solved, constraining the scope of work to solving first one problem and then another. Bing Gordon, a cofounder and the former Chief Creative officer of the video game company Electronic Arts, calls this process smallifying.

At Electronic Arts, Gordon found that when software teams worked on longer-term projects, they were inefficient and took unnecessary paths. However, when job tasks were broken down into problems to be solved, activities which were both manageable and could be tackled within one or two weeks, developers were more creative and effective.

Those familiar with software development will recognise this as Agile Development. Sims suggests every business could benefit from the adoption of Agile principles with a focus on small, manageable pieces of work and narrowly defined problems. Given the fear or indecision we often confront when attempting to unleash our creativity, the practice of rigorously smallifying problems is liberating.

Not only does the smallifying process facilitate the more efficient development but it also promotes faster learning and it’s also a good method for failing fast.

Lesson 5: Immersion

One of the best ways to identify creative insights and develop ideas is to throw out the theory and experience things first-hand. As Steve Blank, a cofounder of the software company E.piphany, who teaches entrepreneurship at Berkeley’s Haas School of Business says, “No facts exist inside the building, only opinions.”

Research evidence suggests a strong link between inquisitiveness and creative productivity. Sims refers to a study that found several “patterns of action” or “discovery skills” that distinguish innovators from non-innovators. In addition to experimenting, innovators employ techniques such as observing, questioning, and networking with people from diverse backgrounds all skills which can be developed.

The innovators highlighted were also voracious questioners, regularly seeking to challenge the status quo by asking “what if?” “why?” and “why not?” questions. They steer clear of the status quo bias.

Immersion is a way to challenge one’s assumptions and gain broader insight. It increases diversity, whether that is with perspectives, experiences, or backgrounds. It fuels creativity.

Lesson 6: Plussing and Playing

Let’s consider Pixar the successful Digital animation studio. Throughout their creative process, Pixar rely heavily on what they call plussing. Plussing is the ability to build upon and improve ideas without using judgmental language. Rather than criticise an idea in its entirety (even if you don’t think it’s good), finding and building on the good points encourages progress. Plussing allows for critique and positive feedback simultaneously, but presented in such a way so criticism is not deflating.

As Pixar animator Victor Navone said, “You always want to present your ideas in a constructive manner and be respectful of the other animator’s feelings. I usually start my suggestions with ‘what if’ or ‘would it be clearer if’. Creating an atmosphere where ideas are constantly being plussed, while maintaining a sense of humour and playfulness, is a central element in doing it this way.”

Like plussing, cultivating an environment that allows for playfulness embraces healthy perfectionism and can increase the quantity and quality of group communications. Humour has also been demonstrated to increase trust.

 A playful, lighthearted, and humorous environment is helpful when ideas are incubating and newly hatched, the phase when they are most vulnerable to being snuffed out or even expressed because of being judged or censored by the boss.

Putting it all together: Small Wins

Sims believes if we begin to make use of these methods to develop new ideas, strategies, and projects, they will combine to create small wins.

A Small Win can be defined as “a concrete, complete, implemented outcome of moderate importance.” They are small successes that emerge out of our on-going development process, and it’s important that we look out for them. They serve as landmarks, and they can either confirm that we’re heading in the right direction or they can act as pivot points, telling us how to change course.

However, small wins do not combine in a neat, serial, linear form with each step being a demonstrable step closer to some predetermined goal. More often small wins are scattered and align only in the sense that they move in the same general direction.

One of the best examples of how a series of small wins shaped a company’s evolution is Pixar’s emergence as a respected animated film company.

Pixar set out as a computer hardware company, trying to create a market for its Pixar Image Computer. When Steve Jobs got involved with Pixar, it had only sold only 120 of the devices. Animation was the one team that began to show signs of promise. What management did, which enabled them to impress Steve Jobs enough to continue to support their efforts, was to demonstrate the value of computer-generated animation films in a series of small wins.

They proposed a series of short films, arguing that they would help to sell Pixar’s other products.

Lux Jr., the first short film made after Steve Jobs bought Pixar in 1986, was considered a real breakthrough, especially for its emotional realism. It’s success compelled Jobs to allow John Lasseter and his assistants to make another short film; Red’s Dream.

Little bet after little bet led to Toy Story, and the development of Pixar into one of the most successful feature film producers of all time.

Learn from Pixar (and other great innovators), and you’ll be well on your way to that “overnight success” you’ve always been waiting for.