How do smart entrepreneurs know where their next idea is coming from? Simple. They give it top priority

Looking back on it, it would be tempting to dismiss Mike Stephenson's epiphany as the by-product of what can happen when entrepreneurs and alcohol mix.

After all, Stephenson openly admits he can't even remember what kind of wine he was cradling in his hands when the idea that would remake his business lodged itself in his brain. Maybe because the bottle's contents were safely corked inside. The president of Great Lakes Hybrids Inc., an agricultural seed supplier based in Ovid, Mich., was too intoxicated by the wine's packaging to take a corkscrew to it. Dining in a noisy Manhattan steak house with his accountant, a German investor, a New York City investment banker specializing in agriculture, and assorted lawyers, Stephenson actually began reading the label aloud. "There was a personalized message. The vineyard owner talked about harvest conditions, this list of things the crop had gone through to bring these grapes along. There were family details, and he'd signed the label," Stephenson says, recalling details of that 1988 night as if it were last week. "The owner's name was right on the bottle, and that impressed me." Hey, he thought, I can do this at my company--we'll sign our names on our bags of seed corn; we'll make a personal statement about our quality.

The branding idea was nothing less than a godsend. "For years we'd been looking for ways to pull ourselves out of the commodity market, set ourselves apart," he says. "It was a battle trying to move away from selling on price." As he explained this to his dining companions, they listened but gave no reaction. Stephenson didn't much notice. "I was in my own world at that point," he says.

When he got back to the office, he started talking to people in the hallways, one or two at a time, almost shyly bringing out the bottle. "My sales manager got the idea, and so did my plant manager and the production people," he says. "But they asked a lot of questions that made me think--they were thinking more about how do we implement this, and why."

Ultimately, the inspiration that sprang from a message on a bottle triumphed in a new line, christened Signature Seed. The line helped boost the company's sales from $7 million in 1988 to $18 million by 1992. And it's still the company's premium brand.

The annals of entrepreneurship are, of course, filled with such crowning moments. And everybody knows the type of CEOs who tend to star in such episodes: the tireless searchers who--on top of running their fast-growing companies--never seem to run short of either ideas or new places to scavenge for them. The same gut instinct that served them so well in turning an idea into a business proves just as adept at spinning out a steady stream of innovations, the kind that leave everybody around them wondering, "Where'd they come up with that?" Until recently, the answer probably wouldn't have provided much insight. CEOs looking to rear a steady brood of well-behaved ideas could do so by popping in at an annual industry trade show or by taking in the occasional customer comment. But there's a reason such simple--indeed, civilized--approaches don't work anymore: competition.

As industries consolidate and product cycles shrink, even the best ideas--with patents as their pedigrees--come under assault practically on arrival. Hot products, no matter how unlikely their success (read Beanie Babies), are the most obvious of those endangered species. And just try selling anything from batteries to beds over a toll-free line (or the Internet) and you'll find yourself reduced to me-too status. "The cycle of growth, of decline and renewal, is so compressed today," notes Jim Amos, CEO and president of franchisor Mail Boxes Etc., which has faced stiff competition. "The market changes so rapidly that at any moment you have to give up what you are for what you could be." That's a backbreaking burden for any CEO.

In fact, it can be downright demoralizing. "Coming up with new ideas used to be one of my favorite pastimes," says Warren Schlichting, cofounder of Yucatan Foods, a $3-million company in Santa Monica, Calif. "I simply don't have the energy or the motivation anymore."

Who does? As much as Mike Stephenson's story may sound like the proverbial lightbulb-over-the-head experience, what happened after that dinner is much more illuminating. As the bottle of wine went from hand to hand at Great Lakes Hybrids, Stephenson's original idea changed and grew. The whole experience, Stephenson says, "made us focus on quality issues." The company decided to go beyond what the U.S. Department of Agriculture required seed-corn suppliers to provide on their tags, he says. Then came the marketing ideas; the company's product tag got a redesign--as did its brochures, followed by its fleet of trucks. Though Stephenson provided the original spark, he hardly claims credit for all that followed. Who came up with the moniker Signature Seed? Ask him, and Stephenson heaves a nearly audible shrug. It's not his concern. He knows he did his part.

Stephenson and entrepreneurs like him understand that generating ideas in the name of fueling growth is a wholly different task from the "Aha!" experience that gets a company started. The sheer volume and quality of ideas a growing company consumes means that it's no longer feasible for a CEO to take each one firmly in hand, clutching it tightly through every perilous intersection. The passion that enabled you to steamroll everyone who said your business wouldn't fly will exhaust you and everyone else if it's always on display. Better to treat idea generation just as you treat, say, hiring: preserve the part of the process you feel you need to do, and make sure the company can carry out the rest. Stephenson, like many entrepreneurs, considers himself a world-class snoop; he fishes out ideas and then sends them on for refining.

But before you can find yourself in the right locale to scout out ideas, you'll likely have to abandon assumptions about where ideas originate, what kind of culture fosters them, even what the best ones look like at birth. Not to mention ditching myths about the role of customers and employees--and even your own exalted status as idea czar.

'Ideas will just come to me, as they always have'

Your employees would be unlikely to doubt you (openly, anyway) if you attributed the idea you cherish most to your fanatical devotion to feng shui, the newly faddish Chinese practice of arranging a room to maximize the flow of energy. But conceding that there's a mystical component to generating ideas doesn't mean you should assume that the process is out of your hands. The miniature Zen garden on your desk, for instance, won't provide any inspiration if you don't have time to rake it.

And the CEOs who generate ideas most consistently are mindful of doing whatever they need to--hiring, delegating, reorganizing--to give their minds time to roam. Yes, they make it look easy. But watch them in action and it becomes clear that they've made explicit trade-offs, with the aim of weaving idea generation into a daily discipline. It's not so much that they understand the process. But they do respect it.

On the surface, Cameron Kuhn comes perilously close to the stereotypical image of the eccentric entrepreneur. "You know that time right before you're about to fall asleep?" he asks earnestly. "If you stay up, that's when you get very creative." His rÉsumÉ alone attests to his idea overflow: not only is he the founder of EnviroCheck, a fast-growing $5-million provider of energy-conservation services for building owners in Orlando, Fla., but he has also started or taken over some 22 other small ventures. On the days he comes into the office, he often leaves around 4 and continues to brainstorm at home until he finally falls asleep--with a notebook by his side in case he thinks of something midslumber. Recently, he's even been dreaming up ways to encourage his 35-person office staff to act more professionally in the midst of hypergrowth at EnviroCheck, which ranked #268 on the 1997 Inc. 500. "A thought came to me last night," he says. "Everyone gets a $240 credit, and for every unprofessional act, an employee gives back $20. What do you think of that?" (Hey, we said he was eccentric.)

But even in his case, things aren't what they appear. Kuhn owes much of his ability to be creative to some very conscious decisions. For starters, three managers now share the job of running the company's operations. About six months ago Kuhn came up with another idea that helps him stay focused. He developed his own version of a "dash report," a weekly rundown of about six key marketing and finance ratios that tells him how EnviroCheck is faring. Kuhn is continually looking for new ways to manage his arrangement better.

While Kuhn's creativity is driven by the sheer love of starting companies, Ethan Assal believes that if he hadn't pursued hundreds of possible new ideas, his company very well "might have gone out of business." For the CEO and president of Executive Presentations Inc. (EPI), a $15-million integrated-marketing company based in Rockville, Md., living by his wits has become a necessity. Having started nine years ago as a slide-show producer, the company has found itself in one cutthroat industry after another--from systems integration to photo-lab services to Web design, adding hundreds of services in nine different niches. Not that all of Assal's initiatives have succeeded--there was a disastrous foray into 24-hour photo shops. But he attributes the company's fleet-footedness to the decision he made three years ago to bring in a chief operating officer.

Of course, not every entrepreneur relishes the idea of giving up operational control, but there's also the option of loosening up: you might force yourself to delegate whatever administrative tasks you can't complete in about 20 hours a week. So advises Gary Schroeder, CEO of Oakshire Mushroom Farm Inc., a $5-million grower based in Kennett Square, Pa. Schroeder has for the past two years cleared his calendar so that more than half his time is spent doing what he loves: nurturing new ideas while getting his hands dirty in the greenhouse, and calling impromptu brainstorming sessions.

Schroeder concedes that he broke the 20-hour rule recently to work on the financing of his next big idea. But he knew he'd made the emotional leap last year when he voluntarily vacated his office and moved into another building. "I was too involved," he admits.

'There are no stupid ideas'

In recent years CEOs have been battered--by competition or, even worse, by management gurus--into making employees part of the idea-generating process by just about any means necessary. But whether you armed them with an Etch A Sketch or subjected them to rural retreats, the overall environment needed to be one of blanket acceptance: All ideas are worthy. None are stupid.

It all sounds very validating, but anyone who has mastered the process knows that the most powerful ideas share one other trait: they are resoundingly bad. Or at least that's how they look at first. To tell the truth, they should be no more than half-baked. "Ideas are the raw material for solutions, not the solution," says Arthur VanGundy, a professor of communication at the University of Oklahoma. Study the history of good ideas, he urges, and you'll find that the best of them tend to come from the worst "with high frequency." Silly Putty, for instance, started as a wartime substitute for rubber.

Two years ago Oakshire Mushroom's Gary Schroeder and three managers started playing with a seemingly ridiculous idea--selling a product to competitors--while trying to address how to stem the loss of the company's 40% market share in shiitake mushrooms. "We kicked around a lot of ideas--franchising, expanding geographically to be more local" to supermarket and restaurant customers, Schroeder explains. "But these other competitors were already there."

So Schroeder and his team arrived at an unconventional solution: they'd sell their expertise to rival farms. Oakshire Mushroom's claim to fame is a sawdust log for growing shiitakes that reduces the harvest time from four years to four months. The choice has paid off: sales increased 45%, to $5 million last year, and Schroeder expects to double sales this year.

Doug Levine knows where he needs help: figuring out which of his often-oddball ideas actually have promise. The CEO of Crunch, an innovative New York City-based chain of gyms whose offerings include gospel aerobics and coed wrestling, gets his 30-person staff together weekly to discuss the offbeat ideas he gathers from all over: clothing and computer trade shows, restaurants, clubs, and competing gyms. From a visit to the clothing store Old Navy, Levine got a merchandising idea for the gyms: the company logo, emblazoned on canvas, draws customers' attention to high shelves loaded with clothing inventory.

Levine even makes the time for strangers who've read about his company and who phone in their own ideas. "Some of them are pretty crazy, but I listen to them all," he says.

Scott Reeves, president of Jinwoong Inc. USA, a $57-million division of a Korean camping-equipment powerhouse that's turned out more than 2,000 tent models alone, seeks inventors out. He puts communing with outsiders on his regular to-do list, talking to a dozen or so each year, choosing those whose notions sound the most plausible. Reeves's 1996 meeting with an Arizona inventor quickly led to the development of the Connection Tent, a two-room tent connected by a tunnel, which accounted for more than $5 million in sales in its first year. One of Jinwoong's latest creations, an ungainly two-legged sleeping bag, originated when a New Zealand inventor came to Jinwoong with "a rough prototype," says Reeves.

'If you listen to customers, they'll tell you what to do'

What Cameron Kuhn is about to say would be considered heresy in some quarters, where CEOs have come to believe (much to the annoyance of their salespeople) that tagging along with salespeople is a can't-miss strategy for collecting ideas. "I love my customers, but to meet with them would really muddy the waters," insists Kuhn. "I just want to bring them better new products. I have a great sales team. They have the customer relationships--why would I want to step into the middle of that?"

Even CEOs who see the virtues of face time with customers believe that it's only as useful as the process it's part of. "Buyers have so much on their plate. They can't identify all the trends," says Jinwoong's Reeves. "If you have the right product at the right time at the right price, many times a customer will adapt to what you've done." Even Kuhn concedes that he'll consort with a small group of key accounts once an idea has moved into the testing stage.

Aside from reacting to what's already on the table, customers can help out by identifying unmet needs. But for a CEO (or a salesperson, for that matter) to distill a workable idea from what customers say requires much more than merely nodding attentively; the suggestions must be filtered through an ever-more-detailed screen of knowledge about what ideas suit the company.

"We listen to our customers but not in a traditional sense," says Brad Cary, president of CIBT Inc., a $12-million provider of visa, passport, and other international-travel services, in McLean, Va. "You have to read between the lines."

Back in 1992, for example, Cary got a call from a potential customer looking for help in streamlining the process for obtaining visas for workers heading overseas. "When the customer described the problem, we realized the solution would be a specific software program," says Cary. "Of course, we weren't in the software business at the time, but we decided on the spot that we could do it."

The customer's people, he adds, "just knew they needed help." Within a few years, that project had evolved into a proprietary system that has enabled CIBT to capture more revenues from four big customers.

'It takes only one brainstorming meeting to generate more ideas than we can handle'

Late last year someone stopped Jim Amos in the hall and stuffed a bunch of papers into his hands. Amos, CEO of Mail Boxes Etc., listened intently as a member of the finance and accounting department detailed an idea he had for how Mail Boxes Etc. could offer more technical services to the home-office market. His idea "merited looking at," recalls Amos.

It's that kind of incident that convinces Amos that meetings aren't enough. Ideas are best shaped through an ongoing companywide dialogue; what happens between get-togethers can be every bit as crucial as what happens during them. "Ideas come out of those meetings, if not at them," he says. "Every company has a collective mind."

Amos set about getting that mind working within his first 90 days of taking over as CEO in 1996. At a companywide strategic-planning session--to which he invited, among others, the company's top 50 franchisees, as well as vendors and board members--he solicited ideas that would take the company forward and still fit its culture. The result? "An explosion of ideas," he says.

But every blast leaves a mess in its wake. Amos, fully aware that following up on the best ideas would be the only way to keep them in circulation, created a new-business-development group. The six-member group's mandate is to evaluate, track, and refine the ideas that flood into a centralized database--at a rate averaging six a day--through the company's Web site or intranet, or from phone calls, letters, and E-mail. Furthermore, Amos is also holding monthly two-and-a-half-hour "renewal" meetings for all employees, to provide updates on ideas in development. So far, two major new services--including self-service computing kiosks in hotels--have resulted from Amos's formal idea-development process, and nine more are in the wings.

What brainstorming meetings can do is send the message that employee input is valuable. But to play a more active and consistent role in generating ideas, employees need to be educated. The invitation to participate is most effective if employees know how they can have an effect. That means opening the rest of the process up to them.

Two years ago Will Raap, CEO of Gardener's Supply Inc., a $26-million mail-order business based in Burlington, Vt., granted a half-dozen employees their dream assignment. For six months the employees spent eight hours a week developing their new-product ideas with the help of mentors. The results were more than encouraging: four staffers proved to be so skilled at developing good products that it's become part of their jobs. A woman from the marketing-analysis department got the green light to spend one day a week cultivating a brand-new business--an herb farm on the company's grounds. "We hope she will become a supplier of herb plants and related products for us," notes Raap.

Given the program's success, Raap took the only logical leap: he junked it. What he had was too potent to limit to a few people. "We broadened the initiative to increase the awareness that we need new products and that anyone can come across them," he explains. Today all 120 employees know the critical target numbers, such as the average gross margin dollar per square inch of catalog space, so those who want to come up with a great new product idea know what their goal should be.

"For the last holiday catalog, we got 50 ideas from two-dozen people that buyers could follow up on," brags Raap, who offers employees monetary rewards for their ideas. "Ten got in, and three to four of them were better than average."

So brimming with ideas are some entrepreneurs that they need to make sure they keep track of the inventory that resides in their own brains. CIBT's Brad Cary writes down every business idea he has--a habit he developed in business school. Just logging his ideas into a computer every week can help him assess whether a concept is worthy of future follow-up. "The exercise is as valuable as the idea itself," says Cary.

'Getting ideas isn't the problem; implementing them is'

Once you've adjusted your own role to make room for idea gathering--as well as motivated and educated your employees to work with the raw material of ideas--there's one more tool you'll need to join the ranks of the top idea generators: a suck index.

That's what Tom Lix calls his version of it, anyway, using language that sounds borrowed from those revered business strategists Beavis and Butt-Head. What the suck index offers is an early-warning system to catch newborn ideas that aren't likely to thrive. Lix, CEO of NewMarket Network, a Web-site developer and marketer in Boston, has his eight employees rank ideas on a scale of 1 to 10 in five areas, including up-front resources required, technical complexity, and legal liability. (For example, how likely is it that someone will sue if NewMarket creates a site for Howard Stern's fans?) If the boss or anyone else should proffer an idea that scores a string of 10s on the suck index--hey, it's nothing personal.

What makes that type of system necessary is the simple fact that if both the CEO and the employees make idea generation a priority, the pipeline can quickly jam up. "We come up with hundreds of ideas and bring a few to market," says CIBT's Brad Cary. Each week, he enters his ideas on a simple form in his computer that allows him to examine target markets, marketing and pricing factors, the estimated start-up capital and time commitment, and the three-year revenue potential. From there, he ranks each one on a feasibility index and a profit index. By multiplying the two, he can "see if it's worth going forward."

The screen-test phase can vary widely among companies. Crunch CEO Doug Levine assesses all ideas in terms of his endlessly repeated mantra: How will this enhance the brand? (That helps explain why the gym chain has expanded into clothes, books, and videos.) At the other end of the spectrum, Mail Boxes Etc. uses a scale of minus 2 to 2 for each of 20 criteria, which are weighted to arrive at a total score; Jinwoong, the sporting-goods marketer, uses an "eight-link chain" model for managing decisions about potential new products; the links detail the company's strengths in eight areas, such as distribution and in-store merchandising.

It can seem as if such tools take all the fun out of the process, forcing every flight of imagination to crash-land in a mountain of paperwork. But with lots of ideas, such a phase doesn't render a simple death sentence; after being rejuvenated and reappearing in a slightly rejiggered state, some ideas return to pass with flying colors. Then there are the ideas for which any screen is beside the point.

Like the one Jinwoong's Scott Reeves points to as a current favorite, a simple project-management tool he calls a "product-development system," a calendar that enables managers to keep better track of key deadlines as they create multiple new products. Reeves had no hesitation about giving the idea, intended for his company's internal use, a thumbs-up.

After all, he has new-product meetings scheduled for almost every week this year.

Susan Greco is an articles editor at Inc.