The Innovator's Hypothesis: How Cheap Experiments Are Worth More Than Good Ideas

by Michael Schrage

Achieving faster, better, cheaper, and more creative innovation outcomes with the 5X5 5 people, 5 days, 5 experiments, $5,000, and 5 weeks. What is the best way for a company to innovate? Advice recommending "innovation vacations" and the luxury of failure may be wonderful for organizations with time to spend and money to waste. The Innovator's Hypothesis addresses the innovation priorities of companies that live in the real world of limits. Michael Schrage advocates a cultural and strategic small teams, collaboratively—and competitively—crafting business experiments that make top management sit up and take notice. He introduces the 5x5 giving diverse teams of five people up to five days to come up with portfolios of five business experiments costing no more than $5,000 each and taking no longer than five weeks to run. Successful 5x5s, Schrage shows, make people more effective innovators, and more effective innovators mean more effective innovations.

Genres: Business, Nonfiction, Leadership, Entrepreneurship, Management, Economics, Audiobook

237 pages, Hardcover

First published January 1, 2014

About the author

Michael Schrage is a Research Fellow at the MIT Sloan School of Management's Initiative on the Digital Economy. A sought-after expert on innovation, metrics, and network effects, he is the author of Who Do You Want Your Customers to Become?, The Innovator's Hypothesis: How Cheap Experiments Are Worth More than Good Ideas (MIT Press), and other books.

Reviews

[Jay French · Rating 3 out of 5]

Schrage suggests using a methodology of doing many quick and cheap experiments to generate innovative behaviors. I was greatly confused in the beginning, but Schrage uses an example of an obvious good idea – eat less and exercise more to lose weight – and suggests that there are plenty of other good ideas for losing weight, like lipo. The key is in implementation, and you can focus the experiments there for value. Lots of examples.

[Jose Papo · Rating 3 out of 5]

Schage book is good, but he focus a lot in explaining why experiments are good and the best way do create innovation. For new people learning about innovation it's good. For experienced people and who knows a lot about design thinking and jobs to be done literature the book is good in Part III. There he explains the 5x5x5 approach to experiments.

[Said AlMaskery · Rating 4 out of 5]

This is a very useful book on innovation. However it is not complete as it presumes you - the reader - understands what innovation is. Incidentally I had course that focused on innovation and hence was able to relate this approach to innovation and put it in context.

The approach, called the 5x5x5, aims to simplify and reduce the cost of innovation (btw; innovation is not R&D, it is much wider) whether it was for bringing a new product to the market or testing a business hypothesis, or even a new management tool that you would like to bring into your organization.

The author focuses on an important point; any idea is not good enough if it is not testable. In other words, the world is filled with great ideas which are very expensive and hence, it would be much more useful to have a testable idea that would take no longer than 5 team members, in 5 days, to come up with an experiment that should not cost more than 5000$.

The book is useful for a variety of reasons as the concept can be applied in real life as well if you think about this process as a cap (in time and money) for any new idea.

[Scott Pearson · Rating 4 out of 5]

Empiricism and the scientific method have had some positive impact on the practice of business. Most people recognize the market as a great external object of study, yet scientific impact on innovation is usually limited and relegated to the domain of hunches by analytic experts. For their part, business schools tend to crank out expert planners and analysts, but do not expressly delve into experimentation. Schrage thinks that is a mistake and writes this book to plead his case that experiments can drive innovation in the business world, much as it does in the sciences.

Empiricism as a practice functions as a core historic precept of the scientific method and continues to transform modern life. It simply means that theories/ideas need to be tested against reality for their truthfulness. Few have problems with this idea, and efforts to enact empiricism often expand into building useful and even revolutionary tools to do reality-checks. Even fields like psychology use this lingo in coaching clients how to approach life. Sometimes, humans believe deeply in their ideas, and experiments do not always prove those ideas to be completely correct.

Schrage thinks it’s time that the business world embrace such an ethic of experimentation. He, a PhD economist, tires of seeing businesses hide behind the analysis of MBAs instead of running inexpensive (“cheap”) tests to see if the market can bear such a practice. I am no businessperson, but in my field of software development, we often build slow so that we can quickly correct mistakes without misspending tens of thousands of dollars. Indeed, prototypes to test these reality often become the basis of the next innovation. Though no economic or management expert, it certainly makes good sense to me to expand this practice of hypothesis generation to business planning.

Of course, the devil is always in the details. The strength of this ethic lies in coming up with good hypotheses, itself an art-form. Many business schools churn out planners, not thinkers and experimenters. Implementing this ethic may require further education in order for such scientific thinking to become prevalent. I agree wholeheartedly with the sentiment that experiments trump analysis, but analysis is more prevalent because it’s easier. Scientific thinking is harder and more disciplined, but Schrage devotes the concluding chapters of this book to developing how this change can transpire. More thought and explanation could help businesses with this task because the potential is high.

[Esther · Rating 2 out of 5]

While I agree with the core premise of this book, it didn't merit this length being spent on the topic. It felt like the essence of the argument could have boiled down to a blog article, and the author felt like he was waffling.

Also, he patently misunderstood some of the core arguments of Keynes and Schumpeter which he quoted. Keynes' comment is about economic systems, not what runs companies and you only have to compare China to America to Russia to see the truth of what he was talking about. Honestly...

[Backslash · Rating 3 out of 5]

I liked the book, and it's central theme. I was definitely challenged to consider more experiments at work. I think it was a wee bit longer than it needed to be. And the writing style was a bit odd like a combination of lots of little sound bites. Which you would think is easier to digest, but instead it made it a harder book to read.

[Juan Castro · Rating 3 out of 5]

5x5 model for testing hypothesis in business.

Business experiments are a cheap, quick and simple way to generate smarter, better, safer and more scalable innovations that will benefit companies and their customers' future.

Advice: Don't forget to act. Once you have a business hypothesis act on it.

[Alex · Rating 5 out of 5]

Seriously awesome book

[Megan Tidd · Rating 2 out of 5]

Annoyingly repetitive writing. Concepts are great but seem obvious.

[Terri · Rating 5 out of 5]

This book is based upon a 5 X 5 methodology which emphasizes "lightweight, high-impact experimentation, as follows: Give a diverse team of 5 people no more than 5 days to come up with a portfolio of 5 business experiments that cost no more than $5,000 (each) and take no longer than 5 weeks to run."

Further the experiment needs to be easily replicable, provide meaningful learning with measurable outcomes.

Michael Schrage further contends that good ideas have nothing to do with good implementation. In fact, some "good ideas" are simply truisms masquerading as a good idea. For example, to lose weight a truism like, "eat less, exercise more" might seem like a good idea but it's nothing more than a truism.

Implementation needs to happen to make a good idea become successful; ideas mean nothing unless they're given tangible form. So, what innovators do matter more than what they say. To be successful the innovation needs to be: simple, fast, cheap, smart, lean, and important. Sam Walton of Walmart didn't take the best ideasto use in his company; he took the ideas that worked.

Michael Schrage is a "sought after consultant on business innovation" and a research fellow at the Center for Digital Business at MIT Sloan School of Management. For the price of this book, you can pick his brain. Good deal.

[L · Rating 3 out of 5]

I would give 4 stars for this book if half of it didn't focus on a seemingly endless array of business ideas and companies that successfully used the 5x process. The methodology itself is rather good, 5 people, 5 experiments, $5000, and complete the ideas in 5 days. Its philosophy of focusing on action and tangible results is refreshing in the age of moving to agile to faster delivery. Some of the tips are probably known by seasoned veterans in project management but never the less the good ones include:

- Get buy in. Present well.
- Find the intersection of great arguments, great problems and great visions.
- Diversify the portfolio of experiments.
- Give them the third best as the second best comes too late and the best never comes.

In conclusion, take creative risks and execute on those experiments!

[Ben Azadi · Rating 3 out of 5]

This book advocates a cultural and strategic shift for companies to run cheap experiments before putting a lot of money into projects. Small teams, collaboratively conducting business experiments. The author introduces the 5x5 framework; giving diverse teams of five people up to five days to come up with portfolios of five business experiments costing no more than $5,000 each and taking no longer than five weeks to run.

Overall the book has some golden nuggets that I'll take with me to try out, however I did find some parts in the book to be repetitive.

[Willis · Rating 3 out of 5]

Interesting concept that encourages many quick cheap experiments over the big grandiose experiments. I definitely agree that this concept of sequential experimentation and reducing the reliance on making business decisions based on what we think is right. The main premise is that you have to do the experiment to show the cause and effect - to get the real knowledge and insight that one needs to make better business decisions.

[Karim Faramawy · Rating 3 out of 5]

The book is mainly focusing on the importance of experimentation, and claiming its the shortest way for innovation. Also offering different to facilitate experimentation happening, specifically through the 5*5 techniques.

Overall the book motivates firms to stop wasting a lot of time in the myth of creating good ideas, and to start experimenting different hypotheses. But i see it's not giving you a real understanding or definition for innovation.

[Frank · Rating 3 out of 5]

I definitely liked the approach covered in the book of fast-paced experiments, and it matches much of current thinking in the Valley. But I wish he would have covered more about the method itself, how it originated, and more of a discussion on how to apply it instead of just having a lot of case studies jumbled together and assuming you know all about the method coming into the book.

[Sushant · Rating 4 out of 5]

Innovator's Hypothesis is an interesting read.
The author presents a framework for driving innovation, and goes into details of how the framework can be put into practice.
He combines elements from Portfolio management, agile techniques and statistical design for his innovation frameworks.

[Patrick Mulder · Rating 4 out of 5]

The author provides interesting views on how innovation is affected by personal bias and costs of change. One interesting example is development of a computer mouse by apple, at the fraction of the price of the prototype from Xerox Parc.

[Theodore Kinni · Rating 5 out of 5]

Why experiments are the key to successful innovation--and a quick, cheap methodology for putting them to work in your company

[Sean · Rating 4 out of 5]

Fascinating insight

Overall an interesting read that is balanced in both theory and application. Supported by research and applicable both professionally and personally.