How do companies innovate? With "Loonshots"

For every game-changing idea, there are countless concepts that lead nowhere. This puts companies in a difficult position: Is it worth investing time and money in innovation?

Even businesses that do like to experiment often get cold feet and fail to foster what physicist and entrepreneur Safi Bahcall calls “loonshots”: disruptive ideas that are crazy enough to work.

Most organizations start out in a high-stakes scenario: it’s do-or-die, boom-or-bust. But then something changes at a structural level: success tends to make companies risk-averse.

Job titles and bonuses don’t mean that much in the early days of a start-up. But once an operation gets off the ground, a survival impulse kicks in and decisions get conservative.

Take Nokia as an example. After decades of successful innovation, its engineers had another bright idea in 2004: a touchscreen phone that runs apps and has a camera built in.

Nokia’s executives didn’t back the idea. Three years later, Apple introduced the iPhone and revolutionized the mobile computing market. Nokia went from industry leaders to has-beens.

Safi Bahcall’s research led him to believe that pioneering companies need to balance “radical innovation with operational excellence” while also keeping them separate from each other.

Loonshots, by nature, are fragile. They need to be nursed to health in isolation. Sharing crazy ideas with those responsible for a company’s stability (or “franchising”) risks killing them off.

The people who develop loonshots are the artists of any organization. The people who maintain a company’s health are its soldiers. Both are equally important: a lesson Steve Jobs learned the hard way early on at Apple when he valued designers more than operators.

Good leadership acts as an intermediary between artists and soldiers, between loonshots and franchising. Leaders keep an open mind, don’t micromanage, and focus on translating seemingly crazy ideas into ones that will feel irresistibly simple. That’s the sweet spot of success.