Thursday, December 27, 2012

Capital Ideas

One of the most dominant criteria used to judge a new product and technology innovation is whether it fits with the corporation’s strategy, core competencies or operating philosophy. Most companies have some explicit or implicit measures of relevance to judge a new product, process or technology innovation.  Although this criteria is expressed in different ways, it usually asks the question, “Does this new idea – if implemented properly and effectively – fit”? 

There are ample reasons for asking the question of corporate fit because eventually the corporation – or one of its business units – will need to adopt, nurture and raise the newborn innovation if it is to succeed.  The adoption, nurturing and rearing of a newborn creates a demand on resources, and it competes for management time and attention against existing operations.  So at first glance, asking the question of corporate fit makes sense.

Yet a growing number of companies are recognizing that the question of fit my have been applied too narrowly in the past.  Many of these companies are now viewing their competition in different ways.  Instead of seeing them as simply threats, many companies are viewing their competitors as potential sources of revenue.  Thus the former question of whether an innovation fits with where the company is headed is, for these companies, evolving into a question of whether the particular innovation fits with where the industry or market may be headed.

If an idea, discovery or invention conceived by a corporation’s R&D fails outside the corporation’s strategy or competencies but represents potential value to others in the industry, it is no longer dismissed as quickly as it may have been on the original criteria of fit.

The innovation may represent new intellectual capital with the potential to generate revenues without requiring the company itself to commercialize and/or implement the innovation.  Corporate fit may be giving way to “strategic industry fit” as the measure of relevance for many companies.

In his new book, Intellectual Capital, Thomas Stewart cites the experience of Dow Chemical Corporation which sought to do a “spring cleaning” when it created the position of Director of Intellectual Asset Management in 1993.  “The idea was to turn a passive function – central record-keeping for Dow’s 29,000 patients – into active management of the opportunities patients represent by cleaning up the portfolio and seeing what additional licensing revenue might be obtained from them.”

Gordon Petrash, who holds the position at Dow, found that not only did the company exploit fewer than half of its patents, but “most were orphans; no business unit was responsible for commercializing or licensing them.”  Petrash found that Dow was not alone.  Most companies have a high percentage of unused, unattended patents, which not only cost a lot to maintain, but also represent significant underutilized potential.

Dow and several other companies are starting to do something about these “ideas for others.”  Over ten years, Petrash figures, Dow will save about $50 million in tax, filing, and other maintenance costs.  Even better: by bringing valuable but unused patents out from the corporate attic, he estimates that the company will increase its annual revenue from licensing patents from $25 million (the 1994 total) to about $125 million by the year 2000,” according to Stewart.

Those of us involved in product and technology innovations may want to rethink the parochial question of “fit.”  Having good ideas for others may represent a source of revenue that rivals the revenue derived from ideas that only fit our own company’s strategy and competencies.

This article was originally published in Innovating Perspectives in September 1997. For this and other back issues of our newsletter, please visit our website at or call (415) 387-1270.  

Tuesday, December 11, 2012

More Data, More Doubt: How “data-addiction” leads to more imitating not innovating

Just as “cloud computing” has made its way into our vocabulary, “big data” seems sure to follow.

Enabled by ever-more capable and abundant digital storage systems, access capabilities, and bandwidth, it seems big data comes with the underlying assumption that it is always better to have more data. After all, data is crucial to sustain any endeavor. Whether the data we amass is numerical, statistically valid, qualitative, or even anecdotal; the more data we have the better.

My own experience leading a team reinforces this. When I was managing a small team of consultants, data turned out to be essential in the team’s success. Actually, it wasn’t just the data that was so helpful. It was also its collaborative collection, frequent updating and visual display. Even in creative endeavors “connecting the dots” is often about seeing correlations between previously unassociated data points. Data is essential to both operating and innovating.

However, data is always derived. It comes from direct experience and observation. The biologist, chemist and market researcher alike generate data to prove or disprove their hypotheses. But it is their hypotheses that drive the generation and analysis of the data in the first place. And solid hypotheses come from personal observation and direct experience, infused with empathy and imagination.

Observation and experience may be more nutritious to innovating than data. Don’t get me wrong. Data and analytics are necessary contributors to every successful innovating effort. But while innovating may be informed by data, knowledge-creation and understanding are driven by personal experience and direct observation.

This might sound like an obvious observation, were it not for the fact that innovators are faced with an ever-present challenge: anticipate the future. Innovating requires lead times, sometimes long lead times. Innovators must innovate in the present but for the future. Delays require anticipatory behavior. Like hockey’s Wayne Gretzky, innovators must skate to where the puck is going, not to where it is.  

The future looms large in the thinking and acting of innovators. But the future is always both “data-less” and “experience-less.” Innovators cannot rely completely on data or their own experience. Something else is required, something that “one person cannot directly communicate to another,” i.e., faith. (See Prisoners of Hope: How Engineers and Others Get Lift for Innovating.)

“Data-addiction” is one reason many hosted innovating efforts prove less than satisfying and never really get beyond “creative imitating.” If innovating is allowed to be driven by data, it will likely end up more imitation than innovation.

Just as the new is surrounded by considerable and unavoidable uncertainty, so also is the future. Uncertainty is perhaps the future’s signature. Attempts to avoid uncertainty by searching for assurance from more data can lead us away from innovation and toward incremental improvements. Improvements are not without value, but let’s be honest with ourselves, they are not innovations either.

Recovering from data-addiction requires innovators to cultivate the art of advocacy—a phrase I learned from Larry Plotkin at Hewlett-Packard Company some 15 years ago. Plotkin, an innovating engineer, was taking part in a five-company study we were conducting on how companies manage to both operate and innovate at the same time. Plotkin was very clear about the need for innovators to learn the art of advocacy—what the ancient Greeks referred to as rhetoric. 

Aristotle said rhetoric was comprised of three essential elements: logos (appeals to logic or reason), ethos (appeals to conscience), and pathos (emotional appeals). Lest you think ancient is “old and out-of-date,” consider the recent discoveries of neurology that suggest emotionless thought is a myth. All thinking is processed through the amygdala, wherein emotions are “processed” as well. Pathos. And when innovators are directed to targets of opportunity, where the need is fulfilled with a compelling solution, little additional incentive is needed. Ethos. The examples of logos are legion. More recently, in his book Changing Minds, Howard Gardner (theorist of multiple intelligences) gives us a more tactical and practical look at what are essentially Aristotle’s three basic dimensions of rhetoric. 

Thirty years ago it was well understood that innovators would run into resistance from their own “host” organizations, not to mention, in the marketplace. In anticipation of this resistance, innovators were thought to need deep conviction—passion—if they were to have any chance of success. Today, I don’t hear or see much of this understanding among my clients or in the literature. Have we become too reliant upon data, because we are not stretching ourselves enough. Perhaps we are not confident enough in our own convictions or appreciative enough of the courage it takes to innovate? 

The remedy is not more data. Nor is it more logos. We have plenty of both. Instead, the remedy is to bring to our unavoidable advocacy more ethos (conscience) and pathos (conviction). This requires innovators to be willing to go deeper into the unknown and let go of what we think we know. As Dee Hock, founder of VISA International, said in his book, The Birth of the Chaordic Age, “the problem is never how to get new, innovative thoughts into your mind, but how to get old ones out. Every mind is a building filled with archaic furniture. Clean out a corner of your mind and creativity will instantly fill it. Once you got the old ideas out of your mind, new ones come automatically.”

Perhaps this is what we need to keep our heads out of the clouds (computing and big data) and to keep our feet firmly planted on innovating that works.    

This article was originally published in Innovating Perspectives in November 2012. For this and other back issues of our newsletter, please visit our website at or call (415) 387-1270.