Little Bets: How Breakthrough Ideas Emerge from Small Discoveries

We learn how the founders of corporate giants like Google, Amazon, Starbucks, Pixar Animation Studios, Apple, and Hewlett Packard built their businesses through a series of experiments. We read how acclaimed contemporary architect Frank Gehry designed Bilbao's Guggenheim Museum and Los Angeles' Walt Disney Concert Hall through a process of trial and error. And we're shown how the US military used a strategy of small bets to win incremental victories against insurgents in Iraq.

This book's message is that the best ideas didn't always start out great, rather they emerged through a process of experimental innovation.

Quoting entrepreneurs, CEOs, designers, writers, psychologists, neuroscientists, and military leaders, the author shows how failure can be an important, positive step on the path to creativity. And he explains how we can overcome our fear of it and just get out there and try.

So who's this book for? Well, if you're a budding or seasoned entrepreneur, you'll find some great tools in this book to help you get your project off the ground or develop a new idea. Managers can pick up tips from innovators like Google or Pixar on how to get the best out of their staff. And if you're a writer, artist or designer, you'll learn how to overcome mental blocks and get something down on paper, canvas or the drawing board.

"Little Bets" is the author's second book. A former venture capitalist, Sims co-authored the bestselling business book "True North" with Bill George. His work has appeared in the Harvard Business Review, Fortune, and TechCrunch, and he contributes to business blogs at Reuters and the Harvard Business Review. He's spoken or advised at numerous organizations, including Cisco Systems and Eli Lilly. And to write "Little Bets," he studied how more than 200 creators and innovators do their work.

So keep listening to hear how learning to fail quickly can be the key to eventual success, why questions are the new answers, and how focusing on small wins can help transform your business beyond what you ever imagined.

"Little Bets" is a short, easy-to-read and neatly structured book of 10 chapters that mixes anecdotes with real-life case studies, input from academics and scientists, and practical tips to succeed at work and elsewhere.

You'll learn how to make losses that are affordable, how to handle time and financial constraints, and how to move from a fixed mindset to a growth mindset so failure feeds ambition instead of crushing it.

The book also provides answers to some thought-provoking questions. For example, why do some people seem to be luckier than others? And what's the difference between healthy and unhealthy perfectionism?

At this point, we should note that not all the author's ideas are new. Some of them will be quite familiar, if you've read many business books in recent years or explored the basics of organizational psychology.

That said, some of the examples of experimental innovation are fascinating – ranging from Middle Eastern counterinsurgency operations to Pixar's "Finding Nemo" – and these really help bring the concepts to life.

So let's take a closer look at how little bets work.

The author starts the book by describing how entertainer Chris Rock develops his comedy routine. When preparing for a new show, Rock tries out reams of material on tiny audiences in small comedy clubs. Armed with a notebook and pen, he experiments with jokes, discarding those that fall flat and building on the ones that get a good laugh. Rock understands that great ideas don't arrive fully formed but they emerge through rigorous experimentation.

So, how do we become experimental innovators? Well, let's start with the concept of failing quickly.

Failing quickly to learn fast is a familiar concept for seasoned entrepreneurs. Entrepreneurs often push ideas into the market as quickly as possible, so they can learn from mistakes. Their failures are signposts, pointing them in a new direction. Similarly, some writers sketch out a rough first draft or multiple drafts just to get their creativity flowing.

The secret is not to invest too much time, resources or emotional energy in a first draft, an initial idea or a prototype. If we're not too attached to our first attempt, it'll be easier to modify it – or even rip it up and start again.

Architect Frank Gehry, who designed the Guggenheim Museum in Bilbao, is someone who fails quickly to learn fast, according to the author. When starting on a new building, he begins by cutting up, folding and crumpling pieces of paper or corrugated cardboard into rudimentary shapes that gradually resemble buildings.

Along with his colleagues, he then takes a long look at his models before cutting out pieces or adding extra folds. In this way, his team can work quickly and inexpensively, incorporating thousands of ideas. It's a huge process of trial and error. On a typical project, Gehry Partners usually produce between thirty and fifty models from cardboard, plastic, Styrofoam or metal.

This approach can work in all types of organization. Consumer products company Proctor and Gamble has learned that it's more cost effective to test through prototypes with users, rather than perfected products. P&G staff put together models of products using duct tape and cardboard, much like Frank Gehry.

They find consumers are more willing to share their honest opinions when an idea is still a work in progress. And the P&G team is less emotionally invested in its ideas and more willing to modify them or start again.

These examples are encouraging for anyone involved in a creative process – as an individual or as part of a big organization. It's common knowledge that large corporations will struggle unless they keep innovating. Making quick, small bets at a minimal cost to strip out the things that don't work is a great way to trial new ideas.

Another way to help build success out of little bets is by asking questions.

In the chapter Questions are the new answers, the author says one of the best ways to come up with new ideas is to approach problems from the bottom up.

That is exactly what Nobel Peace Prize winner Muhammad Yunus did in the 1970s. Yunus was teaching economics at Chittagong University in Bangladesh in 1974 when a severe famine hit the region, prompting mass migration from the countryside into cities and causing sickness and death. Yunus couldn't reconcile the lectures he was giving on economics with the reality on the streets outside, so he decided to go and experience people's lives first hand – to take what he called the "worm's eye view" rather than the bird's eye view of his subject.

Yunus immersed himself in daily life in the Bangladeshi village of Jobra and started to ask questions of the local people. It was there he met Sufiya Begum, a 21-year-old woman who made a meager living weaving bamboo stools. Through asking questions, Yunus discovered Sufiya borrowed money for bamboo from middlemen and then sold her stools back to these lenders, making a profit of two US cents per stool, barely enough to survive. She was trapped by her circumstances, unable to access other types of credit because she had no collateral.

Yunus asked one of his students to compile a list of people in Jobra who, like Sufiya, depended on middlemen. There were 42 people who needed a combined sum of $27 to finance their work.

He decided to make the first $27 loan out of his own pocket and then found the capital to start the Grameen Bank in 1977, launching the microfinance industry.

Grameen provided poor, self-employed workers, mostly women, with tiny loans. Many observers were skeptical about these worker's ability to repay their loans. But over the coming years, Grameen would loan over $6.5 billion and 98 percent of all the loans were repaid.

So how does this theory translate from rural Bangladesh to the West's corporate world? Well, whether you're trying to solve a problem in your business or launch a product into a new market, it's vital to discover what's really going on at grassroots level.

Proctor and Gamble has taken this on board with its Living It program. Company employees spend time living in low-income homes around the world, with typical users of P&G products, so they can understand what they want and need.

Let's now take a look at Pixar, the king of digital animation, and see how the concept of small wins helped turn a struggling business into a movie-making giant.

The author says we don't need to notch up great successes or know exactly where we're heading when we start out. Instead, we should celebrate what organizational psychologist Karl Weick calls outcomes "of moderate importance," and then build on these. One small win sets in train another and then another.

Pixar Animation Studios started out as a computer hardware company called The Graphics Group. It was trying to create a market for its Image Computer, which allowed people to see complex images clearly, such as CAT and MRI scans.

In 1986, Apple co-founder Steve Jobs bought the company for $5 million and renamed it Pixar. At this time, digital animation was a sideline that wasn't making any money – and Jobs never expected it to. But Ed Catmull, the company's lead technologist and president, had dreamt for years of making a feature-length computer-animated film. Trouble was, hardly anyone took him seriously. Catmull had even persuaded Jobs not to shut down the digital animation division – a number of times, the author says.

Catmull knew Jobs wouldn't back a full-length feature film, so he proposed a series of short films that would help sell Pixar's other products. The goal of the first short film, "Luxo Jr.", was to promote Pixar's hardware products at an annual computer graphics conference.

"Luxo Jr." showed a large desk lamp interacting with a smaller lamp as though adult and child. It received a standing ovation at the conference. The film was the first small win for Catmull and Pixar's chief animator John Lasseter, and it paved the way for the company's extraordinary success in digital animation. The Luxo lamp was incorporated into Pixar's logo and appears at the start of every film.

On the back of "Luxo Jr."'s success, Jobs gave Catmull and Lasseter the green light to produce another short film for the graphics conference. Again, the audience loved it and Pixar got rave reviews.

But despite the success, Pixar's core hardware business was still struggling and animation wasn't producing any money. Jobs considered shutting it down again. Catmull tried his luck once more, proposing a short film named "Tin Toy" in which a toy comes to life. "Tin Toy" scored a much bigger win, getting an Oscar in 1988 for Best Animated Short Film.

Jobs gradually began to steer Pixar towards digital animation and in the early 1990s, Disney suggested a partnership on a feature-length computer animated film. Lassiter used "Tin Toy" as the basis for "Toy Story," and the rest, as they say, is history. Pixar went on to produce box-office hits including A Bug's Life, Toy Story 2 and 3, Finding Nemo, The Incredibles, and the Cars movies.

The important point about Pixar's success story is there was never a road map. After all, Pixar was a hardware company. Catmull and Lasseter had a vision, but they knew they had to start small, winning over Jobs with a series of little victories that built up their credibility and won critical acclaim.

Much of the author's insight into Pixar's development comes from the book "The Pixar Touch" by David Price. This might be one reason why the author leans heavily on examples from Pixar to back up his theories throughout the book. They provide great color, but some readers may think Pixar gets too much coverage, and this makes the author look lazy.

Indeed, the author draws on books, documentaries and newspaper articles in a fair number of his key case studies. But he doesn't depend entirely on secondary sources. He conducted some valuable in-person interviews to back up other examples, including with top military officials.

Perhaps what "Little Bets" is missing most of all is a counter argument. The author includes few caveats and we feel the book lacks balance. There aren't enough examples of companies that haven't used little bets to succeed, and there's no mention of the potential negatives of this strategy.

That said, if you can overlook these shortcomings, "Little Bets" is a really encouraging read. If you're struggling in business or facing creative blocks, this book should spur you on, help you to overcome a fear of failure, and teach you to build on small wins, learning from your mistakes.

"Little Bets" by Peter Simsis published by Random House Business Books.

That's the end of this episode of Book Insights. Thanks for listening.