Bringing Innovation to the Military

On March 1, 2016, Former Secretary of Defense Ashton Carter spoke with the Commonwealth Club of California. To begin his speech, Carter said, “one of my core goals in this job has been to build, and, in some cases, rebuild the bridges between the Pentagon and America’s wonderfully innovative and strong technology community.”[1] To support that statement, Carter created the defensive innovation advisory board, headed by Eric Schmidt, the Executive Chairman of Alphabet. The board has offered a set of informal recommendations to Carter, including building software platforms and human networks to encourage innovation, sponsoring innovation contests, providing education to advocate collaboration and creative thinking, increasing the recruitment of computer scientists, and spending more on machine learning technologies. Finally, the board suggested the DoD establish a Chief Innovation Officer position, which Carter has made an effort to do. Little has been said about the role of the position, but the Officer would be a senior advisor to the Secretary of Defense.

With innovation becoming the big push, companies have been advised to establish a Chief Innovation Officer. The Forbes article notes, “businesses need to establish uniformity of command by designating a single person to be accountable for their innovative programs.”[2] Guess who disagrees? That’s right, Eric Schmidt. The Chairman of the board who just advised Ashton Carter to hire such position. In his book How Google Works, co-authored by Jonathan Rosenberg, Schmidt writes, “As business managers, we like to manage things. Want something done? Then put someone in charge of it. But innovation stubbornly resists traditional, MBA-style management tactics. Unlike most other things in business, it cannot be owned, mandated, or scheduled.”[3] Tim Cook, CEO of Apple, echoes a similar message about the position. “As soon as a company has a Chief Innovation Officer you know that a company has a problem.”[4]

If adding structure to innovation will only hinder innovation, how does a company/agency encourage or capture innovative ideas? Udi Manber, a previous employee at Google and the former Chief Innovation Officer at Yahoo, comments, “Innovative people do not need to be told to do it, they need to be allowed to do it.”4 So don’t force innovation; evolve it organically.

Then maybe Carter is on the right path with his DIUx initiative. The Defense Innovative Unit Experimental (DIUx) is an experimental group within the Department of Defense with the mission of “accelerating technology into the hands of the men and women in uniform.”[5] The first DIUx technology hub facility opened in Silicon Valley in August 2015. The California team connected innovators with senior level DoD leaders. These connections opened Pentagon funding sources, fellowship, and rotational programs to encourage innovators. Carter then followed a Silicon Valley lesson and decided to iterate DIUx to create DIUx 2.0. This iteration pushed DIUx as a nationwide initiative. Since then, two more DIUx hubs have opened in Boston and Austin, TX. Carter also upgraded the start up’s processing power and operating system. He implemented a flat structure with DIUx 2.0, another a page out Silicon Valley’s playbook. He even snagged Isaac Taylor, a former head of operations at Google X, to join in the leadership team. And finally, Carter reorganized the communication system of DIUx so the unit would report directly to the Secretary.

Of course, none of these efforts mean anything if the new Secretary of Defense, Jim Mattis, doesn’t continue the work initiated by Carter. But, it has been reported that Mattis will continue to invest in innovation, so it seems as though the innovation advisory board will remain intact, along with the DUIx hubs. So far there is no word on Mattis’s plan to hire a Chief Innovation Officer, but it looks as though the option remains valid.

-Lauren Young



[3] Schmidt, Eric, and Jonathan Rosenberg. How Google Works. New York: Grand Central, 2014. Print.



Can Corporate Entrepreneurship Cure Big Pharma?

Most of us are all too familiar with the current state of big pharmaceutical companies. These giants plow an enormous amount of money into R&D for often mediocre results, leading to outrageously-high drug prices, slow movement, and the ever-present reminder that there are an uncountable amount of diseases out there still needing to be cured. As a result, these giants risk being drown out by generic companies, which fight the soaring drug prices but still do little to advance the state of pharmaceutical research. It is clear that a change must be made toward real, meaningful research.

Some firms have begun experimenting with various methods of bringing a more entrepreneurial R&D process to large pharmaceutical companies in order to better encourage long-term value creation through innovation. In particular, there appears to be an emphasis on small, relatively autonomous divisions within R&D which specifically focus on a very small number of therapeutic areas and driving one or two breakthrough solutions in these areas to early clinical trials. GlaxoSmithKline and Vertex Pharmaceuticals have had successes with bringing the small company R&D feel to big pharma research in this way. Pfizer attempted to take this further, establishing therapy group skunkworks projects in the form of a network of small companies, but this has since been dissolved. GlaxoSmithKline has implemented a reward system to compensate for breakthrough innovation and Eli Lilly is examining the possibilities of doing the same. Eli Lilly has also been successful at investing in integrating other companies into their R&D network in order to have several different sources of innovation working together (Douglas, Narayanan and Mitchell). Dr. Shreefal Mehta, currently CEO of the Paper Battery Company, a board member of Pulmokine and an entrepreneur who has been involved in the founding of two biotechnology firms noted that many of these efforts get killed off due to large changes of management when these big pharmaceutical firms acquire other companies- “During these acquisitions many new management figures become involved. If someone doesn’t like the direction this innovation machine is headed in, it is killed off before any results can be obtained.” These big pharmaceutical firms need to adopt some sort of protective framework for these entrepreneurial divisions if they are going to survive in this existing corporate structure.

Too often large pharmaceutical firms are judged by the number of new chemical compounds which proceed to clinical trials (Douglas, Narayanan and Mitchell). This focus on volume rather than real breakthrough medical discoveries has lead to a pharmaceutical equivalent of incremental innovation in which the reality is that many of these new compounds are simply some minor additions made to an existing compound in order to be able to quantify it as a novel innovation. Dr. Mehta says that risk adversity plays a big part in the sluggishness of big pharma R&D, whereas in small companies there is a drive to make a true breakthrough in order to gain notoriety and to really help people. This kind of short-sightedness in research mirrors the quarter-to-quarter short termism that is rampant in large, public companies in order to keep shareholders happy and, similarly, creates a largely stagnant, numbers-based form of R&D that does not add any real value to the industry. With the kind of advances being made in drug discovery thanks to advances in big data analytics and its relation to chemical compound discovery, there are more effective methods than ever to create a pool of potential compounds likely to be game-changing for the pharmaceutical industry, and there is becoming less and less reason that these large corporations cannot organize a push towards real breakthrough innovation in a way that could save countless lives.  Failure to do so will result in extinction as these pharmaceutical giants are outcompeted in price by generics, sealing the fate of meaningful R&D in the pharmaceutical industry.

As these innovative changes have begun to take hold over the last few years, it will be interesting to see if there will be new life breathed into R&D at big pharma companies. These companies must overhaul the way they do drug discovery if they hope to stay competitive and beat back the growing tide of generic medications. Only time will tell if they are able to adapt quickly enough to these new models of innovative discovery.

-Stephen Notley

Works Cited

Douglas, Frank L., et al. “The case for entrepreneurship in R&D in the pharmaceutical industry.” Nature Reviews, Volume 9, September 2010 (2010): 683-689.

Food: The Last Piece of the Digital Pie

Intro by Gina:  Sometimes in Corporate Entrepreneurship class we stray from the topic of how large companies can institutionalize capability for innovation….and we talk about interesting emerging innovations themselves.  Pelin, an architecture student studying for her Masters’ degree in Technology Commercialization and Entrepreneurship, is struck by the many attempts that have been made to increase the convenience of grocery shopping.  It’s all about the business model, and to date, it appears, no one has found the winning model.

Since the advent of the internet, big business and startups alike have been exploring the possibilities of online shopping. More and more people have stopped frequenting stores and instead opt to buy necessities online. Groceries, however, have had an increasingly difficult time jumping into the digital marketplace. Today, over 80% of groceries are purchased from brick-and-mortar stores according to the FMI, but it’s not due to a lack of options. Nearly every major grocery store has both pickup and delivery options in addition to the plenty of newer companies that offer food delivery services to major cities. However, no innovation has made a dent in traditional grocery sales, and even the “successful” ventures aren’t nearly as profitable as physical stores.

This lack of success is primarily due to customers’ continued desires to inspect their produce before purchasing it. This desire trumps any perceived inconvenience of physically going to the store. Additionally, both pick-up and delivery options come with fees or minimum delivery requirements. Customers won’t pay for others to do their shopping when they believe that selecting their own produce results in better quality. Of the 5% of people who utilize online grocery shopping, it is typically as a one time interest or last resort.

In 2007, Amazon introduced an online grocery delivery service in Seattle called AmazonFresh. Since then Amazon has expanded to several other cities, but has run into the same challenges in the food delivery business as others have faced. The company has begun transitioning towards physical stores in order to increase sales. Just this year, Amazon opened its first Amazon Go store in Seattle.  Using technology similar to self-driving cars, items taken off the shelves and placed in your shopping cart are digitally recognized and your Amazon account is charged automatically when you leave the store, eliminating lines and hassle. Amazon touts the notion of convenience as a major advantage of these stores, although they assure their customers that this is just the beginning.  As much as anyone, Amazon is unsure if the stores will be a success and are working on other options such as a grocery pick-up area and drive thru’s. Amazon is confident that the next generation will embrace online grocery shopping, it’s just a matter of time and establishing buyer trust.

At the same time Wal-Mart, which already commands 25% of the grocery market, is also pushing the limits of the grocery store business model. Rather than promoting online shopping, the company is moving forward with another concept which Amazon considered: pickup stations. Setting it apart from other stores that offer similar services, Wal-Mart’s dominance of the market enables the corporation to provide in-store pickup at no cost to customers. The few stores currently offering the services proved the stations to be remarkably successful. However, nothing is free, and offering an additional service at no cost to customers means that prices increase elsewhere. In addition, this pick-up option does nothing to alleviate the worries of the average customer about purchasing produce before even viewing it.

If Wal-Mart’s small sample size is indicative of the rest of America, perhaps Amazon should abandon its high-tech no-lines store in favor of a pick-up option. However, the pick-up option is not new, and others are skeptical of how successful it will be, and doubtful that it will make a significant profit for Wal-Mart.  Only time will tell if either innovation will be successful.

-Pelin Akman

David vs Goliath, the story of Fitbit vs Apple.

Wearable fitness trackers are hot as lava nowadays, and for many reasons. Whether it’s helping track heart rate, calories burned, and personal activity, “shipments of the devices spiked from 35.5 million in 2014 to 85 million in 2015, representing a 139% increase year-over-year.”[1] With such an eruption in sales continuing on, new fitness trackers and models are coming out every day by competitors in the industry trying to edge out one another. The two biggest ones are Fitbit and Apple. These companies share a similar product and target market, but they differ in many more aspects. Apple is… well its Apple. Everybody knows Apple is able to develop the newest innovations in products for both hardware and software better than arguably any company ever. And they have been at their best producing innovations from the early 2000’s until now. They have an advantage compared to Fitbit, a much newer company which had IPO’d in June of 2015. Now to gain an edge over each other, they have to compete with new models and apps that work with these watches, which means the company with the better corporate innovation will come out on top.

The strongest brand in the world is that way for a reason, constant innovation, and they stay on top because of it. The brand is very important here, since Apple will get customers who want to wear an Apple Watch more than they want a fitness tracker. The technology they bring to the smartwatch industry is similar to other products they have made in the past, like the iPod Nano with a touch screen, making it easy for them to innovate and create a product better and quicker than competitors. Not only that, when you check your Fitbit stats, you generally use an iPhone to do so. With the better technology than Fitbit, and the brand which is unbeatable, it’s easy to see why Apple is Goliath.

However David, also known as Fitbit, has something to say about that. Fitbit, being a newer company, still specializes in just fitness trackers and smartwatches. They innovate much quicker than Apple in this niche area, producing a wider variety of products, and all for a cheaper price. Not only that, they innovate in the fashion area, meaning people will buy their product based on how nice it looks, which makes its fashion at least as  important as brand. With a lower price point, they are able to win on fashion, as people can upgrade to a new style tracker more frequently than with a more expensive model such as Apple. With a whole company more focused on innovating in a certain area of products, it makes Fitbit the top dog. In Sept 2016 Fitbit held 25.4% of the market share in wearables, while Apple was third, with 7%, after dropping from 20.3% of market share just a year prior[2]. This shows how Fitbit, a new company, is beating one of the most innovative companies in the world. Fitbit is an excellent example of a niche player being able to maintain a 3 times the market share over the leading technology company in the world by intense focus and great execution.

-Dom Pizzano

Update: even more recent market share information can be found here: