There is one assumption in this post that makes me cringe: Why is innovation a binary proposition?

The way you've framed this post, how would you qualify a product that is 90% the same as the previous version, but 10% different? Would that qualify as innovation or not? No product in the world is 100% new - how exactly do you define innovation? Since you don't offer a definition I had trouble with the rest of this post.

As I'm attempting to point out on my first Harvard Business post, Innovation is overrated, I think the question you're asking would be best served by eliminating the word innovation from it: it's a subjective and vague word and it clouds what might be several strong point you might be trying to make here.

Perhaps your point is that change creates risk. If your company creates products that are better than your competitors, change can works to your advantage. But how much change & risk a CEO should introduce at a given time is a tough question, and perhaps the real question the manager was trying to get at. Why take the big risk of being first when you can take a smaller risk of following in second? However, NO CEO would ever say they shouldn't bother taking risks at all.

> We believe we are on the cusp of an era where companies
> develop the ability to innovate much more reliably and
> repeatedly. Patterns of success and failure, highlighted

Research is great and enlightening, but is always a measure of the past, not a *predictor* of the future. It may yield insights for the future, but they're far from predictive.

I'd much like to see any of the acclaimed researchers you mention publicly list their predictions for successful innovations, and do it before products are released. Until they have data about their own predictive abilities, their research says nothing about how useful it can be in predicting the future. In fact I doubt they'd make the same claim about their work that you did :)

In my practical experience the way even successful and innovative corporations innovate is inefficient; there is huge opportunity to improve innovation performance, whether VC-funded or corporate-led. Few corporations give much attention to “how to innovate” and most confuse both R&D spend and New Product Development (NPD) processes with innovation and have no metrics to measure their innovation performance.

Innovation as a discipline is immature but rapidly developing, as you point-out. How many organisations do we know that have bothered to understand what innovation means to them, shared and applied this, developed innovation tools and processes to enable it or measure and value it? The market is wide-open.

Our challenge is to help develop the innovation discipline, make it relevant and meaningful and focus on solving real problems that we face as a society. I argue that this needs to go beyond the traditional, narrow and industrial-era New Product Development (NPD) concepts that are all too familiar and increasingly irrelevant.

We need to elevate innovation to the boardroom and educate, educate, educate until it becomes as core to the corporation as finance. Given the scale of economic, environmental and societal challenges we face the need for innovation across and beyond corporate boundaries is greater than ever before eg US auto industry, energy, food etc. We will have to develop new open and collaborative approaches, tools, IP and structures to meet these challenges to survive, let alone prosper.

Yes, a 20% success rate is abysmal and your client is right to ask, “Why bother”. But my response is that with a success rate like that even a marginal improvement will have a significant impact on overall business performance; its time to ‘stop hunting and start farming innovation’!

There is nothing wrong with 'leaving innovation to entrepreneurs' - you just end up paying market rates. Ask Twitter about Summize!
Free the invisible Hand!

The incumbents could use their vast resources to operate incubators for entrepreneurs and set up an agreed profit sharing arrangement.

My thinking was influenced by "A Lodging of Wayfaring Men". The incumbents help start-ups become investment grade companies by helping supply premises, equipment and expertise. When profitable, they can retrieve their set up costs then divide further profits 50/50 with the entrepreneur.

New growth innovation should be left to start-ups, if one wants to increase the odds of success. The underlying question is can an incumbent identify the emerging opportunity or emerging disruptive competitor and respond with an 'internal start-up' or does the incumbent get lost in ignorance or arrogance and allow the disruptor to emerge under it's nose. The key is whether or not the incumbent has the collective leadership character and foresight that enables strategic analysis, thinking and idea processes to detect emergent opportunities and then respond to them in the right way. Can they determine their 'growth gap' and explore how to fill it?

My concern with an answer of "leave it to the entrepreneurs and venture capitalists" is that it sounds like a proxy for "it will never work", "it won't amount to anything", "that stuff will never effect us" or "our customers won't be interested in that". The legacy media companies left innovation (internet solutions) to the entrepreneurs and venture capitalists and chose to stick with what they knew how to do best. They may be the current poster child for creative destruction as the dire business situation they face is all too clear. Imagine what it must feel like to work at one of them with the noose tightening a little more each day. I would not want to go away that way without a good fight.

P&G's approach of acquiring 50 percent of its innovations outside the company appears to be a hybrid position within the context of your questions. They seem to be doing both- finding external solutions to their innovation challenges as well as becoming the entrepreneur by potentially supplying solutions to other businesses/industries.

Scott,

While it’s easy to say that all large incumbents should work towards nimbleness and quick decision making let’s face it- small, entrepreneurial companies will always be more agile. This doesn’t mean, however, that incumbents should give up on innovation altogether. One subject that’s already been addressed is that innovation doesn’t necessarily mean a product (or service) that is entirely new. Incremental changes are just as important as radical ones. That said, radical innovation is absolutely necessary- especially in today’s world when society is facing several challenges (eg: the energy crisis) that will likely only be solved via technological and innovative solutions.

The way incumbents pursue this radical innovation does not have to be limited to internal development, however, and this is where I think most large companies are failing. Since P&G has already been mentioned as a best in class example I can further elaborate on them. I was fortunate enough to meet A.G. Laftley at the Undergraduate Business School Leadership Conference hosted at Emory’s Goizueta Business School this past February because he was a guest speaker. The conference’s theme? Innovation. His presentation was phenomenal, and the thing I found most interesting was that he said that if he could create all products through partnerships he would. He was a huge proponent of collaboration between firms (horizontal relationships and vertical ones) in order to capture and inspire innovation. Seems to have worked well for him :)

Juhi Heda
Brilliont
www.brilliont.com

Hi Scott,

Was a really thought provoking write-up from you. I strongly feel, every other firm either incumbents (large or small), the bottom-line for growth and being visible in market is through innovation. Now, to explain why i'm so strong on them (incumbents) being innovative can be best explained by a simple example. GE for years has been the most cherished in the Industry that has given every Consumer with best of products, Why?. Just because, they wanted to make like simpler for others and so even a common switch was desugned and developed with utmost care. Similarly, in todays jet-speed life, every Consumer wants prodcust that can simply his/her work and this makes every Company (even a 100 years old one) to innovate and present something new rather than manufacturing millions of similar items and leaving the INNOVATION Tag for a VC or Some Body else.

It's more important that large companies innovate to keep up with ever-changing business needs. Lack of innovation doesn't mean that you would maintain status-quo in any industry, instead you would be moving back-wards as the rest of the flock keep moving forward.

Be it operational efficiency, a new product, or a new market - Innovation has to be one of the main goals for any manager.

All,

Thanks for the well thought out comments. Just to add my own $0.02 to a couple of points ...

To Scott's post that opened up the discussion, we do have a strong belief that well-grounded theories that emerge from analyzing the past in the right way have terrific predictive power. And it's not a belief. Check out the introduction to the paperback version of The Innovator's Dilemma (which calls a number of disruptive developments early), the last six chapters of Seeing What's Next (which takes stands on a number of industries), or some of the Innovators' Insights we've been writing over the past few years (at www.innosight.com; last November we summarized the ones we got right and the ones we got wrong here). We definitely don't get it right 100% of the time, but I certainly think we get it right more often than we get it wrong. I don't have any large sample data sets with specific figures yet, but we're working on it!!

To Brendan, who wrote, "We need to elevate innovation to the boardroom and educate, educate, educate until it becomes as core to the corporation as finance," I couldn't agree more. There's a lot of work that has to happen to get there, but it is critical work.

To Juhi, who wrote, "The way incumbents pursue this radical innovation does not have to be limited to internal development, however, and this is where I think most large companies are failing," again, I completely agree. Whether it is partnerships, JVs, or acquisitions of small businesses, there is much more that companies can do than just organically innovate.

Benjamin's idea that "The incumbents could use their vast resources to operate incubators for entrepreneurs and set up an agreed profit sharing arrangement" is an interesting one. Certainly VCs have entrepreneurs in residence, and I know of at least a couple large operating companies that follow that approach as well.

I am passionate about helping companies get this right, since I think they dramatically under-utilize their potential, but recognize how very difficult it is. We'll keep at it!

Thanks.

Scott Anthony