The Business of Breaking Boundaries

An interview with Barry Nalebuff, author of "Why Not? How To Use Everyday Ingenuity to Solve Problems" Have you ever been in line at the grocery store, sitting in a meeting, refinancing your mortgage, programming your VCR, waiting on hold—and thought to yourself, "There must be a better way to do this!"

Why Not? is a book that challenges us to stop accepting the status quo and, in the words of Robert F. Kennedy, "to dream of things that never were and ask 'why not?'"

In Why Not?: How to Use Everyday Ingenuity to Solve Problems Big And Small, professors Barry Nalebuff and Ian Ayers reveal four simple tools that can help each of us dream up ideas for changing how we work, shop, live, and govern. While most of us equate innovation with high-tech breakthroughs discovered by scientists, the truth is that many ideas are the result of good, old-fashioned ingenuity. In business the creation and execution of new ideas is critical at a time when the economy needs new approaches more than ever.

Graham Duncan (GD): One of the goals of Why Not? is to get people thinking, to provoke them a little by identifying problem-solving solutions that all of us can use. I was intrigued by the example of 900 phone numbers. You use the telemarketing industry as an example where, if telemarketers want to make a call, they pay the receiver for taking the call. That way the receiver is paid for their time.

You also describe how this would work for Gallup pollsters, who may be encouraged to reverse the 900-number charge to increase their dismal response rates. These are just two examples from many in the book.

Are you optimistic that problem solving and creativity are increasingly in the domain for all of us to use?

Barry Nalebuff: I think this is a capability that all of us have to a degree. The trick is to reinforce it and, as you can see from the book and the website, it is not just about the initial idea, it is about improving the idea.

So with the brake lights that shine brighter, somebody suggested that they change colour from green to red. Somebody else suggested that they go on the side of the car and not just the back of the car to get to get the car slowing down into a four-way intersection. Somebody said add an audible feature to it, so have a rear-facing horn. Somebody else said why can't the brake light go on as soon as I lift the foot off my gas? That gives you an extra one-tenth of a second.

As you can see, initial ideas are good but they can be built upon to make them even more creative.

GD: With the decline in the economy is it not going to be harder to encourage people to get thinking in new ways as many organizations step back and retrench their thinking? Or is this a great time to become bold in problem solving strategies?

Barry Nalebuff: We're not going to get to financially stable just by doing more of the same.

Let me describe two examples. Whether we are considering the bailout solution to the housing crisis or with energy to simply fall back to nuclear power to free us from oil, we are going to require additional creative thinking to the extent that people are willing to be open up to more bold solutions than they were six months ago. I wish we didn't have to be in the situation, but let's see if we can take advantage of the good part of this opportunity.

GD: Why Not? was first published in 2003 and has been very well received in the business community and the public. Has the success of the book inspired you to create other solutions?

Barry Nalebuff: Why Not? helped us form processes for developing ideas and for testing ideas. It has given us a great confidence and comfort to find that there are many other fellow Why Not? travelers out there. The book has helped me find them. We've done research in digesting whether or not this can be taught and we have some indication that we can really help people become more creative.

Ian and I, my co-author, are hoping to create a television series based on Why Not?. As we say, why not?

GD: Your website http://whynot.net/ is also very successful and popular. It encourages others to submit new ideas to solve solutions. Are you surprised how popular this website has become?

Barry Nalebuff: I will say that it continues to bring new ideas and contributors even with literally zero publicity. Many people are finding us, but what is also remarkable to me is that it is also mainly a self-policed website. People understand the ethos of the site, they see the type of ideas that are contributed and the type of constructive comments given, and so they contribute fairly and appropriately. We're now up to, I think it is, 15,000 contributors.

GD:
Are there any chapters or content you would add if you were publishing an enhanced edition today?

Barry Nalebuff: I think that it would be smart to have a collection of ideas from the website. Many of the ideas that are up there have now actually happened. The two most popular ones are: brake lights that shine brighter when you slam on the brakes—BMW offers in their Series Six car—and the second most popular, geotracking for your photographs.

GD: As an expert on game theory, you have written extensively on its application to business strategy. In your work with corporations, can you please describe how they are adopting game theories to improve their business processes and operations?

Barry Nalebuff: Game theory is essentially about how others are going to react to what you are going to do, and trying to perceive those reactions, and then consider different perspectives.

In physics where every action has a reaction equal and opposite, in game theory there is also a reaction to every move, but it is only opposite if you don't agree with it. The other point to emphasize is that people always think that game theory is about competitive games and beating other people, like poker, football, and chess, but actually much of game theory is how to cooperative and make the pie bigger. Here is a good example.

I am watching Google and Yahoo and their joint partnership in terms of having Google ads on Yahoo. The joint service agreement between Google and Yahoo is really about the bigger piece of the pie. By understanding what is in Yahoo's interest, Google is able to come up with something that is mutually beneficial.

It turned out that there are people who will do searches on Yahoo, and Yahoo might not necessarily have the right ads to show them. And if Google can come up with a better ad that is more likely to get the person to click, then there is more money to be made. If Google can help provide those ads and get the customer to go and buy something, then Yahoo is better off, because they got money for that ad being clicked on, and Google is better off because they got a share of the revenue.

GD: And the customer is going to come back.

Barry Nalebuff: Absolutely. So having a structure like that where everyone wins is an application game theory.

GD: For many organizations the "problem in search of a solution" approach is often deployed by asking the customer to assist in seeking new solutions. In the world of social networking, with Facebook and YouTube so popular, some businesses have turned to these websites to seek customer support in solving problems.

Do you foresee more businesses seeking problem resolutions via social networking?

Barry Nalebuff: I think for some types of problems that is a terrific solution. In fact, many companies have taken the Why Not? software and brought it internal to their own organization and used the social network of their employees to contact their clients and suppliers and have them help solve problems. That's one approach.

In Why Not? we talk about hypothetical customers. Imagine Donald Trump or Bill Gates as one of your customers. How would they solve the problem? Because, unlike your typical customers, they have more resources, this will probably show up with a better answer and a practical one.

Now you've got a higher-level solution and all you have to do is work on making it cheaper, which is often easier than coming up with the solution to begin with.

GD: In your book you suggest that one of the best ways to identify problems is to pay attention to what bothers or bugs others. Innovators, whether in business or in their personal lives, need to look to situations where "that's just the way it is" is a signal for an opportunity for innovation.

In your work with corporations, what approaches have you taken to guide them in cultivating theses sensitivities?

Barry Nalebuff: I think if you go and talk to—let's take insurance agent for a moment—it is not that hard after five minutes of talking with him to find out that if he were in charge he would know what changes he would make.

I, for one, hate the fact that I always have to put in the state when I am filling in a form on the web. They know my zip code. If you know my zip code then you know what state I'm in.

You might think that is irrelevant but think of how many times people have to do that and you have to scroll down and find your state. I would much prefer it if I could type in the letters rather than having to hit the scroll thing.

This is not one of life's biggest issue but it is an example of people just not paying attention to what the customer is going through.

GD: You indicate that not all boundaries should be broken. Some boundaries are real and need to be respected. How does this type of thinking—inside the box, thus imposing constraints from the outset—contribute to finding new solutions?

Barry Nalebuff: One shouldn't go back to ground zero necessarily. Oftentimes people try and do things that violate—if you like the law of physics or the law of economics—trying to find a perpetual motion machine is not going to work. When I try and create a product I had better make sure the return is going to equal the cost of capital or otherwise it is not going to work.

So I think about what the fundamental constraints are and make sure I don't violate them. But the good thing about that is, having done it, it now directs my search to the right areas. It's also true that if I put in a broad restraint I may not find the right solution, so I must adapt those restraints carefully.

GD: One of the two approaches that you provide in the book is the "solutions in search of problems" approach—the same approach that the Jeopardy! television game is so well known.

How do you see this approach, where you start with a known quantity and then move forward to search for problems that you didn't know you had, applying to the reduction of greenhouse gases?

Barry Nalebuff: If I knew the answer to that I would likely have already written a book on it. I will give you one example.

We look at the way fuel economy is measured in miles per gallon. If you flip that you get, of course, gallons per mile. And you might think gallons per mile or miles per gallon, who cares? It is sort six of one, two dozen of the other. But all of the excitement these days is hybrid cars getting 50 miles a gallon or 70 miles a gallon. But we've had this huge focus on getting really high fuel economy but what we need to do is get rid of the really low fuel economy.

Our focus has been entirely on the wrong end of distribution. It makes much more sense to measure it in gallons per mile or gallons per thousand miles. Where the Dodge Ram would require 111 gallons to go a thousand miles, the Prius would require only 20 gallons. Then your focus would be on getting rid of that 111.

GD: You obviously have a passion for problem solving. Has problem solving always been part of your professional career?

Barry Nalebuff: It has always been a part of my life essentially from me being a very difficult child. I often go around thinking, "Hey! If I were in charge I would go about doing it differently." And people saying, "You know, what your problem is you think you know our business better than we do." My view is well, maybe in this case….

GD: The concept of crowdsourcing is the act of taking a task traditionally performed by an employee or contractor and outsourcing it to an undefined, generally large group of people, in the form of an open call.

For example, the public may be invited to develop a new technology for a company. IdeaConnection aggregates pre-qualified experts in a wide range of specialties based on their abilities and the problems they have previously worked on. From these experts a diverse team is selected to solve problems for companies or individuals.

Can crowdsourcing work in solving problems in the industries like finance and investment where the need for critical solutions is most apparent?

Barry Nalebuff: It certainly can. In broad terms the idea of facing an open-source movement for ideas is something that can work terrifically even in the finance sector. You have people that respect each other, know how to work together, and it should be both productive and enjoyable.

The advantage of crowdsourcing is that you might have one person who is really good at coming up with ideas and somebody else who is very good at improving on them and somebody else is really good at finding the holes.

There is no reason to think that one person, can be as creative as many others.

GD: As you have described, the concept of symmetry is very active in your approach to problem solving. Why Not? describes many examples where the flipside approach has helped businesses turn ideas on their head.

For example, H.J. Heinz re-designed their ketchup bottles to better facilitate the flow by turning the bottles up-side-down. Is there a discipline or practice that must be acquired before one can deploy this concept of flipping to solve problems?

Barry Nalebuff: We talk about competitive strategy, what would be the opposite of that? Oh! Cooperative strategy. We talk about competitors. What is the opposite of that? Oh! Complementers. People that make your business more valuable like Intel and Microsoft. They're in a complementary relationship rather than a competitive relationship. Why do we make competitive relationships more important that cooperative ones or more important the complementary ones?

In fact, in many businesses like a gas station, if you don't have the complementer—which would be a convenience store—you don't have enough teeth. You may have thought of it as having the best gas pump, but with the convenience store it is the milk and the eggs that make the difference whether you succeed or not.

So we are often out there and we've just gotten a focus on one part of the puzzle and by looking to the symmetry that will make sure our attention is more appropriately focused or more appropriately flipped.

GD: Why Not? was a pleasure to read. Writing a book is a creative process in itself. It is clear that you had fun describing the solutions we have been discussing. Is fun an ingredient that is under-utilized in problem solving?

Barry Nalebuff: I think fun is just something you utilize. Whatever you do, if you enjoy it, your ability to do it improves. So the difference between the great gymnasts or the great violinists or perhaps the great creative people is that they are able to devote a large amount of time to it because, in a way, it isn't work. So I certainly hope people are doing what they enjoy.

GD: In addition to being a creative process, writing a book takes a lot of focus, time, and effort. Do you have an editorial team to review your drafts?

Barry Nalebuff: No, not really. That's why I became a co-author. I couldn't get anybody else to read half of what I do. Ian and I are writing a new book now. It's called something like The Security Champ's Guide to Investment Strategy. And it is showing people how to invest their savings for retirement and why they currently get it all wrong. And my new book which comes out this week is called The Art of Strategy.

Conclusion:
According to Barry Nalebuff and Ian Ayres, most original ideas are not completely original, but are the product of two methods: the straightforward approach of problems in search of solutions and an approach that starts with the answer and looks for the right questions.

Why Not? offers four distinct problem-solving tools motivated by four questions:

• What Would Croesus Do? Imagining how a consumer with unlimited resources (a modern-day Croesus) would solve a problem can inspire practical solutions.
• Why Don't You Feel My Pain? Externalizing internal problems, forcing the cost of inefficient practices to the surface is another way to solve problems.
• Where Else Would It Work? This translation tool starts with a solution from another context and searches for a problem it might solve somewhere else.
• Would Flipping It Work? Looking for potential symmetry and then turning things around offers unexpected solutions.

Barry Nalebuff is the Milton Steinbach Professor of Economics and Management at Yale School of Management. An expert on game theory, he has written extensively on its application to business strategy. He is the coauthor of Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life (with Avinash Dixit) and Co-opetition (with Adam Brandenburger). Professor Nalebuff is on the boards of Trader Classified Media and Bear Stearns Financial Products and is the chairman and co-founder of Honest Tea. A Rhodes Scholar and Junior Fellow at the Harvard Society of Fellows, Nalebuff earned his doctorate at Oxford University.