A Few More Thoughts on Innovation

Stephen DeAngelis

December 10, 2010

In yesterday’s post entitled Time for Some Innovation, I discussed the importance of leadership and having a team committed to change when a company wants to be innovative. In this post, I want to look at what a few other people have written on the topic of innovation. I’ll begin by discussing a book review written by John Gapper [“An inventive take on innovation,” Financial Times, 13 October 2010]. The book Gapper reviews is Where Good Ideas Come From: The Natural History of Innovation by Steven Johnson. Gapper writes:

“Innovation is a perennially fascinating subject – what is it, how is it cultivated, why are some companies much better at it than others? Yet in this book, a grand synthesis of thoughts developed in other books such as The Ghost Map and Emergence, and itself highly inventive, Steven Johnson says businesses are looking in the wrong place. Instead of relying on a few scientists or technologists to have a commercially driven idea that is shrouded with patents and copyrights, society should let it all hang out. Most of the most significant inventions of the past two centuries have not come from flashes of for-profit inspiration but from communal, multilayered endeavour – one idea being built on another until a breakthrough is reached.”

Although there have been “aha” moments, they are not as common as people seem to believe. In past posts, I have lauded the benefits of collaboration (especially cross-discipline collaboration) as well as the benefits of hard work and persistence. There are geniuses, of course; but even their ideas can be improved upon by colleagues. Gapper continues:

“The classic inventor, such as Willis Carrier, who came up with the air conditioner in New York in 1906 when a printing company asked him to find a way of removing moisture from air, is an anomaly, Johnson suggests. Innovation usually comes about through teamwork and the adaptation and re-purposing of other people’s ideas, made possible by ideas being unfettered. ‘We have a natural tendency to romanticise breakthrough innovations, imagining momentous ideas transcending their surroundings, a gifted mind somehow seeing over the detritus of old ideas and ossified tradition. But ideas are works of bricolage, they’re built out of that detritus,’ he writes. Indeed, the breakthrough that leaps several stages ahead of anything others have yet conceived is not only unusual but inherently unlikely. Instead, Johnson thinks innovation springs out of the ‘adjacent possible’ – the final stage in a long and iterative process of intellectual exploration.”

I love the term “the adjacent possible.” It implies that if you want to be innovative you had best keep your head on a swivel and look at the possibilities around you. A lot of books about creativity note that creative people often have a bunch of things (e.g., toys, gadgets, etc.) scattered about their working space. They draw inspiration from these items (i.e., they build on other peoples’ ideas). Gapper continues:

“The most inventive places are thus hives of activity where people get together and share ideas – the 18th-century coffee house in London, the Homebrew Computing Club in Silicon Valley or Freud’s Wednesday salon at Berggstrasse – without being constrained through selfishness or competition.”

This idea isn’t new. Frans Johansson pointed out a number of years ago that Italy’s famous Medici family sparked the renaissance by gathering Europe’s greatest thinkers and artists together to exchange ideas. He called the result “The Medici Effect.” The Medici Effect is the ultimate payoff of interdisciplinary collaboration. Gapper continues:

“Johnson’s interest in communal innovation is not unique. Technology and internet-inspired writers such as Jeff Jarvis, Lawrence Lessig, John Hagel and John Seely Brown, and Don Tapscott have advocated open-source innovation models, and discussed the ways in which they challenge traditional ideas of the firm. He brings to the subject, however, a distinctively stimulating and enjoyable way of looking at the world, drawing not only on technology but on the history of science and medicine. He is a polymath with many stories to tell. … He admits that anecdotes do not prove anything – that an adept writer can cherry-pick. He addresses this by categorising the biggest inventions since 1800 and finding that relatively few – aircraft, transistors and dynamite, for example – came from one inventor with a financial incentive. In contrast, a huge number, from vitamins to superconductors, were the ‘non-market/network’ products of groups motivated by something other than money.”

Philip Delves Broughton continues the discussion of open innovation [“Another form of creative thinking,” Financial Times, 17 November 2010]. He writes:

“Open innovation is one of those terms that is harder to explain the more you try. At first, it seems obvious: the phrase suggests the antithesis of buttoned-up research and development units or the ‘not invented here’ mentality of big corporations. It resonates with the barrierless world of internet-based communication and information sharing. For some, it im­plies Wikipedia and Linux, the open-source software platform, vast bodies of knowledge assembled by armies of distributed innovators and creators – all driven by their own particular set of incentives. Henry Chesbrough, the Haas Business School professor who coined the term in 2003, is more specific. He says open innovation is a process that starts with looking outside the organisation as you think about things to do inside. It is about ‘using other people’s wheels’ to get you moving. Or, to quote Bill Joy, co-founder of Sun Microsystems, it is a way of dealing with the fact that ‘not all the smart people in the world work for you’.”

As an entrepreneur, I know that will not be able to assemble enough smart people to do everything I want to see done. As a result, I look for partnership opportunities. Finding the right partners gives you access to smart people who are happily employed elsewhere. Broughton provides a litany of successful products that have been developed using open innovation, but he also points out one glaring disappointment — Boeing’s 787 Dreamliner. He writes:

“To cut costs, Boeing syndicated much of the design to outside companies, whose R&D spending would be recoup­ed as they became subcontractors to Boeing. Unfortunately, Prof Chesbrough says, ‘there were a lot of technical risks in the plane. When they put it all together, the plane didn’t fly. It wasn’t just a matter of control but of complexity.’ Trying to be too open with such a complex project led to unforeseen integration problems.”

Of course, producing the 787 involves more than complexity and accepting that it performs “good enough.” Unlike other open innovation projects, an error in design of an aircraft can have tragic and fatal consequences. Broughton notes that open innovation is more than collaboration on a project where a group gets to tackle a challenge from scratch. Another form of open innovation involves companies “making their unused ideas and technologies available to others.” He explains:

“John Willbanks, who runs the Science Commons project at Creative Commons, a non-profit group that aims to make it easier to share and build on other people’s work, consistent with copyright laws, says: ‘In traditional innovation systems, big university departments or industrial R&D units generate research, then there is a systematic process to assess what to do with it.’ But what happens in the majority of cases where the research fails to lead to commercialisation or even publication? ‘Big companies have so many worthwhile products that don’t go forward because they don’t move the needle financially,’ he says. And moving these products out to a broader audience often seems more effort than it is worth as it involves lawyers, confidentiality and even the unpicking of patent law. Sage Bionetworks, a Seattle-based non-profit outfit, was spun out of Merck to try to do just this. Merck had spent years and hundreds of millions of dollars running data-driven models on disease and drug responses. When it realised no single company could either generate or make sense of all the data, it created Sage to take advantage of the best of open innovation. Sage in­vited groups of biologists to share its data in order to speed up the discovery process and produce more accurate forecasts. Companies can commission research from Sage but on condition that the results of that research go into the public domain after a year. The idea is that you take an area as rule-bound and difficult as pharmaceuticals research and speed it up by allowing people to share their research in the hope of one day maximising its financial and social return.”

A final form of open innovation “according to Prof Chesbrough, is new business models arising from opening up the process.” Broughton continues:

“[Chesbrough] cites Bharti Airtel, the Indian mobile operator, which rather than building its own network of communication towers, shares those of its rivals. This model allowed it to build a bigger network with lower fixed-cost investment. Threadless is an American T-shirt company that invites people to design their own shirts and allows visitors to its website to vote on their favourites, which are then made and sold. Prof Chesbrough says investors have put a $100m valuation on the business. This model of customer communities driving a business is an example of what happens to business models when you open up innovation. Imagine the kinds of business that would emerge, says Mr Willbanks, if everyone had access to accurate data on biotech research around the world – or, say, energy consumption? If we could gather all the data on just the loss of energy in transmission lines, then make it freely available, hundreds of small service companies could enter the market providing energy-efficient solutions. It would create thousands of jobs and transform an industry. It is at this point that open innovation will become a truly revolutionary force.”

In an article published in The Economist, the benefits of hard work in the innovation process are explored [“The innovation machine,” 26 August 2010]. More specifically, they look at the implementation rather than the generation of ideas. The article begins:

“In his new book, ‘Still Surprised: A Memoir of a Life in Leadership’, Warren Bennis, a management theorist, tells a story about Sigmund Freud’s flight from Vienna to London in 1938. On arriving in his new home Freud asked Stefan Zweig, a fellow Viennese intellectual, what it was like. ‘London? How can you even mention London and Vienna in the same breath?’ Zweig thundered. ‘In Vienna there was sperm in the air!’ Today there is no hotter topic in management theory than ‘sperm in the air’. How do companies generate new ideas? And how do they turn those ideas into products? Hardly a week passes without someone publishing a book on the subject. Most are rubbish. But ‘The Other Side of Innovation: Solving the Execution Challenge’ is rather good. Its authors are Vijay Govindarajan and Chris Trimble, two professors at the Tuck School of Business at Dartmouth College. Last year Mr Govindarajan and Mr Trimble (hereafter: G&T) published a seminal article, with Jeff Immelt, the head of General Electric, on frugal innovation. In their new book they address two subjects that are usually given short shrift: established companies rather than start-ups and the implementation of new ideas rather than their generation.”

The article notes that a number of companies ask their employees to spend some amount of their time on generating new products (e.g., 3M asks employees to spend 15% of their time in such endeavors and Google asks its employee to spend 20% of their time). Govindarajan and Trimble apparently aren’t convinced this is a good idea. The article continues:

“G&T are ready with the cold water. The let-them-loose approach spreads resources thinly and indiscriminately. Companies dissolve into a thousand small initiatives rather than focusing on a few big problems. It also produces far too many ideas: managers have to spend weeks sorting through the chaff to find a few grains of wheat. A second approach focuses on closing the loop between ideas and results. Nucor Corporation, a steelmaker, gives its workers bonuses if they can produce steel more efficiently. Deere & Company, a maker of farm machinery, has produced a detailed playbook on how to design new tractors. G&T concede that this approach is an excellent way of making incremental improvements to existing products and processes, but suggest that it has little chance of producing a big breakthrough.”

So what do they suggest? You’re going to have to wait a bit for the answer. The article continues:

“G&T say that you need to start by recognising that innovation is unnatural. Established businesses are built for efficiency, which depends on predictability and repeatability—on breaking tasks down into their component parts and holding employees accountable for hitting their targets. But innovation is by definition unpredictable and uncertain. Bosses may sing a pretty song about innovation being the future. But in practice the heads of operational units will favour the known over the unknown.”

The latter idea reflects arguments presented in yesterday’s post. The Economist should probably have written that “organizational innovation” is unnatural. The history of mankind has demonstrated that innovation is what has permitted mankind to thrive, not just survive. What could be more natural than that? To get past the unnatural feeling of organizational innovation, Govindarajan and Trimble note that mavericks arise and large groups are broken down into smaller groups. The article explains further:

“Many would-be innovators deal with the trade-off between efficiency and innovation by rejecting traditional management entirely. They repeat mantras about ‘breaking all the rules’ and ‘asking for forgiveness rather than permission’. They set up skunk works (small, autonomous units with a remit to innovate) and mock the boring corporate types who write their pay-cheques. But again this is counter-productive. Mocking the corporate establishment only encourages it to starve you of resources. And producing ideas in isolated skunk works ignores the basic reason for working for a big company in the first place—to use its superior resources to supercharge what you are doing.”

Having dissed traditional organizational approaches to innovation, Govindarajan and Trimble finally provide their solution.

“G&T argue that companies need to build dedicated innovation machines. These machines need to be free to recruit people from outside (since big companies tend to attract company men rather than rule-breakers). They also need to be free from some of the measures that prevail in the rest of the company. But they must avoid becoming skunk works. They need to be integrated with the rest of the company—they must share some staff, for example, and they must tap into the wider company’s resources as they turn ideas into products. And they must be tightly managed according to customised rather than generic rules. For example, they should be held accountable for their ability to learn from mistakes rather than for their ability to hit their budgets.”

Frankly, I didn’t find a lot new about that approach — at least theoretically. Actually creating innovation machines is a lot more difficult than talking about them, which is probably why there are so few companies that have successfully done so. Govindarajan and Trimble point to Harley-Davidson and Allstate Insurance as companies that have been successful. The article concludes:

“G&T undoubtedly get carried away with their model. Innovation machines come in many shapes and sizes. Sometimes it is wiser to buy something than to make it yourself. Unilever, for example, would not have invented ‘Chubby Hubby’ ice-cream if it had not bought Ben & Jerry’s. But G&T are nonetheless right to argue that students of innovation must pay more attention to big companies. They have the muscle to chase big prizes, from alternative fuels to clean drinking water. But they need to learn how to conquer new territories while continuing to cultivate old ones.”

In a blog post, Chris Trimble writes, “People discount, marginalize, and ignore the ideas of others — and refuse to lend the support that is necessary to get beyond the idea stage — because they are, after all, only human, and can’t help but want to be king.” [“The Peculiar Way We Reward Innovation,” Harvard Business Review, 23 August 2010] He finds the notion of providing greater rewards to the person who comes up with ideas than to the person who implements those ideas a bit peculiar. He writes:

“If you think about it, rewarding the idea above all other parts of innovation is a peculiar system. It’s sort of like analyzing the life of a great person, say Mozart, and giving all of the credit of his output to the ovum. Or, it’s like idolizing the kicker on a football team because he starts the game with a kickoff.”

Although I do believe that coming up with great ideas deserves to be rewarded, I have noted before that innovation = new x valuable x realized. If any of those parts is missing (i.e., if any of those traits = 0) then you can rest assured whatever you’re discussing is not an innovation. I agree with Trimble that those who recognize that someone’s idea is valuable and those who can implement those ideas deserve to be rewarded as well as the person who came up with the idea in the first place.