Creativity, Innovation and Entrepreneurship

The Science Times section of the New York Times recently published an interesting feature -- entitled "Determined to Re-inspire a Culture of Innovation" -- on recently retired President of the National Academy of Engineering, Dr. William Wulf. It seems to me that Wulf provides evidence -- even if it's only a single data point -- that it is possible for an individual to embody the technical sophistication of a world class engineer and the business savvy of a highly successful innovator / entrepreneur.

Ironically, I've just returned from visiting with senior leaders of two large technology-intensive companies:

Case 1: a company whose core competency is production processes on a massive scale; and

Case 2: a company whose core competency is software development on a massive scale.

In one case, the company has recruited an innovative CTO to help drive organic growth through innovation. In the other case, the company is struggling to figure out how to deal with the impending retirement of the innovators / entrepreneurs that have made it one of the most successful companies in the world.

Wulf states that the economy of innovation depends not only on an educated workforce and abundant investment in innovation, but also on intellectual property law, tax codes, patent procedures, export controls, immigration regulations and [other] factors making up what he calls the ecology of innovation. All the elements in the ecology of innovation can be in place, but innovation will still languish unless there are creative, entrepreneurial innovators who can leverage that ecology. On the other hand, the productivity of those entrepreneurial innovators will be constrained if the innovation ecology is non-supportive.

The article reports that there are elements of culture that form an important part of the ecology of innovation, and in this regard the United States has advantages and disadvantages. One advantage is that an innovation that fails in the marketplace carries much less stigma for the innovator here than in other parts of the world. On the other hand, there is widespread ignorance of science and technology in the U.S. Wulf suggests that 90% of our population is incapable of intelligent conversation about some of the most important [science and technology] policy issues of the day.

Wulf indicates that the U.S. has ceded the its dominance in mass production manufacturing to low wage countries -- a hard cold reality that should obviously concern engineers who work for the Case 1 company that I referenced above. Many of these engineers were trained, as I was, to be competent in "routine engineering" in support of mass manufacturing. However, Wulf goes on to say that unless something is done to improve the ecology of innovation, we will miss the opportunity for a comeback in the coming age of mass customization. He suggests that this is a knowledge-intensive kind of manufacturing that will not be done by low wage labor. He concludes by indicating that we have the potential to be the greatest manufacturing country in the world, but we are doing nothing about it, i.e. nothing about improving our ecology of innovation that will be necessary to support mass customization production. I suggest that in addition we need our educational institutions, as well as professional training systems and processes, to support the development of individuals who embody both superior technical skills and business savvy -- people like Dr. Wulf; the CTO hired by the Case 1 company referenced above; and the founding team of technical entrepreneurs that have made the Case 2 company so successful.

It seems to me that it is much easier to add business savvy to a technically skillful engineer than to add technical sophistication to a business savvy entrepreneur. Hence it's my hope that more engineers will sustain their technical competence while also having the courage, vision, energy and commitment to get outside their technical comfort zones in order to become more skillful in the art and science of business. By the way skill comes from practice. Gaining knowledge is necessary but insufficient for becoming skillful.

Dear readers:

My wife and I are leaving early tomorrow for a ten day trip to Alaska, so I may be absent for a bit. But I will be back.

This week I'd like to react to some of the threaded discussions that have followed my earlier blogs. In particular, there were some interesting comments in the threaded discussion that followed the blog referenced above.

A couple of reactions:

For five years I served as the director of a technology business incubator. Occasionally someone would show up in my office brimming over with enthusiasm for their good idea (generally neither patented nor patentable), and they would ask how they could collect their reward. I'd gently respond that a good idea is a starting point, but rewards generally only come after someone invests the time, energy and funds to convert the idea into a product or service that customers would pay for and to build a business that could get the product or service to market.

(You might think that patenting avoids all these headaches, but even after a patent is granted, someone has to invest time, energy and funds in marketing the patent to potential licensees. One successful company in the incubator licensed a technology from an IBM inventor for about $500K and then spent several million dollars and a number of years pursuing licensees. Happily they were eventually successful in landing a major Japanese company and it turned out to be a big success.)

This hard reality is why often success comes from creating a team to commercialize the innovation -- whether in a corporate venture or a start up venture. So the technical innovator teams up with an entrepreneur (someone who has similar energy and creativity but applied to building a business rather than a technology.)

In fact before I became incubator director, I was a co-founder of an innovative, technology-driven company that was one of the first companies in the incubator. We had some modest success but were constrained by the weakness of the team -- strong on technology but naive about business.

As a result of that experience, I submitted a short essay during the hiring process for the incubator director that discussed the value of bringing together "technical entrepreneurs" and "business entrepreneurs" who could work together to build both the technology and the business.

It's common to hear the following answer to the question: "For investors, what are the five most important factors in deciding whether to invest in a new venture?"

Answer:

1. The team

2. The team

3. The team

4. The team

5. The attractiveness of the opportunity -- i.e. the fit between the market and the product / service.

So if you aren't getting the support you think you deserve, you might want to consider linking up with someone who has a successful track record of getting support from investors (or if you are working inside a company, from senior managers).

Best wishes.

Mark

P.S Last week I ran an innovation workshop for a billion dollar company and it was both fascinating and frustrating to see and hear all the conflict related to operational excellence (doing the same old stuff) vs. the drive for innovation.

The answer of course is "Yes." It can be done well. It can be done poorly. It can be done for good purposes. It can be done for bad purposes?

When Innovation is Bad: Today's New York Times "Business Day" section has several relevant stories. The big story is entitled: "When Fakery Turns Fatal: Food Scares Raise Questions about Chinese Entrepreneurs." Yes, those entrepreneurs are pushing innovations -- substituting inappropriate ingredients into pet foods, pharmaceuticals and baby-milk formula -- that are appalling. (But why does the New York Times tar and feather the general category of Chinese Entrepreneurs? I'm writing this blog on an IBM laptop built by Lenovo, which has served me well for the past two years.)

When It's Not Clear Whether an Innovation Will Be Valued as Positive: Also on the front page of the NYT Business Day section are stories about the competition between Microsoft and Apple over the next generation of desktop computer operating systems. Some technology reviewers believe the competition may be irrelevant, and that modular collections of web-based software developed by Google, Yahoo and fast -moving startups will displace desktop operating systems. Without doubt, PC and web innovations have transformed our lives -- dramatically accelerating communications and knowledge transfer. Some (including me) would question whether the outcomes are always positive, as the overuse of e-mail can create mind-numbing clutter and misuse of e-mail can create major league HR problems. (For example, about a week ago a key member of my team quit in disgust when someone outside my organization committed e-mail assassination, at least in the mind of the offended employee.)

Investment in Innovation for Potential Good: Also in this section of the New York Times are two stories of venture capital investments in innovative products and services. Elevation Partners bought 25% of Palm, Inc. stating that "the rationale for the investment is found in the rapid innovation that is changing cellphones into computers and entertainment devices ….. and that rapid innovation will continue to proliferate, making it impossible for several large players to dominate." The article goes on to point out that after struggling for years and losing hundreds of millions of dollars, Microsoft now has a substantial lead over the net three vendors of operating system software for advanced smartphones. The side-by-side story discusses a new $700M venture fund that will focus on companies producing products, processes and services "that can reduce the crushing costs of healthcare." Last week I was talking with senior officials of Blue Cross Blue Shield about innovation. One individual said that sadly innovation in products and services often doesn't result in financial savings, as it drives wider adoption of the product or service. Of course, those innovative products and services may enhance health.

Change is inevitable, and entrepreneurs and innovators will be key drivers of change. Some outcomes will be positive, some negative. Some innovators and entrepreneurs will be skillful and effective; others will not.

All this week I'm in the Pacific Northwest, meeting with people from several innovative companies -- including Intel, Nike and Microsoft -- about Babson's innovative Fast Track MBA Program. (See http://www3.babson.edu/MBA/programs/fasttrack/)

From Intel's Vision Statement:

At Intel, we constantly push the boundaries of innovation in order to make people's lives more exciting, more fulfilling, and easier to manage. Our unwavering commitment to moving technology forward has transformed the world by leaps and bounds.

(See http://www.intel.com/intel/vision/index.htm?iid=about+ln_vision)

The Nike Vision:

To bring inspiration and innovation to every athlete in the world.

(See http://www.nike.com/nikebiz/nikebiz.jhtml?page=4)

From Microsoft Mission and Microsoft Unlimited Potential:

At Microsoft our mission and values are to help people and businesses throughout the world realize their full potential. Innovative technologies and local partnerships are transforming education, fostering local innovation, and enabling jobs and opportunities to help create a continuous cycle of sustained social and economic growth for everyone. (See http://www.microsoft.com/about/default.mspx and http://www.microsoft.com/emerging/default.mspx)

Innovation starts with a good idea, and a good idea starts in the mind of a creative individual. What's a good idea? When we told Craig Wynette, the manager of Corporate Ventures at Procter and Gamble, that respondents in our study on radical innovation said their firms had no shortage of ideas, he said: "Yeah, right, but I challenge them to tell me how many of them are good ideas." By that he meant how many really had the potential to become breakthroughs.

Creativity is one of the characteristics that make us human -- but generally we think some people are more creative than others. Since innovation is defined as "the introduction of something new" (Merriam-Webster Online), the likelihood of having an innovative idea is diminished if the focus is on execution in the ongoing business, i.e. doing what you've always been doing as perfectly as possible. When people have innovative ideas based on their ongoing work, often these ideas are incremental. Don't get me wrong. Incremental ideas can be very useful, particularly when they are in response to requests from customers for improvements in existing products and services.

However, good ideas as envisioned by Craig Wynette, i.e. ideas with breakthrough potential, often come from connecting things outside your everyday domain with things that are part of your normal routine. You can catalyze this kind of thinking on your own, but your company can also support creative thinking and innovation by valuing good ideas and by implementing processes, systems and structures that support the discovery, development and commercialization of innovation.

In our study of radical innovation in ten large, R&D intensive companies, here are some of the ways companies supported idea generators.

Leaders signal that they value innovation and actively seek good ideas by declaring "strategic intent", i.e. that the leadership wants the company to be innovative. For example, a common theme in the strategic vision statements of many companies today is "growth through innovation." Leaders can follow though on strategic intent by issuing a request for proposals. The former CEO of Texas Instruments said: "We need to grow. Find me businesses in the white spaces between our existing lines of business." Result: TI formed a new business development division and issued a request for proposals that generated hundreds of new business ideas. One of those ideas turned into the digital light processor -- DLP -- that drives half of the world's projectors.)

Sometimes an industry is confronted with a "holy grail" challenge. Thirty years ago I was part of a solar energy R&D project. At that time, the holy grail for the alternative energy industry was energy storage. What do you do when the sun isn't shining? In the elevator industry, the holy grail was tied to Frank Lloyd Wright's design of a mile high building many decades ago. It couldn't be built because there was no practical way to move people and goods up and down the building. So when the President of Otis Elevator challenged his R&D organization to come up with breakthrough innovations, he said: "Find me a solution for the mile high building problem." That's pushing on an industry holy grail.

Companies can also implement specific approaches that are enablers for idea generators. These examples are drawn from our longitudinal study of radical innovation mentioned above.

· Think tanks

Jack Kingsley, the researcher who originated the idea for the digital x-ray medical imaging device, was enthusiastic in describing the periodic think tanks GE convened, bringing together people from a variety of units and disciplines. He said he had more good ideas during the day and a half think tanks held quarterly that in the three months in between.

· Promoting connections to external sources of information

For some years, three senior technical people gathered periodically over lunch to review ideas submitted from outside the company. In evaluating one of the ideas, one of the reviewers explained why the idea violated the laws of thermodynamics. But in evaluating that idea, he came up with a new approach to designing a hybrid vehicle.

· Forecasting exercises

At IBM Steve Depp, an early participant in technology forecasting, projected the the increase in display resolution, reduction in power consumption and increase in memory storage that would enable an electronic book. Although IBM didn't pursue the idea of an electronic book, the technical advances found their way into IBM notebooks and laptops.

· Adding opportunity recognition to technical reviews

At DuPont a technology review of the discovery of a new material for electronic displays included Terry Fadem, the head of corporate business development, who was invited by a research manager to attend the review and to assess the business potential of the technical concept. After the review Fadem engaged in intense due diligence with his internal network -- generating lots of additional idea generation and development -- that led to the formation of a project team to pursue the idea.

· Creating an idea "sand box"

At Nortel Networks, the broadband division was seeking approaches to stimulating adoption of broadband in the home. Three smart techies were assigned to an idea sandbox for six months to explore all kinds of possibilities. What emerged was a concept for renting software over the internet, which eventually morphed into a digital rights protection project.

How much is a good idea worth? Common wisdom says ideas are a dime a dozen. That just reflects the reality that good ideas need to be converted into innovations and ultimately into new businesses that generate economic returns to the inventors, innovators and entrepreneurs. However, all mega-businesses were once small businesses and all small businesses started with zero revenues -- and a good idea.

This past week I received the following from a reader of this blog. It is followed by my response.

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"Management's resistance to innovative ideas is one of the main reasons so many entrepreneurs just give up. As the famous inventor Charles Kettering said: 'If all the naysayers had to be met, nothing would be ever be invented.' Naysayers seem to be prolific in the halls of upper echelon management. Our story is just one of hundreds of similar stories. Every time I tell our story at a seminar, many in the audience come to me with their own stories of management's destructive, naysaying ignorance.

It's not enough to be entrepreneurial, innovative, inventive and enthusiastic about new technology. You must also be a convincing salesman, a persuader of the minions of power that your innovation has merit. Many of us who have trusted management to be on "our side" have been dismayed to find our projects shelved, given away or just ignored."

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Why do some managers reject innovations? Let me count (at least some of) the reasons.

1. Short Term Focus: They are only concerned about short term performance -- perhaps because they want to pump up the value of the company's stock in anticipation of cashing in stock options after retirement; perhaps because they are afraid of being dumped or of lawsuits if the stock's value declines because of criticism from the analysts about less than stellar short term performance. Besides most significant innovations take a long time to come to market, and the leader is likely to be long gone before that happens. Why make the successor look good?

2. Leadership (or lack thereof). They really don't understand that leaders take responsibility for both long term and short term performance, and hence aren't really leaders.

3. Surviving against Intense Competition. There won't be a tomorrow if the company can't compete today, and hence all available resources need to be focused on carving out a sustainable competitive position in order to generate -- eventually -- the extra resources for investing in innovation.

4. Fear of failure / fear of uncertainty. They don't know how to manage / lead in the domain of innovation, and are trapped by their own competence related to management in mainstream operations. They stay within their own comfort zone.

5. Lack of bandwidth. The company doesn't (yet) have a system for supporting innovation and the management simply doesn't have the bandwidth to take on the challenge.

6. Lack of confidence in the innovator. They have many activities competing for limited resources and -- like venture capitalists -- choose to invest in innovators in whom they have confidence. Perhaps the innovator who seeks but fails to gain support doesn't have the knowledge, skills and attitudes that generate confidence in the minds of the management.

Of course there are many other reasons.

Responses from frustrated innovators I've seen adopted by various innovators at various companies.

1. Give up. Hunker down in routine technical work. Wait for new management and hope that it is more receptive. Use your creativity outside of work.

2. Advance your innovation "under the radar screen" of senior management by enlisting others to work with you informally and scrounging resources -- so that when you seek formal support you have more substance to demonstrate.

3. Increase your knowledge, skills and attitudes related to business development to complement the technical skills that enable you to be an innovator -- so that you increase your chances of getting support.

4. Recruit a champion who has the respect of senior management.

5. Leave for another company that is currently more receptive to innovation.

6. Leave to start up a competitor of your company.

Each of these strategies have their pluses and minuses. You'll have to decide which one or ones are best for you. You may choose to adopt one or more, sequentially or in parallel.

By the way, when I have the opportunity to discuss innovation as a key component of a growth strategy with senior leaders, I suggest that the company should consider adopting a 15% Rule for Senior Management. You may have heard that 3M has a 15% rule for employees which allows them to use up to 15% of their time to pursue an idea for a new product. Imagine if senior leaders were required to demonstrate how they are spending at least 15% of their time supporting innovation in their companies. When things get tough and the pressure mounts to focus on survival and stop investing in the future, suppose management had the courage to mandate the elimination of the least productive and valuable parts of current operations in order to sustain support for innovation?