The name Loonshots refers to “widely dismissed ideas whose champions are written off as crazy” (Bahcall, p. 2). “Being good at nurturing loonshots is a phase of human organization, in the same way that being liquid is a phase of matter” (p.12). What is most important is that phase transitions occur when competing forces are simultaneously being driven apart and drawn together. Maintaining the tension of competing forces, affirming the value that each contributes, results in heightened commitment and performance within an organization. The early phase of creative organizational life usually involves smaller numbers of people who maintain a shared view of what they are attempting to accomplish – all are committed to an outcome that transcends any particular individual or group. The problem is that, once success is achieved and “teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase” (p. 13).
Bahcall differentiates two broad categories of organization performance – franchises and loonshots. Franchises are important and helpful ideas that spin out of previous processes or products. By contrast, when loonshots are successful, they change the world. An organization that can only produce franchise initiatives will lack innovation potential but can be a solid, average performer in its niche. The organization that focuses exclusively on loonshots will produce an occasional brilliant breakthrough, lots of failures, and will ultimately be unsustainable. The key then is to establish structure and cultivate culture that maintains both franchise and loonshot capability, which he calls phase separation. Once these two phases exist, the leadership challenge is to see that the two do not undermine or overwhelm each other, a state he calls dynamic equilibrium.
Phase separation is critical because “People responsible for developing high risk, early-stage ideas (call them ‘artists’) need to be sheltered from the ‘soldiers’ responsible for the already-successful, steady-growth part of an organization” (p. 38). Bahcall singles out current efficiency systems such as Six Sigma or TQM as being particularly destructive to innovators; phase separation protects creatives from attack by bureaucratic measures such as these. Loonshots are also of two types – P-type which are “There’s no way that could every work” ideas and S-type which are “There’s no way that could ever make money” (p. 66) ideas. Creative and entrepreneurial types need to be skilled at both types of loonshots. In the mid-20th century airline industry, Pan-American Airlines sought to innovate through launching new aircraft (i.e. jet engines) which was an example of a P-type loonshot while American Airlines eclipsed Pan-Am through innovative tracking and booking strategies, an example of a S-type loonshot. The Pan-Am example demonstrated how P-type loonshots can result in tunnel vision focused on innovation itself without the grounded realization that the innovation has to create a sustainable economic outcome (S-type loonshot).
Organizations that strive to create breakthrough ideas are plagued by two problems – one is the complacency of success and the second is that, with success, organizations increase in size and complexity and are overtaken by the growing focus of employees on advancement of their careers. One hundred fifty staff is the number that is most commonly identified as the barrier beyond which innovation declines (a number also identified by Malcolm Gladwell in Tipping Point) but this number can decrease or increase as a result of intervention in four areas – equity, management span, organization fitness, and salary rate up the hierarchy. Defining these variables in detail and describing strategies to adjust them to maintain a loonshot environment are addressed in Chapters 7 and 8. Managing these variables in order to maintain the capacity for loonshots should then be the focus of leadership which Bahcall summarizes in “Raise the magic number” (p.224). In addition, Bahcall provides Appendix A (p. 273) as a summary of all the variables associated with creating and maintaining a loonshot organization.
