Managing Innovation - an oxymoron?
Innovation is really the domain of the small company when it comes to new breakthroughs. i.e. NOT the Gillette Mach3 which gives you a closer shave due to blah blah blah, but the discovery of a new drug, the invention of Google etc.
Innovation in large companies is managed evolution. Many of their R&D departments, with a few exceptions (GSK, Xerox?), have been disbanded, run down or outsourced. For many industries where there are not 'breakthrough technologies', managing evolution faster than the competition IS innovation. Getting a car to market faster is a massive competitive advantage as Toyota has shown.
So for most industries (Automotive, Government, FMCG, and Financial Services) "managed evolution" aka innovation required people to be improving on a current baseline position, able to quickly evaluate and discard options from a cost or achievability perspective and apply rigorous version control from a compliance perspective.
Two industries live with 'breakthrough technologies' as a day to day focus: Pharmaceutical and Information Technology. Each industry has its own issues, but both have come up with the same answer for R&D in the most unlikely place - the Venture Capitalists. Small start-up companies have the skills, nimbleness and entrepreneurial flair to come up with new ideas. VC's back them so they can take their ideas to market until they are then bought by a big player. Essentially R&D has been outsourced to the market.
This throws up a different set of skills required for the large corporate: Acquisition Management. In the past acquisitions have had a high failure rate. This new R&D model means that is no longer acceptable. A more disciplined and auditable approach needs to be taken to due diligence, accurately modelling the total forward production costs, providing the transition process so that the new scientists or software engineers can fit in and continue to be effective (and not leave after the minimum notice period). Finally provide visibility back into the corporation so that they can leverage its assets (information, experts, procedures, research ...) easily. This is something Cisco achieved, with great success, in the late 90’s when they were acquiring at a huge rate. – but then the bubble burst.
But this approach should be applied which there are 5 due diligence cases and 1 acquisition per year – when it is even more important to get it right.
Innovation in large companies is managed evolution. Many of their R&D departments, with a few exceptions (GSK, Xerox?), have been disbanded, run down or outsourced. For many industries where there are not 'breakthrough technologies', managing evolution faster than the competition IS innovation. Getting a car to market faster is a massive competitive advantage as Toyota has shown.
So for most industries (Automotive, Government, FMCG, and Financial Services) "managed evolution" aka innovation required people to be improving on a current baseline position, able to quickly evaluate and discard options from a cost or achievability perspective and apply rigorous version control from a compliance perspective.
Two industries live with 'breakthrough technologies' as a day to day focus: Pharmaceutical and Information Technology. Each industry has its own issues, but both have come up with the same answer for R&D in the most unlikely place - the Venture Capitalists. Small start-up companies have the skills, nimbleness and entrepreneurial flair to come up with new ideas. VC's back them so they can take their ideas to market until they are then bought by a big player. Essentially R&D has been outsourced to the market.
This throws up a different set of skills required for the large corporate: Acquisition Management. In the past acquisitions have had a high failure rate. This new R&D model means that is no longer acceptable. A more disciplined and auditable approach needs to be taken to due diligence, accurately modelling the total forward production costs, providing the transition process so that the new scientists or software engineers can fit in and continue to be effective (and not leave after the minimum notice period). Finally provide visibility back into the corporation so that they can leverage its assets (information, experts, procedures, research ...) easily. This is something Cisco achieved, with great success, in the late 90’s when they were acquiring at a huge rate. – but then the bubble burst.
But this approach should be applied which there are 5 due diligence cases and 1 acquisition per year – when it is even more important to get it right.
posted by Ian Gotts at 7:42 AM
2 Comments:
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