Making Big Bets

What do Android, the iPhone, and the Kindle have in common?

Hint: it’s not just that they all have to do with mobile devices.

These transformative products from Google, Apple, and Amazon are all examples of innovative Big Bets. What exactly are Big Bets?

A Big Bet is:

• Profoundly better than the status quo. Not incrementally better.
• Radically different than anything else on the market. Nothing else like it exists.
• Intrinsically surprising because it hasn’t been imagined before.

Making Big Bets is extremely hard. In order for companies to make Big Bets, they need to do three things:

• Think Big
• Focus
• Be Persistent

Let’s go into each of these a bit deeper.

Think Big

In “How Google Works” by Eric Schmidt and Jonathan Rosenberg, the authors observe:

Most people tend to think incrementally rather than transformationally or galactically… That’s why one of Eric and Larry’s [Google’s cofounder] challenges to engineers and product managers in Google product reviews was always “you aren’t thinking big enough”… Later replaced by the Larry Page directive to “think 10x.”

In the same chapter, the authors discuss why it’s important to “think 10x.”

The obvious benefit of thinking big is that it gives smart creatives much more freedom. It removes constraints and spurs creativity… Astro Teller, the head of Google[x], notes that if you want to create a car that gets 10 percent better mileage, you just have to tweak the current design, but if you want one that gets five hundred miles per gallon, you need to start over. Just the thought process—How would I start over?—can spur ideas that were previously not considered.

In order to create something that’s profoundly better, radically different and intrinsically surprising, you have to be able to Think Big. If you want to build something that’s profoundly better, you have to think 10x.

Focus

Also from “How Google Works” (I’m going to quote from this a lot in this post because it’s such a great book):

Big bets often have a greater chance for success by virtue of their size: The company can’t afford to fail…On the other hand, when you make a bunch of smaller bets, none of which are life threatening, you can end up with mediocrity. We see this all the time in business: the company with a large line of not- great products.

The authors compare the state of Motorola—which had dozens of different small-bet phones, none of which were big enough to fail—and contrast it with Apple, which has a single Big Bet phone—the iPhone.

When Jonathan started helping new Motorola CEO Dennis Woodside, he discovered that the company had dozens of different phones, with each device targeted at a particular, market- research- defined segment, such as millennials, Gen X, boomers, and soccer moms. But it led to a sprawl of mediocrity. Each phone had its own set of product people who would work hard to make their product great, but they also knew that if their product was only good, the company would survive

On the other hand, the iPhone is a popular product precisely because it is the only phone Apple makes. If there’s a problem in the development of the next- generation iPhone, no one on that team goes home until there’s a plan to fix it. It’s no coincidence that Apple has only a few product lines. None of them can afford to fail.

In order to make Big Bets and create transformative products, you have to focus your efforts and consolidate your resources on those Big Bets. When you focus on a single Big Bet, you’ll work smarter, push harder, and hustle faster because failure is not an option. By definition, you don’t have the ability to hedge your bets.

There’s an old saying from financial investment management:

Concentration produces wealth. Diversification protects it.

In the context of Big Bets, I would modify the saying as follows:

Concentration produces innovation. Diversification produces mediocrity.

My advice to product managers and entrepreneurs is always to focus: make big bets, do fewer things, concentrate your resources. Don’t hedge, commit. You won’t be able to create something profoundly better, radically different or intrinsically surprising unless you do.

Be Persistent

Making Big Bets is not just about thinking big and focus. You have to think long-term, and be persistent. If you’re tackling a really hard problem, and you’re thinking 10x — well, it may take a lot of testing and iteration to achieve your goal. You have to be willing to commit to something for the long-term. A failure is a learning opportunity. A setback is a bump in the road.

Jeff Bezos in a 2011 interview with Wired Magazine said:

Our first shareholder letter, in 1997, was entitled, “It’s all about the long term.” If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow — and we’re very stubborn. We say we’re stubborn on vision and flexible on details.

In some cases, things are inevitable. The hard part is that you don’t know how long it might take, but you know it will happen if you’re patient enough. Ebooks had to happen. Infrastructure web services had to happen. So you can do these things with conviction if you are long-term-oriented and patient.

I’m also reminded of the story of Thomas Edison’s invention of the incandescent light bulb:

In the period from 1878 to 1880 Edison and his associates worked on at least three thousand different theories to develop an efficient incandescent lamp…

By January 1879, at his laboratory in Menlo Park, New Jersey, Edison had built his first high resistance, incandescent electric light. It worked by passing electricity through a thin platinum filament in the glass vacuum bulb, which delayed the filament from melting. Still, the lamp only burned for a few short hours. In order to improve the bulb, Edison needed all the persistence he had learned years before in his basement laboratory. He tested thousands and thousands of other materials to use for the filament. He even thought about using tungsten, which is the metal used for light bulb filaments now, but he couldn’t work with it given the tools available at that time.

One day, Edison was sitting in his laboratory absent-mindedly rolling a piece of compressed carbon between his fingers. He began carbonizing materials to be used for the filament. He tested the carbonized filaments of every plant imaginable, including baywood, boxwood, hickory, cedar, flax, and bamboo. He even contacted biologists who sent him plant fibers from places in the tropics. Edison acknowledged that the work was tedious and very demanding, especially on his workers helping with the experiments. He always recognized the importance of hard work and determination.

“Before I got through,” he recalled, “I tested no fewer than 6,000 vegetable growths, and ransacked the world for the most suitable filament material.”

“The electric light has caused me the greatest amount of study and has required the most elaborate experiments,” he wrote. “I was never myself discouraged, or inclined to be hopeless of success. I cannot say the same for all my associates.”

“Genius is one percent inspiration and ninety-nine percent perspiration.”

Edison decided to try a carbonized cotton thread filament. When voltage was applied to the completed bulb, it began to radiate a soft orange glow. Just about fifteen hours later, the filament finally burned out. Further experimentation produced filaments that could burn longer and longer with each test. Patent number 223,898 was given to Edison’s electric lamp.

In order to create world-changing products, you have to be willing to make Big Bets. To qualify to be a Big Bet, a product has to be profoundly better, radically different, and intrinsically surprising compared to anything else in existence. If you want to see what a Big Bet looks like, watch the first iPhone keynote by Steve Jobs, which coincidentally happened eight years ago today. When it was first released, the iPhone had a profoundly better UI; was radically different than competitive phones from Motorola/ Blackberry/ Nokia; and its multi-touch UI was intrinsically surprising, something completely un-imaginable before that time.

As leaders, entrepreneurs, and product managers, we all want to create that kind of transformative impact. Innovators like Apple, Google, Amazon and — arguably the world’s greatest historical inventor — Thomas Edison, all reinforce that in order to make Big Bets, you need to do three things:

• Think Big
• Focus
• Be Persistent

We’re in an amazing time, where technology allows us to create world-changing products. If we want to have this kind of transformative impact, we have to make Big Bets.