When I built the Corcoran Group, I had the happiest, most productive company in town because I turned our little real estate shop into a hotbed of trying new things. I knew that if I was going to be the leader in my field, I'd need to build a work culture that fostered innovation, so I created a surefire system to make that happen. Here's how I did it then and continue to do it now for the young companies I invest in on ABC's Shark Tank.
RULE #1: Build in a Budget for Failure
My parents raised 10 kids on a shoestring budget and my mother was smart enough to hand my dad $20 cash when he gave her his paycheck every week. "Here's your $20 mad money, Ed," my mom would say. "Go out and have some fun!" We never were sure what Dad did with it, but he sure looked happy taking the cash.
I did the same thing at the Corcoran Group. Each year, I gave all my managers 5 percent of their operating budget to use however they wished with no accountability. If they didn't spend their mad money by year-end, they had to give it back. No one ever did, and they blew it on all kinds of stupid things like ad hoc parties and day trips, costume and movie rentals, surprise bonuses for good deeds, gifts, fortune-tellers and lots of alcohol. They also spent it on wacky business ideas—most of which didn't work. But they learned to laugh it off and, in the process of failing, tripped over some good business ideas that did work.
All the small changes that helped grow my business happened when we were playing outside and/or spending money that we had no business spending. I never had a good idea sitting at my desk nor did I harvest a big, game-changing idea around a conference table. They all happened outside.
One time, a receptionist came up with the idea to have our salespeople, their kids and their pets in a full-page advertisement in The New York Times. She showed me a page from the L.L.Bean catalog with all their factory workers smiling and looking wholesome while packing boxes on the assembly line. We dressed our salespeople up, shot a series of ads, and it became the most innovative ad campaign we ever ran.
A cheerful stock room guy, who we had sent to Cancun with some mad money, brought back a black-and-white photo of Reverend Moon from an in-flight magazine. The Reverend’s face popped against the page of typeface. I stole the idea and made my smiling face the company logo and placed it all over the endless boring classified real estate columns of The New York Times. That grabbed attention and got me more than my fair share of customer phone calls for years until our competitors got wise and followed suit.
When we were on the way to a company fun trip, one of my sales agents pointed out the airline monitor that listed all the incoming flights. Each flight was listed in a different color by airline. He had way too much to drink at the bar, and he stood there mesmerized. Once we returned to the office, I color-coded our entire filing system—every drawer, hanging file and index card—into color categories. As our company grew, it saved our agents endless hours looking for things, and, as you can imagine, nothing was ever misfiled again.
One time, I got it in my head to put all our sales listings on VHS to make New York City apartment shopping easier for our customers. The idea was a complete flop and I blew $76,000 on it. On the heels of that fiasco, I went out to dinner with a Navy captain who told me about a new technology that the Navy was using to play war games in South Korea. He had just returned from training and enthusiastically explained how the war exercises happened in “real time” on this new thing called the Internet. I registered our URL the next morning, posted all the property videos and … Bah-Bam! We sold apartments to two buyers out of London within the first week, and I quickly registered all my competitor's URLs before they woke up to the biggest thing that was about to change the real estate business forever. Our company listings were online a full two years before our rivals, and it gave the Corcoran Group not only a huge advantage over our competition, but also the well-earned reputation as the innovator in our industry.
All of the best ideas that created the most change would not have happened without the 5 percent mad money budget earmarked to try new things and breed innovation.
RULE #2: Reward Effort Versus Results
We established a bright green "good idea!" box in each of our real estate offices, and my managers opened them at their Monday morning sales meeting. The ideas were read aloud, and many were actually complaints in disguise. But there were always a few really good ones in the box. My managers rewarded each idea, good or bad, with a crisp new dollar bill right there at the meeting. We got hundreds of good ideas that helped us improve our business from that silly “good idea!” box.
I do something similar with the many small businesses I've invested in on Shark Tank. None of my businesses operate out of my office, and each one of them sells something different. But what they have in common is me. And so I use myself to constantly encourage my entrepreneurs to take everyday risks and give every plausible idea a shot. As the entrepreneurs are scattered all over the U.S., beyond the reach of a good idea box, I bring them together for a three-day retreat each year and blow my mad money on a helluva of good time. We allow for a half day of business brainstorming, but all the really good stuff happens on the beach, in the hot tub, on the ski slope or mixing a Mojito. My entrepreneurs become fast friends and continue to farm ideas from each other long after the retreat has ended. And I leave confident I've cross-fertilized my fields with fun, friendship and ongoing innovation.
RULE #3: Make Failures Public
Grandstanding your own failures is one of the best opportunities to encourage innovation within your company. Everybody looks up to the boss, like her or not, and her actions always set the example for the team to follow. By grandstanding your failures, you give your team permission to try new things and fail.
Long before real-estate and house-hunting shows became part of our pop culture, I was asked to audition for the very first real estate show about the ups and downs of selling real estate in New York City. The subject was one I knew everything about, and I was the absolute best person for the job. I prepared for the audition three solid days to make sure it would be a slam-dunk. To my surprise, I lost the spot to a young, inexperienced woman who had just started her real estate career one week earlier at my company. I was mortified and insulted! But instead of killing her the minute I got the news, I decided to grandstand my loss. The very next day, I made her the star of our company-wide sales meeting, treating her like our very own Miss America with a bouquet of red roses and all. I explained to our 600 salespeople how many hours I spent and how hard I had worked for the gig … only to lose it to the better (looking) woman. The entire sales team admired and emulated my chutzpah and became more willing to try.
In business, failure and innovation are kissing cousins. You can’t have an innovative business unless you allow and plan for failure. It’s only through failure that you discover all the important new stuff that moves your business to the top.
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