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Tuesday, March 03, 2009

Innovation in business today Part V

Innovation in business today Part V

By Dr. Earl R. Smith II

In the first four articles in this series, I discussed the difficulties of cultivating and maintaining innovation in a corporate environment. In this article, I would like to describe two companies. They addressed the challenge of cultivating innovation from two quite different directions. The first was a case of too much innovation while the second was the more traditional case of too little.

The Story of Company A

With this company, the balance was all the way over to innovation. Almost the entire team - with the exception of clerical support - was PhDs. They jokingly referred to themselves as a ‘dysfunctional gaggle of a-social eggheads’. Their windowless office space was in the basement of a building. Most of them arrived before dawn and left well after most other offices had closed. The strength of the organization was innovation - they were incredibly prolific. Advance after advance flowed from teams that were attacking difficult problems with apparent ease.

However, there was a major problem - they were not turning their innovations into revenue. None of the team had any experience with negotiating agreements and the ones that they had negotiated had turned out to be unproductive at best. Many of their attempts at ‘technology transfer’ were stillborn - generating no revenue at all and tying up the technologies under unproductive agreements. Further, no one on the team who had the slightest interest in gaining the abilities needed - they were all having too much fun ‘tinkering and creating’. Reality, however, was pressing in - the bills had to be paid and less-than-desired levels of compensation were an ongoing issue.

Working with this company presented a particularly delicate set of challenges. The first rule in any intervention is, ‘do no harm’. In this case, that meant avoiding any actions that derailed the culture that was producing so many great advances. That engine was delicately tuned and any damage might be impossible to repair. A core of team members realized that the commercialization of their advances was critical. With that support, it was time to try something new.

A first step was to open a ‘store front’. As it turned out, there was open space on the ground floor of the building. The idea was to move the innovations from the basement to the shelves of the storefront and to staff that part of the organization with ‘sales people’. Eventually they joked about putting in a ‘dumb-waiter’ to accomplish the transfer.

A key hire was what we came to call the ‘translator’. This person acted as liaison between the storefront and the basement and was the key to making the structure work. One of the principal difficulties in monetizing the innovations turned out to be the tendency of the team to loose interest in the innovations as soon as the ‘problem’ was solved. This meant that they usually stopped working short of ‘proof of concept’. The translator’s job was to set the ‘state of development’ required before the new product became commercially interesting. Once the new organization was in place, the storefront’s ‘shelves’ became stocked with lots of interesting and commercially viable products. The sales force began to make much more attractive arrangements and revenues increased significantly. The PhDs kept working and producing. The cars in the parking lot became newer and more upscale.

The Story of Company B

The organization and culture of this company was very different from the first one. It focused on extracting value out of a series of products developed by the founders more than a decade ago. The founders had retired and the remaining team had continued the business. Over the years very little innovation had occurred. The company was facing a gradually declining revenue stream. The team focused tactically. No significant forward investment occurred.

Although customers were constantly telling the team about new functionalities which would be desirable or new problems that they would like the company to address, the opportunities for new revenue streams was being lost through inaction. The initial establishment of a research and development department was problematic for two reasons. First, it was prohibitively expensive. The second was that the culture of the company would militate against its success.

A first step involved the outsourcing of the development. The company formed a partnership with another company focused on innovating. The resulting arrangement worked well because the ‘innovation’ culture was ‘out there’. Although the initial investments were modest, almost immediately the results were clear and significant. Customer concerns and needs were better addressed. New products and updates of older ones began to flow into the company’s offerings. The acceptance of the need to innovate came easily.

After a few years of this partnership, the team decided to develop an ‘in-house’ capability. They were able to do this through a merger with their partner. By this time, the team understood the need to allow and support this different way of operating. The senior teams of both organizations merged and a new culture of innovation emerged within the company.

Lessons Learned

Each situation is different - each company starts from a unique place. Efforts to cultivate a culture of innovation always require accommodations to the reality of what is necessary to reach that goal. There is no one-size-fits-all solution - only results that are productive or unproductive. It is not ‘rocket science’ but it is a terribly delicate dance.

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