Innovation of Business

and the
Business of Innovation™
 
The Missing Ingredients in Corporate Innovation

Vision, Value, Agents of Change

Venture capitalist Howard Anderson recently decried the failure of large companies to capitalize on their inventions (Technology Review, May, 2004, pp.56-59).  Causes?  Slowness, timidity, and incentive problems.  Big business just can’t get it right.  Only entrepreneurs really attack markets, changing the world while big companies defend positions with outdated products.  So says Anderson.

Yet who are those entrepreneurs?  Typically, they are people who left (or were ejected from) large companies.  OK.  For a moment in the late ‘90s, universities couldn’t keep students from diving into entrepreneuring.  Still, most high-tech entrepreneurs are people with corporate experience.

The issue isn't company size.  The real problem is not with big business alone and has not been solved by small companies.  The real problem is both bigger and more insidious.


Companies large and small lack both a vision of innovation (the sum of invention plus commercialization) for the company and an innovation vision for every product.  The problem isn't lack of invention, but perceiving invention as the goal.  Nor is it lack of commercialization, but seeing commercialization as tasks to do.  Anderson names the overall problem "execution," yet that focuses on skills.  If we understood innovation, we would adjust our skills.


Sit in on a typical big company project review.  Most management expects and most staff knows no better than to focus on the project - technology, staffing, resources, processes, etc.  Where is value to customer?  Missing, right down to basic conceptual understanding of "value."  Likewise, sit in on a typical entrepreneur's business plan review.  You'll find detail on technology, team credentials, and financials, plus a half-page afterthought marketing plan.  Where are specific needs to meet?  Preference to design in?  Value to deliver?  Not just missing!  Not even conceived.


Clearly I overstate.  Counter examples include P&G, Gore, EBay, and Google.  Still, companies big and small invent just fine.  Their problem is innovation... Reduction of an idea to product in use, for the first time anywhere, that creates compelling value for customers. (For "product in use" also read "business in service", "process in application", and more.)


Why this narrow mindedness?  Because we are trained that way.  Engineering schools teach engineering, not finance, distribution, or marketing.  They graduate narrowly focused experts.  Business schools teach business, not science, engineering, or manufacturing.  They graduate narrowly focused experts.  Each is taught that theirs is the true core expertise needed by the world.  Neither is taught respect for the other.
Then companies hire engineers to do engineering and marketers to do marketing.  Not to serve customers with new products, not to create wealth for the company, but to engineer particular products (on one side) and to launch and sell products (on the other side).


Even worse, engineers are never taught strategy, and business school graduates get at most one course.  So we wind up with tactical experts with no inclination to see the big picture.  And no expertise to create the big picture if they were so inclined.  For the same reason, we wind up with managers, not leaders... with people who often see strategy as an esoteric waste that diverts resources from the real job.
So business knows how to run, but not how to win races.  We have a tactical culture of invention and a tactical culture of marketing, but not a strategic culture of innovation.  We manage discrete functions instead of leading integrated systems.


A few years ago, I integrated two research studies into a book, Technology and the Agents of Change (Market Engineering Press, 1999).  Interviews with Amoco, Chrysler, Corning, Fisher-Price, Lockheed Martin, Lucent (Bell Laboratories), Motorola, Texaco, and US WEST plus several federal research labs yielded a remarkably consistent picture:

  • Movement of technology is as important to business success as is development of technology.
  • Change-agent skills are as important to personal success as are technical-discipline skills.
  • Managing product development is precisely the same as managing change.

In every case, organizations innovated methods to move knowledge and technology through value chains.  Though few could articulate it, management wanted agents of change who could see the big picture, do their tactical job, and successfully move the project into the next phase.  Staff wanted management to provide funding and keep politics away from innovation.  Neither saw core roles as:  "Engineer Technology" or "Market Products" or "Manage Departments."  Core roles of innovation were always higher, more visionary... to change what is possible... to add value every day... to satisfy customers... to create wealth.


Where do we educate strategic change agents?  We don't.  Where do we even suggest to people that their real job is to satisfy customers every day by changing what is possible?  We don't.  Not in formal education.  Not in most corporate learning centers or performance reviews.  We need change agents, yet we educate, hire, and manage engineers.  We need strategic leaders, yet we train, hire, and promote tactical managers.


Perhaps I overstate.  Still, we have far too many companies with blind spots managed and staffed by people with blind spots.  Narrow mindsets infect companies large and small, costing billions each year in higher costs and billions more in lost revenues.


I know from experience.  I lost a wonderful entrepreneurial business in the late ‘80s for just this reason.  I've worked since to help others avoid the same mistakes.  My mantra today:  Be strategic, value driven, and customer-centered.  Each concept has a definition too long for this article.  Each leads to cognitive awareness that, when integrated, becomes a rich, detailed, durable, marketable innovation vision.


Today's world is tough.  We are graduating from industrial age to information age.  Globalization opens new markets and breeds new competitors.  The pace of change is breathtaking, with no sign of slowing.  Formal visioning early in innovation accelerates productivity - both doing the right things (leadership, strategy) and doing things right (management, tactics).  With vision in hand, people from research to launch understand why they are working, not just how to work.  And they see their part in the larger process of creating wealth by satisfying customers so well that they pay and come back for more.


Can we afford anything less?

 


 

10. “Annual surveys of over 700 corporate officers shows that innovation is a top priority.” Adapted from Boston Consulting Group.

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