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By Carmel Fisher, Managing Director
27 January, 2017
Innovation expert Michael Schrage makes a bold claim in his book, The Innovator's Hypothesis.
Schrage says cheap experiments are worth more than good ideas: "The reality is when you do a hard-core, realistic, pragmatic analysis of the economic value of ideas, you realise for most organisations the overwhelming majority of the ideas they have, lost money. They do not break even. Good ideas are bad."
Of course he was being hyperbolic but his findings have some validity. As a research fellow at MIT's Sloan School of Management, Schrage considered the processes companies used to draw the most value from their good ideas and found, more often than not, good ideas lead to nowhere — despite what our biases have led us to believe.
Schrage concluded we should remove the romance we've injected into ideas and think of them not as good ideas but as "testable hypotheses".
The best way to get a return on an investment is to "reframe that good idea as a testable hypothesis that can be run in a fast, simple, cheap business experiment".
I thought about Schrage's hypothesis when I learned of a small ASX-listed company that, at first glance at least, seems like a really good idea.
Shark Mitigation Systems is a Perth-based company providing non-invasive solutions for water users to reduce the incidence of shark attacks.
Given 2016 was the worst year in history for shark attacks around the world, the company is understandably enjoying tremendous interest in their products: SAMS, a unique design and disruptive colour system that creates confusion for a shark's vision and Clever Buoy, a near-shore shark detection system.
SMS co-founder Craig Anderson is a scientist and came up with the idea of SAMS after studying shark sensory systems.
Interesting fact: sharks have seven senses — an electromagnetic sense and sonar as well as the five we humans have. According to Anderson it is not a shark's visual sense and taste that lead it to attack humans.
It is usually a case of mistaken identity — sharks see a swimmer or watercraft and think it's a large fin fish or seal or dolphin. A shark's retina works at a speed of about 10 percent of a human retina, so by the time it has identified what it is seeing, invariably it's too late.
The specific designs and distinctive colouring of the SAMS marine apparel, watercraft and commercial applications create confusion for a shark's visual system. Because the shark doesn't know what they're looking at, they will take more time to work it out or simply swim away.
The problem: is this good idea a testable hypothesis? I for one wouldn't volunteer to swim by in my multi-coloured striped wetsuit to see if I could confuse a shark!
The Clever Buoy is arguably easier to extract value from. It uses sonar technology coupled with software that recognises sharks' swim patterns. Nearly every animal in the ocean has its own unique fingerprint (or is that finprint?) and SMS has developed an algorithm similar to facial recognition software to detect sharks nearby.
The Clever Buoy idea has been tested and genuine demand is emerging from local governments, hotel and resort chains and short term events like triathlons and swimming competitions.
Reducing shark attacks around the world is a good idea. Jumping on board before it is commercialised is less of a good idea.
Investing in a well tested and proven hypothesis, now that's clever.
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