This article is based on a forthcoming book by the authors. Copyright Paddy Miller and Thomas Wedell-Wedellsborg, July 2008.


The Gatekeeper’s Dilemma

How do you tell good ideas from bad?

By Paddy Miller and Thomas Wedell-Wedellsborg

On the day after New Year’s Eve, 1962, the nervous young band members and their manager entered the Decca Records studio to do an audition for a record contract. The manager had great confidence in the band’s potential, but he had trouble convincing the record labels to offer them a contract. In fact, the labels wouldn’t even give them an audition. He had only managed to get that day’s audition with Decca because he had privately contacted the record label and, without the band’s knowledge, offered to pay the cost of the audition out of his own pocket.

The tape that the band recorded that day, containing 15 songs, was sent to one of the record label’s producers, Dick Rowe. Rowe, an experienced professional with more than 20 years in the business, was known as a great talent spotter, and spent most of his time searching for new bands. After he had listened to the recording, Rowe contacted the manager, bringing bad news. Rowe was sorry; he did not think the band had commercial potential, and Decca would under no circumstances offer them a recording contract. He then made the statement that would become his public epitaph: “Guitar groups are on the way out, Mr. Epstein.”

If Brian Epstein hadn’t entered his life on that day in January, Dick Rowe would still be known to the world as a great and talented record producer. But after a fateful day, based on one rapid judgment call, all that was forgotten. After that day, Dick Rowe would forevermore be known as only one thing: the man who said no to The Beatles.

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If you are a professional gatekeeper for ideas, your worst nightmare is not that you will never find a breakthrough idea. The worst nightmare is that you will find it, but fail to recognise it. And when gatekeepers fear that, it is not without reason, because it has happened countless times that companies have been sitting with a golden goose in their hands, only to let it slip through their fingers. The Beatles were not just rejected by Dick Rowe, but also by almost every major British record label. Executives at Hewlett-Packard and Atari turned down Steve Jobs and Steve Wozniak’s ideas for a personal computer. J.K. Rowling, in her efforts to get the first Harry Potter book published, was initially dismissed by editors at eight different publishing houses. The list of errant gatekeepers now rotating in their graves is so long that if you put a spool of copper wire round their coffins, you could generate enough electricity to power the state of California.

Gatekeepers are the people who evaluate new ideas and decide which to invest in, and as such, their role is one of the most important functions in the innovation value chain. The need for gatekeeping arises from a simple fact. The truly scarce resource in the innovation process is not ideas, but the means to carry them out: time, money, attention. And if you manage to build a creative culture in your company, you will soon start seeing not just some ideas, but a lot of ideas roll in, all of them clamoring for more resources. Most of them will not be worth pursuing. But you also know that somewhere in that vast sea of bad ideas, worse ideas and complete plonkers, there is a golden goose bobbing around, waiting to be found – and more importantly, waiting to be recognised. And that brings us to a central question: How do you recognise good ideas?

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Dick Rowe, the manager who rejected the Beatles, provides a core insight into the challenges of gatekeeping: that the hardest thing to recognise is a really good idea. Because the truth is, Rowe was not some pigheaded senior executive who didn’t know what he was doing. He was a highly gifted talent spotter, and Decca Records, his employer, considered him to be one of their best judges of what would succeed on the market. Over the course of his 20-year career, Rowe had signed numerous artists that ended up getting their song on the number one position on the UK Billboards. In 1963, he signed on The Rolling Stones. Dick Rowe was not an amateur gatekeeper; he was one of the best. So what caused Rowe to fail to recognize the potential of the Beatles?

The answer lies in understanding what separates incremental and radical ideas, and the different challenges associated with recognising each of them. Recognising good ideas for minor innovations – possible product extensions, small alterations to processes, and me-too products – is not overly difficult. The gatekeeper often has a good idea of the success criteria of the market, and based on prior experience with the area, he can form a relatively good judgment of the risk involved in pursuing a given idea. Rowe, for instance, was an expert in identifying bands that belonged in what radio stations call Middle of The Road music – songs that perform well on the radio because they are not too extreme or edgy in their style, and therefore suited to please a broad audience. In other words, Rowe was a gatekeeper who had specialised in incremental innovation in the music business; he was a great predictor of bands that were different enough to be interesting and new, but not so different that they became a risky bet. On the very same day that he rejected the Beatles, Rowe signed another band, Brian Poole and The Tremeloes, that went on to produce several hit singles over the next eight years. Rowe could hear from their music that they were a fairly safe bet and fitted well into a market category that already existed, and he was right.

Radical ideas are different. Radical ideas are per definition counterintuitive; they go against the grain. When you go hunting for radical, game-changing ideas, you need to adopt a different mentality, because for the gatekeeper, the most important thing about radical ideas is this: they are almost never fully formed when you first encounter them.

This insight casts a new light on the famous Decca audition. When Dick Rowe didn’t recognise the potential of the Beatles, people are quick to see it as a sign of his incompetence. How can you be in the music business and overlook that sort of talent? But this might not be true. When Rowe didn’t think that their tape was anything special, there just might be another and much simpler explanation: what if he was right? We tend to assume, because we know what happened, that the true promise of the Beatles must have been clearly present on the 15 songs they recorded that day. But what if that was not the case? What if the tape that Rowe heard that day was simply not that different from all the other, reasonably-good-but-not-great bands that he listened to every day?

In fact, there is much that supports this interpretation. There is little doubt that the Beatles were nervous on the day of the audition, and many sources suggest that they didn’t perform at their best on the tape. They were also recording it with Pete Best, their original drummer, who didn’t have a great chemistry with the three other band members, and who was later fired and replaced with the more experienced Ringo Starr. And most significantly, when George Martin, the producer who eventually gave The Beatles their record contract, first listened to the tape of the Decca audition, he stated that while he liked Lennon and McCartney’s vocals, he had a two-word verdict for the group as a whole: “rather unpromising.” The Decca tape, in other words, just wasn’t that good.

What made the difference between Dick Rowe and George Martin was that Martin gave the Beatles a second glance. Despite his first, less than perfect impression of their music, he took another meeting with Epstein, and was so impressed with Epstein’s enthusiasm for the band that he agreed to give them another audition. Even after hearing them play, Martin was still sceptical about the band – he thought that their drummer, Best, didn’t have enough experience, and he found that their original songs were simply not good enough. But Martin then talked to the band after the audition, and according to the studio’s sound engineer, Norman Smith, this was the moment when the turning point happened. Martin asked the band if there was anything they didn’t like, to which George Harrison replied: “Well, there’s your tie, for a start.” Harrison’s humorous reply made Lennon and McCartney start joking around and making word games, and according to Martin, it was this that ultimately converted him; he found the group so witty and charming that he decided to offer them a record contract. The Beatles were not signed up on their music; they were discovered because somebody took the time to firstly get to know them better, and secondly to keep working with them and turning their raw talent into gold.

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The story of the Beatles highlights a central fact: if you want to find breakthrough ideas, you need to look twice. Radical ideas are hard to recognise. They don’t conform to your existing thoughts about what a good idea should look like, and they can even feel outright counterintuitive. And what this means, paradoxically, is that if an idea instantly looks good to you, it is probably not a breakthrough idea – whereas if it looks bad, weird or outright crazy to you, it just might be a breakthrough idea in disguise. Dick Rowe used a quick and efficient search process – get his people to record the band, listen to the tape, and form a quick judgment, based on his experience. And that made him a great gatekeeper for detecting middle-of-the-road ideas, bands that he could quickly and safely turn into a hit. But it also made him miss the Beatles, because while they had something, that something was just too far from being market-ready. Dick Rowe, paradoxically, didn’t recognise the greatest band of the century because he was too busy to do anything but listen to their music.

Martin, in comparison, used a more time-consuming search process, where he didn’t let his first impression decide the matter for him. He saw that while the Beatles were not market-ready, they none the less had something to them that piqued his professional curiosity. The music was just one part of it; it was Epstein’s enthusiasm and passion, and the personality of the Fab Four, that ultimately got him to give them a chance. And Martin did more than that; he also became heavily involved in developing the band and their music, and even performed on several of their numbers. Martin understood that radical ideas don’t come fully formed; they only become breakthroughs once somebody takes the time to work with them – and he was willing to be that somebody.

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The answer to the question of how to recognise good ideas, then, starts with another question: what kind of good ideas are you looking for? If you are looking for incremental improvements that are almost ready for the market, a more formal evaluation process may serve you well – but if you are looking for breakthrough ideas, you need take a different approach. You need to get involved. You need to look twice at new ideas – especially the weird ones – and not let your initial reaction stop you from exploring them further. You need to care less about the many things that don’t work about an idea, and instead look for the one interesting element that could really make a difference. And once you think you have found this element, you need to be willing to invest your own time and expertise in developing it and making it happen. In the pursuit of breakthrough ideas, the role of the gatekeeper changes; it is not just about saying yes or no, but also about being a dealmaker, a facilitator and ultimately an active co-creator.

As Rowe and Martin’s story shows, the pursuits of incremental and radical innovation are two different games, with different rules, and you need to make a conscious decision about which of these games you want to play. And this brings us to a last, important point about the two types of innovation. It is tempting to think that radical innovation is the right thing to go for. Incremental innovation has a bad name; it is hum-drum and nowhere near as sexy as radical innovation. But while it might not land you on the cover of Time Magazine, there is every chance that incremental innovation will still make you both happy and rich – provided you master how to find it, that is. Radical innovation, in comparison, can be a harsh mistress; it is costly to pursue, and often, what you thought was a radical idea was in fact just a bad one. The radical road is not for the faint of heart, nor is it for those who can’t afford to fail. It is for people who have lots of money to lose – or sometimes, of course, it is for those who have nothing left to lose.

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