Delphi Risk Management :
change management financial product expert-witness and arbitration financial innovation and risk consulting banking training
"Creative Thinking: How to capture The Big IDEA"
This well-received speech by Warren Edwardes has been adapted and delivered in numerous countries as a motivational speech.
To book Warren Edwardes
by Warren Edwardes,
Chief Executive of Delphi Creativity, the innovation arm of Delphi Risk Management Limited.
This is based on the text of a speech first given on 9 April 1997 to The Rotary Club of Seoul, Korea link
It has been continually updated and published as:
"Creative Thinking: How to Capture the big new IDEA" 3rd Quarter 98, Global Trading, London link
and further revised as
"How to capture the big IDEA", July /Aug. 99, Treasury Management International, London link
and further revised as
"Creative Thinking: How to capture the big new idea" Spring 2000, Issue 6 Global Trading, London link
"How to capture the big IDEA", Oct 2001, Risk and Reward, London link
This article and speech forms the basis of chapter 2 of the book by Warren Edwardes
"Key Financial Instruments: understanding and innovating in the world of derivatives" 4 February 2000 Financial Times Prentice Hall ISBN 0273 63300 7 London link
Warren was previously on the board of Charterhouse Bank and has worked in the treasury divisions of Barclays Bank, British Gas and Midland Bank. He first researched into what were later to be called "derivatives" in 1975 and was part of the team that executed one of the world's first currency swaps in 1981. Since then he has devised and transacted numerous structures that form part of the history of derivatives. Warren can be contacted via firstname.lastname@example.org
Edwardes is a Board Governor of The Institute of Islamic Banking & Insurance
The Financial Times of July 7, 1999 reported that Marks and Spencer's directors "locked themselves away for a three-day strategy brainstorm". So how best can a firm or individual achieve creative thinking? Not by brainstorming sessions within committees and working parties, says Warren Edwardes in this thought-provoking article. He describes how some innovative inventions such as Velcro and the Post-It notes were made, and counsels us to think the impossible, to turn what might seem like disasters into golden opportunities, to keep thinking - everywhere - and to be sure to jot down our most random-seeming ideas (or speak them into a dictaphone in the car). Inspiration, by its very nature, often comes to people when they are alone.
A final cautionary tale demonstrates the necessity to be constantly on guard against breaches of confidentiality.
Prologue: Life at the Edge of Chaos
We imagine the edge of chaos as a
place where there is enough innovation to keep a living system
vibrant, and enough stability to keep it from collapsing into
anarchy. It is a zone of conflict and upheaval, where the old
and the new are constantly at war. Finding the balance point must
be a delicate matter - if a living system drifts too close, it
risks falling over into incoherence and dissolution; but if the
system moves too far away from the edge, it becomes rigid, frozen,
totalitarian. Both conditions lead to extinction. Too much change
is as destructive as too little. Only at the edge of chaos can
complex systems flourish.
The Lost World, Michael Crichton.
If you try to do things, sometimes you'll get it wrong. If you execute everybody who tries to do something and gets it wrong, pretty soon you'll have nobody who tries to do anything. That's exactly the wrong way around. - Peter Burt, chief executive of Bank of Scotland after the collapse of the Scottish bank's arrangement with Pat Robertson, controversial US television evangelist.
There will be innovation in the financial system but for an individual established financial institution "Why Creativity?" is a very good question. Why not just wait for a small competitor to break ranks, introduce a new product, and then replicate it?
But Creativity is not about inventing products from scratch. Many useful financial products are in use elsewhere or went out of use perhaps because of regulation or tax considerations. A decade ago, Banco Santander and Banco Bilbao Vizcaya trumpeted the "guerra de supercuentas" or the super-account war. They started to pay interest on current accounts. But Barclays Bank, a relatively small player in the Spanish market had paid interest on such accounts for some time before the "guerra"! In early 1998, "current account mortgages" were launched by Virgin Direct in the UK the Virgin One Account. Some small UK mortgage banks and insurance company owned banks also provided such all-in-one accounts. Such accounts blend borrowings and savings so that any income is used to reduce borrowings whilst the borrower retains the right to re-borrow up to his pre-agreed limit at will. But despite the hype and gimmicky press conferences there was absolutely nothing new in such mortgages! Such accounts have been common in South Africa since a client of mine, the Standard Bank of South Africa, introduced the Access Bond in 1993.
Always waiting for some other firm to introduce a product first in a game of catch-up may be fine, but short-sighted, in retail financial products. But plain-vanilla expertise is simply not good enough in the capital markets. So if we agree that we must have more creativity, how best should a firm or individual achieve "Creative Thinking?" Individuals in blue jeans, sneakers and pony tails thinking random thoughts? Committees and working parties scheduling brainstorming sessions? Has anything ever useful been produced by such groups? The only things generated by such bodies are sub-committees and think tanks. So what's the way to "The Big Idea"? It is in the word itself - IDEA.
The Big IDEA - Impossible
There's no use trying, one can't believe impossible things", said Alice. "I daresay you haven't had much practice. Why sometimes I've believed six impossible things before breakfast" said the Queen. - Lewis Carroll in Alice in Wonderland
Picture a young girl in New England. It is her birthday party. Her father is taking photographs. The girl wants to see the pictures NOW. The father thought: "Well why can't she have the pictures now?" That father was Edwin Land, the inventor of the Polaroid camera. So, think like a child. You can have that picture now. Think Impossible.
I recall a new entrant to a dealing
room who was forever coming up with scatter-brained ideas. His
line management often berated him for not focusing on his day-to-day
work on the futures desk. Most of his ideas were indeed off-the-wall
but I was one of the few around to listen to him and some of his
ideas did provide me with a spark of inspiration. Of course I
took all the credit and he was soon fired for not concentrating
on the job at hand! The reverse had happened to me a number of
times and the phenomenon of idea theft was a feature in the book.
"Liar's Poker." by Michael Lewis.
There was a novel advertisement by a job seeker in the September 1998 issue of Director magazine. "Court Jester. Ageing manager seeks appointment as court jester or fool to chief executive of large public company. Will provide own bladders and fools cap." Ridiculous? Absolutely not. The idea was that centuries ago Kings who were surrounded by yes-men and sycophants had fools who had licence to ridicule policies without fear of losing their heads. Present day Chief Executives are also surrounded by yes-men. They need someone to give them an honest opinion. Someone has to tell the emperors of the board-rooms that they are not wearing any clothes before disasters strike. I would venture to suggest that the reason for the demise of Asian economies in the late 1990's such as Korea was not because of a low level of education. Just the opposite. Recent governments have been dominated by economics PhDs and university professors. Korea fell because of the strict hierarchical system and respect for elders. There was a shortage of fools brave enough to point out the obvious.
"But Mr. Bank President, should this bank be lending so many times its capital base to this Chaebol?"
The Big IDEA - Disasters
Remember the two benefits of failure. First, if you do fail, you learn what doesn't work; and second, the failure gives you the opportunity to try a new approach. -- Roger von Oech
Now let us move to a glue laboratory. The scientist is trying to produce super-glue. But he tried and tried and the glue just did not stick. The product was a complete disaster. Have you ever heard of glue that does not stick? Well you have it in every office in the world. The scientist at 3M had inadvertently invented the PostIt note. Disasters are sometimes opportunities. The PostIt note is everywhere and is the most profitable product at 3M. (link to a slightly different "official" story)
A decade ago at Midland Bank's Treasury we created, on the back of apparent customer demand, a tender-to-contract currency exposure contract. I did not really think it would fly for a number of reasons but coined it the SCOUT - Shared Currency Option Under Contract. Midland gained considerable publicity and several news column inches after the launch. To this date, however, not a single SCOUT has been sold but awareness of Midland's ingenuity and customer service was enhanced and plain-vanilla currency options were sold! The SCOUT is, nevertheless, still featured in numerous Dictionaries of Finance. As it did not cost a penny to produce and no brochures printed, in terms of public relations generated the SCOUT may be the most profitable financial product ever launched!
Don't forget that whilst Christopher Columbus was right in looking for a Westerly route to India on landing in America he thought he had actually landed in India. That disaster turned into an opportunity for Spain. And the next time you open a bottle of Champagne think of its origins. It too was a disaster in its day. A still wine that over-fermented and went fizzy. But it proved popular and the rest is history.
So disasters can provide sparkling results.
The Big IDEA - Everywhere
It is always at Perpignan station, when Gala is making arrangements for the paintings to follow us by train, that I have my most unique ideas. Salvador Dalí; in "Diary of a genius"
Let us now move across to a forest in the Jura Mountains in France. It is wartime 1941. A scientist is out hunting with his dog. When he got home, he found that wood-burs had stuck to his woollen jacket and trousers and to his dog's coat.
He decided to examine them. Carefully inspecting the burs under a microscope, he found hundreds of little hooks engaging the loops in the material and fur. The scientist, George de Mestral made a machine to duplicate the hooks and loops in nylon. He called his new product Velcro, from the French words VELours and CROchet.
The rest is history. Today there are thousands of uses for Velcro Fasteners from rucksacks to clothing, all thanks to a man hunting with his dog in the mountains.
So, think Everywhere. Think when out walking. Think when in the shower. Think when listening to a boring speaker. Just switch off and think about that problem that has been bugging you.
One of Honda's most original sports-car designs, the NSX supercar, is reputed to have been sketched by Nobuhiko Kawamoto, the President of Honda, whilst doodling during a tedious board meeting.
The latest in the hugely popular Harry Potter series of "children's" books was launched on July 8, 2000. Its author, J. K Rowling, revealed how she came across her ideas. Sometimes they just came like magic and other times she had to sit and think for about a week before she managed to work out how something would develop. The idea for Harry Potter actually came whilst she was travelling on a train between Manchester and London and it just "popped" into her head. It was the most interesting train journey she'd ever taken. By the time she got off at King's Cross many of the characters in the books had already been invented.
Or did it? On the 16th March 2000, a US author sued the writer and publishers of the Harry Potter books, claiming that plots and characters in the wildly popular children's series originated with her. But Nancy K. Stouffer of Camp Hill argued in her federal lawsuit that ideas for J.K. Rowling's Potter series were lifted from her 1984 book "The Legend of Rah and Muggles," which included a character named Larry Potter. There were a number of other coincidences. J.K. Rowling won the case on September 19, 2002.
I was once attending an extremely tediously presented seminar on Corporation Tax. My mind wandered to solve a problem a corporate customer was having with Currency Translation Exposure. My lack of concentration led to the creation of the Perpetual Currency Swap!
So do think everywhere. And, again, don't bother with those contrived brainstorming sessions and working parties! You cannot plan to create on demand. But you can organise your mind to be constantly receptive to new ideas wherever you happen to be.
The Big IDEA - Archive
It is unforgivable in the course of a meeting or conversation to let ideas float away un-captured, to be lost for all time, when so little effort and so simple a device (a notebook) can preserve them and bring them back to mind later. - Richard Branson in a speech to an Institute of Directors annual conference
The problem, however, with thinking everywhere is that thoughts are often forgotten until somebody else thinks of them. It is too late then! So, write it down. Archive that thought. Keep a pen and paper handy in every room of the house especially by your bed and near the shower! What about when you are driving? Forget the pen and paper. Have a dictating machine in the car. Archive those thoughts NOW.
Many of us have come across situations where we have proposed ideas in brainstorming meetings or around a coffee machine or even directly to the boss, only to find that someone a good deal more senior grabs the credit. I proposed fixed rate mortgages at my bank with hedging through interest rate swaps in 1986. They were new in the UK but common in the US. The idea was dismissed. Six months later, after I had moved from Product Development to another unit, my bank began marketing fixed rate mortgages with great fanfare. I was naïve enough to think that I should have got some credit for the idea!
In 1993, years after the innocent futures dealer was sacked, and well before knowledge management became fashionable, I developed an innovation management system for a client, the Delphi Thought Pad. This allowed anyone from receptionist to internal auditor to input thoughts even in their pre-idea stage onto a database and generate a discussion. Some people are good at ideas whilst others excel at implementing. The advantage, furthermore, is that others cannot steal the ideas of the newcomer. At bonus time, reward is given where it is due. Every contributor in the team or even outside the team takes credit as input and dates are recorded.
However full "information-sharing" is not always advisable. In cultures such as Korea, loyalty can be to university or school alumni rather than to the firm. The Economist of July 3, 1999 reported that "sharing information with Korean employees can easily backfire because most of them gossip over drinks with friends who work for competitors." The article quoted Dave Parker, president of Nestlé Korea which operated an open information system, as being alarmed at the amount of information available to his firm's competitors. In early 1999, Nestlé introduced Taster's Choice coffee packaged with a water container. A mere two weeks after the product was launched, a local competitor began selling its own version. But perhaps this particular case was all down to a little local language difficulty? After all, in Hangul, the English "f" and "p" sounds are translated to the same character so Coffee is commonly pronounced Copy.
The Big IDEA - Delphi's IDEA Kit
He who asks is a fool for five minutes, but he who does not ask remains a fool forever - Chinese Proverb
So to enhance creativity keep on your desk a simple IDEA Kit. It is no more than a bag with a LEGO block, a PostIt note, a strip of Velcro and a golf pencil. The LEGO block represents Impossible - think like a child and ask stupid foolish innocent questions. Raw recruits to a firm should be encouraged to ask: "Why do we do it this way?" If management does not have a good answer other than "When I want your ideas I'll give them to you" or "We've always done it this way" or something similar then the process must be changed. New fresh viewpoints should be utilised and be encouraged to question everything and report on their findings to senior management.
The PostIt note was a Disaster - the non-sticking super glue! Sometimes the best products arise when solving another problem. A solution that does not work for today's problem may be just what you needed for yesterday's unsolved and shelved problem. The Velcro strip represents the motto: Think Everywhere. Finally, the golf pencil reminds us to Archive those precious thoughts. Note that thought in the gym. In the car, use a Dictaphone.
Chance discoveries do not occur by chance. An environment must be nurtured to allow fleeting thoughts, those pre-ideas, to be grasped; then recognised for their potential as ideas; turned into tailor-made solutions and then finally developed into products for other customers. Think across markets. Problem-solving ideas can often be captured from other markets or businesses. The most successful products are not those that use high-tech mathematics. The best financial market products are the result of the most simple of ideas but applied in a fresh way to a completely different business.
And read the newspapers. The Financial Times reported that LIFFE was inexorably moving to electronic trading and abolish open outcry ("Liffe set to reveal electronic trade plan", September 14). Put that together with another article in the same newspaper addressing the travelling allowances of members of the European parliament ("Time to stop making allowances", September 21) and it occurred to me that the European parliament should abolish open outcry. MEPs (and MPs for that matter) should stay in their constituencies and virtually meet through e-mail, e-forums and video-conferencing. Likewise, lessons from the political market can be applied to business or finance.
Banks have grown so large that a number of banks are re-inventing the small entrepreneurial merchant banks of twenty years ago within their banks. They are establishing multi-disciplinary cross-markets groups to include not only rocket-scientists, but also practically minded creative lawyers and accountants.
But the creative process in financial institutions does not stop at the creation of new financial products. In this or any other service industry, creativity must be employed to enhance the delivery process or simply to increase efficiency. The most creative field without doubt is finance. Whilst the morality of some financial schemes may be questionable, lessons can be learned from the creative process.
You can't solve a problem by thinking about it too much. Creativity cannot be planned. Inspiration, by its very nature, often comes to you when you are alone. Perhaps in the shower - just when you do not have a notebook at hand. Good ideas just hit you. Recall Archimedes in the bath shouting out "Eureka". No doubt his modern equivalent financial innovator would yell "Euroclear". Perhaps some can innovate through brainstorming, mind mapping and lateral and objective thinking and all that sort of thing. I just find that the most successful and marketable of ideas are the most obvious ones. There is no better way to hinder innovation than to plan to innovate.
Beware in bars, trains and planes
"Given that genuine new ideas are hard to come by and very difficult to patent , perhaps the quickest way to a new idea is to get it from someone else. Remember to Keep your mouth shut and ears open especially in bars in the City of London or Wall Street. Read the Financial Times on the train or the aeroplane. And don't talk in the back seat of a taxi. Your excited deal-talk may well be broadcast to the taxi-driver's paymasters working for a competitor. The idle sentence may just provide a missing ingredient to a new product.
I was on a train to London's city in 1985. The passenger sitting next to me was reading a report. It was headed "Lloyds Bank - Product Development Department". It proved to be fascinating. You should have seen the look on his face when I thanked him and gave him my business card - "Midland Bank - Head of Product Development". And things just don't change. Martin Waller of The Times reported ("Open Lap", March 10, 2000 City Diary), that two days earlier a banker travelling on a train in London had his laptop open. He was reviewing a report on "the benefits of a proposed merger" between two large banks. What is more, the headline was in 32-point type.
The laptop was invented to allow computers to be used on trains and planes. But now because of the increasing number of leakages of sensitive information many major companies are insisting that their staff keep their laptops firmly closed in public. In November 2000, after one of their executives had reported that he had read sensitive information from the laptop of the person sitting next to him on an aeroplane Aerobus introduced such a closed-in-public laptop policy.
The increasing amount of vital product information contained in portable computers and Palm Pilots, and the ease of theft is causing real concern, and not only amongst the spies of MI5 who often leave theirs in taxis or London tapas bars. Many companies are insisting that those travelling with such portables only stay in hotels that have room safes capable of accommodating them. Others are insisting that their employees save work-in-progress information to floppy disks, or to e-mail files back to the office, and then delete the data from their computer, carrying the disk on their person always. Robust password protection systems to protect data in the event of the computer being stolen is also an important precaution. Sometimes old technology is better than the modern equivalent. TFT screens can be read from any angle; but old-fashioned and cheaper DSTN screens can be read from ahead only and so are a better bet from a security standpoint.
It looks like not much has changed since 1985 when I read the notes of Lloyds Bank's Head of Product Development on a London train. Nowadays one reads others notebook computer screens rather than paper notes.
Beware of "friends" and potential employers.
There is a bank, which will remain nameless, that is permanent ly interviewing for staff. If a candidate says something useful, his ideas are recorded. But the talkative candidate is discarded as being untrustworthy. Somehow, keeping quietly mysterious does not help the candidate either. There is, of course, no job on offer!
And beware of the boastful. I have come across an amazing number of financial markets people who proudly boast about their firm's work. I recall a lunch a former bank employer hosted for some investment bankers. We had worked together on a major deal. I was flabbergasted when my show-off boss coolly and calmly told them what we were working on. In my experience the most leaky are the most senior. Perhaps the key to successful innovation is skilful ego-massaging?
As an innovation management consultant, it is not always possible to get a client to sign a written confidentiality agreement. Over the course of a year, I hinted at a structure to a long-standing "friend", a treasurer of a bank. He said that he really needed to understand the structure and that I should explain it to him with an oral confidentiality agreement. A week later he advised me that he could not proceed with the advisory contr act proposed. I was shocked and felt more than a little naïve a month later when the Financial Times reported that his bank had launched my product.
The Times of 21st April 2000 reported on Liz Jones, who dreamt up an advertisement for Maltesers chocolates. The Sussex University Media Studies student sent in a story board to the advertising agency describing the idea but it was rejected by the advertisers as "it would be dangerous if young children tried to copy it." Not long afterwards, however, amazingly similar press and television advertisements were launched by Mars.
Miss Jones said that "getting a really good job in advertising is what I want and getting some credit for this idea might help. "The advertiser and Mars both deny plagiarism. Joe Boyd, director of the DMB&M, now called D'Arcy, dismissed Miss Jones' claims saying "It was entirely coincidental that we came up with an idea that bore some similarity to her idea."
So make sure all proposals are in writing - and with a watertight confidentiality agreement or not at all. Beware.
But coming up with a great idea and turning it into a successful product just is not good enough. Polaroid was used as a case study into how to think like a child - think innocently. But you have to keep on doing it. But don't just rest on your laurels. A combination of one-hour photo labs and multi mega pixel digital cameras resulted in Polaroid’s demise. On 12th October 2001, Polaroid Corporation filed for bankruptcy protection sealing the fate of one of the best-recognised brands in the world. As the Financial Times wrote on the day. "Polaroid, founded by one of the greatest inventors in US history, Edwin Land, proved incapable of making the transformation into a consumer products group. Products such as a Barbie camera, sunglasses and a flashlight fell flat. The popularity of the I-zone faded quickly, as adolescents turned to other fads."
Capturing the big idea is but the first part of innovation. Innovation involves more than creative thinking. Innovation involves the development of ideas into products and services. And those members of a team with creative minds are of ten not those best equipped to develop the thoughts into products. And vice-versa. So develop an ideas management methodology and system that utilises the best abilities of all in the workplace and win co-operation by giving credit where it is due. As a financial engineer working in a bank, I often found that my products were being sold by my sales and marketing colleagues. They were the ones to get the bonuses. So I just had to close some big deals myself to prove my worth.
In mid-1998 I heard Peter Hain, a UK minister being interviewed on the BBC. "Do tell me about your new idea, Minister" the interviewer asked. The idea may well have been Peter Hain's but somehow I doubt it. Surely a government minister (or a chief executive) should be spending his time evaluating and managing ideas generated by his large team. Mr. Hain should have said: "I'd be delighted to tell you but the idea actually came jointly from my researcher Ms. X and civil servant, Mr. Y."
In UK Prime Minister Tony Blair's leaked email memo "Touchstone issues" (Sunday Times 16th July 2000) he wrote of new initiatives "I should be personally associated with as much of this as possible." And he is not alone in this as these words could have been written or spoken by almost every CEO of a major corporation. Leadership is not about grabbing glory. It is about encouraging creativity and will only be effective if credit is given where it is due.
Warren Edwardes is CEO of London-based Delphi Creativity, the innovation management arm of Delphi Risk Management. Delphi is a financial product creativity, communication and control consultancy.
Warren was previously on the Board of Charterhouse Bank and has worked in the treasury divisions of British Gas, Barclays Bank and Midland Bank. He first researched into what were later called "derivatives" in 1975. Since then he has devised and transacted numerous structures that form part of the history of derivatives.
© Copyright reserved by Warren Edwardes, Delphi Risk Management Limited 2000
A variant of this speech was delivered in London on 10 December 1997 as one of a series of motivational speeches. Warren Edwardes was rated "Best Speaker" amongst five speakers. Comments from the audience included:
"Really superb! Professional, entertaining and educational. Polished use of props produced a high level of concentration in all of us. An 'A' salesman". Fiona Montagu
"Well delivered. Engaged the audience. It all sounded spontaneous. Great!" Kojo Ofosuhene
"Very strong speech with interest and practical applications" Madeline Calaco
"What an outstanding presentation" Richard Paice
"Well organised presentation. The message was clear." Anne-Marie Mahon
"what drives innovation?
Hindervation : Clearing Innovation Road-Blocks
identifies ways companies create artificial innovation road blocks. Identifying these road blocks is the first step in clearing a path to enhancing product or service innovation in an organisation