Free Prize Inside by Seth Godin Book Summary and Thoughts (On Creating Innovation)

I went through Seth Godin’s book Free Prize Inside. If you’re not familiar, Seth Godin is one of the world’s most respected marketing experts. His books are often recommended. Here are the top insights from the book and my reaction.

It’s a short book. The premise is that:

  1. Big, costly research and development (R&D) is not the way to go to create new ideas.
  2. Soft innovation is the way to go.
  3. Advertising isn’t the way to go for businesses.

Let’s explain each of these points.

  1. Seth points to the company AOL’s biggest competitor back in the day. They spent (and ended up wasting) billions on fancy, expensive computers for research and development, while AOL used the cheapest computers they could with their limited budget. AOL eventually won that battle in the internet space.
  2. Soft innovation is what Seth describes as inventing something new on the small scale. This is a very interesting concept. Essentially, it means spending less money to invent something that’s a minor detail in the company. He asserts that this will bring more impact and profit than these big, expensive innovation attempts. He gives a few examples: he had to go through surgery, which cost $5000+. He noticed how during the post-treatment, he was just given some apple juice to ease his sore throat, a common side effect of the particular surgery he was going through. He asserts that the hospital relied on positive word of mouth referral and a small thing like more options of things to drink after the surgery would have made his experience much more pleasant. This could have lead to more customers. Just a few more customers and they would have made thousands of dollars. He also gives the example of a train he almost missed because of faulty technology. A whole crowd of people almost missed it too because of this. He realized a small, common sense innovation of a sign with instructions could have patched the problem and prevented a lot of unhappy customers from never returning to that train service. Finally, he points to a woman who started a candy store that anyone could have started. It was growing by double digits every month and very profitable. The amazing part is that what made it so cool, according to Seth, was the innovative flavors that reminded you of childhood. You couldn’t get these flavors or wrappers anywhere else in Canada. It was a small, soft innovation. It is the theme of the book and name of the book. The Free Prize Inside refers to the free prize that comes in cereal. It’s a small innovation that set cereal companies apart from the rest and brought in more profits.
  3. Seth asserts that anything a company does to WOW! it’s customers no matter how great will eventually be taken for granted and seen as normal. Thus, in order to success, a company must keep finding the next Wow! thing. He gives the example of how the first blimp with GOODYEAR on it was seen as amazing, but now they’re so common no one cares. This point I agree with as it is rather true. Humans always seem to get used to great things over time, whether it’s the first iPod, iPhone, or Virtual Reality headset. He thinks advertising is a waste of money. He believes the money should be put into the product so that it sells itself.

Below are some of the other big insights I picked up from the book.

Pay Them More and Increase Productivity

Dan Pink’s book Drive asserts that for highly creative roles and top candidates, money is not the #1 motivator as compensation. At that level, people want to achieve fulfillment and a higher purpose.

Seth Godin asserts in this book that most of the world is made up of average people, by definition. They make up the bulk of our workforce. And average people do average jobs like plumbing, factory work, or office work. Therefore, paying more money matters. He points to Henry Ford who decided to pay workers twice the average salary.

By doing so, Henry got a mass of applications: 10,000 the next day. Rather than paying people based off their replacement cost, he made their salary also dependent on their productivity.

This correlates with what Dan Pink says in his book as well: for manual or more simplistic labor, money is a great motivator to do more. By doing this, Ford dramatically increased the productivity of his workforce due to competition.

So, it’s important to not just get excited about a scientific study’s findings and run off to apply it. It’s important to ask, “How does this relate to my business and my situation? Or does it?”

The message seems to correlate with scientist’s findings of happiness in relation to salary: There is a significant correlation until you hit a level that is somewhat above median first-world country salary. At the time of the study, this was around $75,000 per year (not inflation adjusted).

What is interesting about this is that it stops far before $1,000,000 a year. It’s clear that once basic necessities get met, giving your employees more and more money doesn’t help as much as you think. The $450,000 a year man should not be that different from the $800,000 a year man in terms of happiness.

How To Bring Up A New Idea or Invention As An Employee

Seth asserts that you should use a concept of “championing the innovation” to bring across your soft innovation. This point brings in an overlooked part of human psychology and dynamics: getting people to buy into something despite their biases and aversion to change.

Here’s the basic idea:

If you’re an employee and have this new idea or innovation that you think can revolutionize or at least help the company immensely, don’t go to everyone and tell them you have this great idea because they’ll usually shut it down.

People want certainty. You want to make it seem as certain as possible so that they jump on board. Moreover, you want to approach small groups of employees or one department at a time to win them over slowly. Avoid being shut down by group think.

Show the idea to one department as something that’s sure to happen. Frame it in this way: “If we worked out these small concerns of yours about the idea, would you consider looking at it more seriously?”

Keep departments updated on the progress of your innovation.

  • A great innovation is disguised with more standardly accepted parts, like a digital watch that still has mechanical hands or a fancy new sign that still uses bolts and wood.
  • Let the boss take your idea and claim it as his or her own so he or she won’t shut it down.
  • Just try and get the first model or prototype cleared and OK’ed. From there, you have more leverage to get the invention to where you want it to be.

At first, I didn’t fully agree with Seth’s thoughts here. It seems like the more likely issue is that you’re at the wrong organization who doesn’t allow for ideas to grow. But over time, I realized that lots of organizations have a lot of bias, human nature, and obstacles, even the ones that champion innovation. It’s not just “political nonsense.” This is necessary work to work around those biases to get something that will work and deserves to see the light to happen.

Some executives crave certainty for return on investment, maybe more than they should. Being able to sense and navigate effectively through social dynamics, beliefs, and differing motivations makes or breaks the difference between a guy who lets his idea turn into a reality or one that lets it die.

He gives a few examples of soft innovations and ideas that came about in this way:

  • Chef Boyardee’s dinosaur-shaped pasta was brought about by a man who went first to the advertising department to win them over before going to other departments to champion the idea.
  • A man was able to get slots on the side of UPS trucks by slowly convincing different departments one at a time. He asked them simply if they wanted to hear more. He got different departments involved on specific areas: engineering on a weather-proof design, legal security on the legality, and so on. He let departments know the progress  of what he was doing.
  • A man got the Starbucks card going, which eventually accounted for 10% of all of Starbucks’s sales. At first, he was shot down by everyone. People didn’t believe him. He sold what he could: the first prototype version. Once he got that cleared, he could add more things on and get it where he wanted. Every department had concerns but none had the power to say no.

I particularly like the last point about Starbucks because the process is backed up with awesome results: a card that accounts for 10% of Starbucks sales. Unfortunately, people need those numbers. Without proven data, an executive asks, “how do I know if this process is worth investing in?” Because of that aversion to risk, it can shut down an idea that could change the organization. To be fair, most ideas thrown at a manager may be garbage and only will waste money, so these people have naturally been forced to grow a tough, skeptical skin.

Ideas Are Not As Important As Execution!

This one is huge. I see a ton of successful businessman bring this up. Ideas are a dime a dozen. Seth Godin gives the example of the website They come up with one new free business idea a day.

Many naive, young start-up businessman overemphasize the idea. They’re constantly concerned about getting people to sign a non-disclosure agreement or secrecy contract. I used to think this myself.

After seeing so many successful business people talk about this, it’s clear that most people that pitch these guys care way too much about the idea itself as if it taking 10 seconds to come up with an idea is all it takes. It turns out that ideas are a dime a dozen. It’s in executing and pivoting if it doesn’t work out that’s the hard part. Many people had the idea for turning Harry Potter and Lord of the Rings into movies. Actually turning it into a movie is much more difficult: pitching it, getting the right cast, getting the budget, etc.

Here is probably one of the best examples. Mark Zuckerberg wrote a post where he agreed with the president of the one of the most innovative companies on the planet, Pixar. Ed Catmull believes that getting the right people and chemistry is more important than the right idea.

The right team will create the right idea. Be sure to check out my article on Ed’s book Creativiy, Inc. 

How to get the right ideas for business

Small, Inexpensive Ideas Make You Stand Out and Profitable

The book asserts that you should not focus your time on advertising because banners and billboards are expensive and you have to keep paying.

Instead, he emphasizes soft innovation: finding cheap, unique, and innovative ways to stand out by a small change in the product or service without changing the process.

He suggests you look at other industries to see how the top players stood out and to do something similar in theme in your industry. Some of the things he suggest are adding another unrelated component to the product (a toy in cereal or candy with your product), eliminating the wait time for customers (Fast Pass at Disneyworld), making the product fun in a unique way (frisbees that they throw on your life for a free quote instead of just telling you), emphasizing the wait time to show scarcity and social proof (expensive cars and watches. I suggest it’s actual real scarcity and you can really overdeliver), and overdelivering on the customer experience in some way unique (this is something I found Richard Branson does. Seth gives the examples of a restaurant with a door that is so big that it weighs hundreds of pounds and another restaurant that only hires the most attractive models. Beware of the legality of the last one so people don’t sue you for discrimination. You should probably officially label yourself as an entertainment-based business).

Warning About This Book

The big issue with the book is the way it’s laid out:

The assertions and directions on how you should market your business, innovate, deal with R&D, or bring up innovation to your higher-up’s are all oftentimes anecdotal or not backed with any science or stories. It’s simply his opinion or based on cherry-picked stories that support his view.

And that can be a dangerous thing. Why should I believe Seth Godin’s advice? What did he accomplish?

Although he seems to be highly admired in many circles online, Wikipedia describes him as an author and entrepreneur. What businesses was he an entrepreneur for? He founded an internet company called Yoyodyne in 1995 and sold it for $30 million in 1998 before the tech bubble where people valued businesses way too highly. He founded a website called Squidoo in 2006 that was later acquired by Hubpages. It was in the top 500 most visited websites in the world in 2008.

While these are reputable accomplishments, I would take what he says with a grain of salt. 

He may have been a great businessman or marketer, but he may have gotten lucky with those 2 companies. There are definitely marketers who have a longer track record of success in actual business and made much more consistently across numerous industries, like Jay Abraham or Dan Kennedy.

A marketing manager who has grown a business to billions of dollars could be more credible. The point is that there is bad advice out there and you just have to be careful. What he says may not be a golden truth for what you’re trying to accomplish in terms of innovation or marketing.

Having said that, there are some good points in the book that are worth noting. Just be careful of the things he says with no results-based conclusion. For example, he brings out a story of how a man managed to introduce slots on the side of UPS trucks, a soft innovation, to UPS. He notes how it correlates with his method of introducing soft innovation to a company. But it only matters if this invention actually did incredible good: did it make a lot more money for UPS or increase convenience incredibly or impact people immensely? Or was it just a thing that took up a lot of money and time? If the latter, then it doesn’t matter what method you should use to do this and it’s probably not important to learn the right way of doing it.

The Starbucks example is one of the exceptions where actual tangible results are shown to prove the value of the process Godin asserts. However, even that is not enough. One anecdotal data point is rarely ever enough. Perhaps there are a hundred or a thousand stories of people who created equally incredible innovations that rose through the company that achieved similar results and did not use anything similar to Godin’s suggest process of introducing your invention to your company and employees. That would completely make his process void.


Some parts of the book and the assertions made should be taken with a grain of salt based on the credibility and anecdotal or unbacked directions of the author.

Having said that, some of his points are definitely worth considering. Certain stories on how to champion your soft innovation are interesting and results-based enough to look at them twice. In particular, a man used specific concepts that Godin highlights to bring an idea of Starbucks card that really benefitted their overall sales (10%).

Another would be the point that soft and small innovations can be more impactful and profitable than big, expensive ones. This one had a great example of AOL’s competitor wasting billions of dollars.

Finally, his point that a company should always keep searching to wow their customers shouldn’t be overlooked. While I don’t think it’s necessary to always look for the next big thing to wow them (that can be costly and unnecessary), it seems to partially correlate with Warren Buffett’s advice on big businesses: “The biggest danger of big businesses is complacency.”

A successful business should always stay vigilant so it doesn’t fall behind out of laziness or arrogance.

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By Will Chou

I am the the founder of this site and I am grateful you are here to be part of this awesome community. I help hard-working Asian American Millennials get rich doing work they love.

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