Strategic Innovation Group, LLC

Recently, I read an article entitled "Innovation Nation" by Robert Atkinson. It can be located at www.democracyjournal.org/article.php?ID=6652 Atkinson talks about the difference between neo classical economics and Innovation Economics. The article claims that neo-economics view of the world is dead. What seemed to be an effective model since the Great Depression, actually does not well describe our global economy. Neo-classical economics tells us more employment and a free market will grow the economy. In the past decade we have seen this is not true. In addition, he states “when the private sector acting on its own can single-handedly be responsible for the losses of over $2 trillion dollars and require the federal government to save both it and the economy, the notion” of a fully free market seems out of balance.

As described by Atkinson, the theory of Innovation economics says that economic growth is derived by raising productivity and innovation in the market. This was both startling yet intuitive to me. I have always seen the need for companies to focus on growth through higher productivity and organic innovation as opposed to focusing solely top and bottom line short term growth. Thus, it would seem that individual companies and nations need to increase innovation to promulgate growth.

Drs Sethi and Iqbal published a very interesting article recently in the Journal of Marketing (vol. 72; January 2008; pgs 118-134) entitled “Stage-Gate Controls, Learning, Failure, and Adverse Effects on Novel New Products”. I led R&D groups and studied radical innovation for many years and this is one of the few studies that examines the impact of managing novel product development using traditional (incremental) tools. In discussion with experienced innovation leaders from large technology companies that have managed radical innovation portfolios, it is intuitively understood that traditional incremental innovation processes are not effective for radical innovation.

Radical innovation carries with it significant uncertainty, not only technically, but also for the market, organization and in the business model. In fact, Dr. Gina O’Connor et al describe a very different innovation process for radical projects in their new book, Grabbing the Lighting. They discuss a model which involves three key steps: Discovery, Incubation, and Acceleration. Grabbing the lighting describes the practices used by twelve large companies to establish and maintain a radical innovation competency, but does not show what would happen if standard innovation processes were used for these projects.

Dr. Sethi’s and Iqbal’s study is one of the first of its kind that I have found. This study suggests that traditional innovation tools like a stage gate process may provide a high degree of comfort and control for management, while actually impeding the development and learning needed to make these novel products successful. Based on this study, a series of management implications are drawn that are intuitive but also profound. Stage gate processes have the possibility of impeding and disrupting novel product development. It is better to design special gate processes for novel product development and it is wise to use the different gate review “committees” to evaluate these products versus incremental projects. Using rigorous gate criteria especially when the technology is in flux or transition, significantly limits product and market learning and thus lowers the potential of success.

Large and small organizations are overwhelmed with tremendous amounts of data generated and stored on their internal networks. It often seems that the computer network and servers are bogged down by the sheer volume of the data flow. What can be done to translate this plethora of data into sensible and actionable information that can free our people to think and act rather than spend hours at their computers searching and reading the data?

Many times I have heard CEO’s and senior management lament that they are just not getting the return on their R&D investment that they expect. There are not enough breakthrough products or services that spawn significant new growth for the organization. The deficiency may not be with one's R&D team or one's Marketing team. The lack of clear direction from the top may be the reason you find few growth opportunities fighting their way to the top.

Middle management nixes ideas, guesses what their leadership expects and is often wrong. It is safer to not float opportunities to their leadership than present ones that will be viewed as not being consistent with that leadership’s vision for the company. Determining what the senior leadership wants for new products, services or industry segments and empowering middle management to promote these ideas is the REAL CHALLENGE.

To be successful and efficient an organization needs direction and boundaries. To channel an organization’s creative energy effectively these boundaries and directions need to be communicated and understood at all levels of the organization - it needs to be part of the DNA so to speak. If individuals and teams inside the organization are working on concepts that fall outside these boundaries, then these resources are being wasted and could be more effectively used on other activities. These individuals would find their work more satisfying if it were ultimately leveraged to further the interests of that organization.

The tough part for a CEO and her/his leadership team is to define these boundaries broadly enough but carefully, such that the creative opportunities that flow from the organization result in a higher number of projects in which the company invests that truly become successful in the marketplace. The toughest challenge is overcoming middle management’s inertia, its resistance to change, and its desire to kill projects that they perceive their boss will not approve.

It is a process to visually and somewhat quantitatively examine the possible paths for development of a technology, a platform, a process, or a product. It helps you systematically determine the technical challenges, ask the last questions first and determine the most efficient and economic approach to advancing the technology or platform for a process or product.