Author Archives: Gina O'Connor

R&D directors….there’s hope.

A couple of weeks ago I got an email from a person who’d attended one of our workshops many years ago on how to build innovation management systems with staying power. He had moved from his former company about two years back to assume the role of Vice President of R&D for a much smaller specialty chemicals company. He had a group of about 40 people, and had recently been given the directive to double the size of his group and add a second location. He wanted to talk through how to design the R&D organization now that he had this opportunity.

It was such fun to help him design an organization from the ground up.  He was concerned about how to allocate the expertise across the two locations, and how to ensure there was a critical mass of expertise across specific technical areas.  He was concerned about how projects would be managed and how the relationships with the Business units would be handled given the additional staff.  But the part of the conversation that was the most fun was how, now that his group was growing, he could build in some expertise for longer term research.  He knew that, even with the added talent, he would not have enough to span all of the technical areas they’d need to invent their breakthroughs for the future.

Ultimately he decided to incorporate technology scouts who would scan universities, start-ups, and other external sources of discoveries and inventions, and help develop partnerships between them and the R&D group to leverage that technology in ways that suited the company’s future needs.   His current mandate is to serve the needs of the company’s business units, but he’s preparing for the future. When the time comes, he’ll be ready to start to build an incubation capability.

I came away with two thoughts: First, R&D isn’t going away, as so many say it is.  Discovery doesn’t always happen inside the company’s boundaries, as we know.  The open innovation model can work. While large central R&D labs are under threat and have been for many years, smaller and medium sized firms are getting in the game more and more.  Scouting is important.

Second, organizational design for R&D affords the opportunity to set up the company’s potential to manage for the short term and the long term at the outset.  It’s not the whole story, to be sure, but getting Discovery right is certainly a start.

Welcome MS Tech Commercialization Students!

School has been back in session for about a month now.  One of our programs, the Masters in Technology Commercialization and Entrepreneurship, is all about breakthrough innovation.  They learn how to manage projects that are very early stage technologies, with potential to offer real value.  They use the Learning Plan, the Technology Translation table, Patent Mapping, and spider diagrams.  They develop skills in interviewing scientists about their discoveries to ferret out potential applications that they then pursue, as budding incubation specialists.  They trace how emerging technologies are disrupting industries and launching new ones. They start companies, and they learn how established companies manage for breakthrough innovation.  They learn the law associated with partnership development and intellectual property management.  Needless to say, it’s a cool program.

Even more interesting is the students themselves.  They’re our most eclectic bunch.  They come from engineering, all walks of science, and even architecture and the digital arts. They see opportunity everywhere.  They share a common interest in finding big solutions to big problems.  One team is exploring a new business model for salt water batteries as a source of energy storage in emergency conditions.  Another is looking at models for carbon capture and re-use. Others are working with faculty in our school of science to explore medical clinics’ interests in a new method they’ve developed to detect which cells in a tumor are most likely to metastasize. Still others are working with RPI’s Lighting Enabled Systems and Applications (LESA) Center to pursue a broad range of applications for a new sensor embedded lighting system.  There’s a team working on identifying ethical issues associated with commercializing a sampling of emerging technologies. We’ll be posting their finished cases on this blog.

This year they’ll be traveling to Silicon Valley and to Washington D.C.  to understand the cultural and policy angles of our country’s innovation system. Their program director is infusing in them the confidence to go beyond one project, one start-up, one first job, to think about economic and innovation policy.  They are up to the task, and it’s great to have their energy, their intellect and their curiosity as part of our Lally community.

Losing one Colleague, Gaining many others: Breakthrough Innovation Scholars around the World

This summer we lost our friend and colleague, Professor Lois Peters, who passed away suddenly.  Not only was her death a shock, but leaves such a gaping hole.  She was a major force behind the Radical Innovation Research Program at RPI, a wonderful professor of innovation, a prodigious intellect, and just plain fun to work with.  She was a true partner.

Over the years, Lois and I began hosting a number of visiting faculty and post-docs.  She worked with them more closely than I have, but now I have the bittersweet pleasure of taking that up.  This year we have hosted scholars from Australia, Denmark, and Japan.  Last year, we hosted from Denmark and Australia as well as a Professor from University of Sao Paolo, Brazil, and are making plans for his former student to complete a post-doc with us in the next year.  I sat on the Ph.D committee of a student from Canada recently as well.

Everyone is interested in breakthrough innovation. We’re making progress on many issues, and now we have an opportunity to learn about the global differences in our approaches to managing it. Again, it’s time to set up these functions in companies.  We have a small but growing supply of educated students, a much better understanding of how to make it happen, and the need to implement what we know.

Lois….you would be so proud.

Lots of talk, No Action—Part 2

In February 2016 the CEO of BlackRock Inc., the world’s largest investment management company, sent a provocative letter to the chief executive officers of the S&P 500 and large European corporations. In that letter he urged them to figure out how to endow their companies’ future through investing in long- term, value- creating innovation, and to be transparent about it. Investors and, indeed, economies, need something more than short- term stock price bumps, he claimed, in order to build a strong foundation for society. And, he continued, if given the compelling vision of companies’ strategic intent, short- term financial deviations will be better tolerated by the investor markets. I quote parts of his letter here for your convenience:

 “While we’ve heard strong support from corporate leaders for taking such a long-term view, many companies continue to engage in practices that may undermine their ability to invest for the future. Dividends paid out by S&P 500 companies in 2015 amounted to the highest proportion of their earnings since 2009. As of the end of the third quarter of 2015, buybacks were up 27% over 12 months.”

“We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment. We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation.

“Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future. This perspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for each company and industry that support a framework for long-term growth. Components of long-term compensation should be linked to these metrics.

“We recognize that companies operate in fluid environments and face a challenging mix of external dynamics. Given the right context, long-term shareholders will understand, and even expect, that you will need to pivot in response to the changing environments you are navigating. But one reason for investors’ short-term horizons is that companies have not sufficiently educated them about the ecosystems they are operating in, what their competitive threats are and how technology and other innovations are impacting their businesses.. . . .

“Over time, as companies do a better job laying out their long-term growth frameworks, the need diminishes for quarterly EPS guidance, and we would urge companies to move away from providing it. Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need.”

The letter continues on to address other issues, but this excerpt is our focus. The letter has generated many cynical comments and much debate, but to me it represents a clarion call. A key leader in the finance community; —a community that has often been considered the bane of innovation’s existence, is calling for companies to invest in innovation that may take a while to recover. .breakthrough innovation. Now it’s up to companies to respond, and to do so, they must develop a capability for strategic innovation. It must become part of the fabric of large, established companies.

The immediate after effect of Mr. Fink’s letter was exciting.  A group of leaders of large companies formed the American Prosperity Project, under the auspices of the Aspen Institute, to draft policies that would set American government and business on a course against short termism.

Then they went radio silent.  I thought nothing was happening.  But I was wrong.

In January of this year, bloggers reported progress, at least on paper. The members of the American Prosperity project issued a paper in which they offer a framework of corporate tax reform and corporate governance reform to discourage short termism.

Who are those members?  The CEO of Unilever. The CEO of Levi Strauss. The CEO of Pfizer. The head of the AFL-CIO.  Board directors of companies like Wendy’s and Henry Schein.  These are multi-billion dollar organizations who are generations old. They are not family run enterprises.

So, let’s see what happens next. It needs to happen fast.  The Dow/DuPont merger and subsequent plans to break up into three companies provides one example of the need for urgency.  How will that treasure trove of R&D be stewarded?  Who bears responsibility for commercializing it?  The jury is out.

Is Larry Fink holding company leaders accountable for acts of short termism???

A few weeks ago I received a call from a person in a well-known pharmaceutical company who had just been given the mandate to build an innovation capability that moved them ‘beyond the core.”  He was shocked at the similarities in what I described from our research and his own experience, and realized that…as mentioned in my last post…that we know more than we realize about building a capability for breakthrough innovation.  We suggested some next steps in working together to help him, because he was starting from scratch without a compass to guide him.

Within a few weeks he let us know that his supervisors were reluctant to engage.  It was “too ‘heavy’ for where his company’s leaders are at, given the internal skepticism on how many successes there really are in the corporate world.”

We have a long way to go to put knowledge into action.  I hope Larry Fink redirects his investments, and the American Prosperity Project starts a lobby soon.

Lots of talk, No Action—Part 1

Quite a few requests for talks and write ups about our research on Management Systems for Breakthrough Innovation, and Innovation Roles & Responsibilities have come in lately, and I’ve been able to get to a number of them.  It seems there is a lot of interest in improving the success rate for breakthrough innovation in established companies.  That’s not surprising since, more and more, people are concerned about these companies’ fate, and see the waste of mergers, breakups, and failures of iconic companies and brands that leverage wonderful rich troves of physical and intellectual assets and employee bases.

At the Product Development and Management Association’s Boston Chapter meeting in early July, I was describing the challenges that innovators in big companies face in their careers as they bump up against entrenched business models and corporate belief systems that prevent breakthroughs from commercial success.  As usual, after that talk, several people commented “You just described my career!”

A talk to a consortium of well–known global companies hosted by DSM in the Netherlands on the topic of metrics for breakthrough innovation provoked impassioned discussion.  In Denmark, an entire hospital system sent their leaders and innovation officers to an Innovation Leadership training program at Danish Technical University’s Executive Education center to learn the frameworks and principles underlying our research, and to use our Innovation Maturity Assessment tool to evaluate their management system for innovation.  The Industrial Research Institute’s journal, Research-Technology Management, produced an interview of me about our forthcoming book, in its July issue. The Center for Innovation Management Studies wants a shortened version for their publication in September.

Just a few weeks ago I gave the keynote address at the PDMA’s doctoral consortium, which was attended by early career scholars and some senior level academics from around the world, along with a handful of industry representatives, at University of New Hampshire.  There I spoke about what we now know about breakthrough innovation, and identified some of the next fertile fields for academic research in the field.

Actually, we know a lot more than we think we do. The industry representatives expressed amazement at what is known, and at how little of it is put to use.

From what I can tell, there is plenty of interest from industry, but not enough to drive action. With the stock market hovering at record high levels, tech companies in excellent cash positions, and the activist investor community operating on overdrive, large mature companies don’t have the will to invest in innovation.

But now is NOT the time to back away. Now, when the economy is strong, is the time to build that capability. When you think about the immense changes coming down the pike stimulated by the CRSPR experiments in gene editing, or by the onslaught of progress in 3D printing and additive manufacturing technologies, by the Internet of Things, Drones, electrification, alternative energy, robotics….How are large mature companies setting themselves up to lead the way into their future?

Can you pay too much to innovate?

Intro from Gina:

In class we’ve been talking about what drives and motivates corporate entrepreneurs.  Common wisdom is that entrepreneurs are motivated by the promise of financial reward. Many entrepreneurship professors start their first class by posing this question to their eager students: “Who in here wants to get rich?”  And the hands shoot up.  I’m not so sure that’s the whole truth, of course.  But certainly, in the world of Corporate Entrepreneurship, the financial upside is not there.  Is that a problem? Below are one student’s thoughts on the matter:

At first glance, one might answer the question that titles this post with a resounding NO,because no one will complain on getting more money to do their job. And some might even say the more money they receive, the more effective and loyal innovators will be to the company. But if you really dive deeply enough into the question your answer may start to change. Hopefully, this post will help lead the change in the way you think about monetary motivation in innovation.

In a digital and knowledge-driven economy that thrives on high-risk competition, in order to grow and survive, companies have to continuously innovate. Innovation implies that companies gain new knowledge and transform this knowledge into new products and services. In order to do this and succeed, companies put a lot of pressure and stress on their employees to develop and produce profitable offerings ahead of the competition. On top of all that, an innovator’s career path is “plagued with risk and uncertainty, as well as career stalling obstacles” (Choi et al. [1]) Thus corporations need to attract, nurture, and keep the right employees who have a skill for exploration and that ability to develop and pursue unique ideas.  What you’d think is that organizations that wish to successfully cultivate an atmosphere for constant innovation, their knee-jerk reaction is to motivate through extrinsic rewards. That’s how they handle most problems.  But it turns out that financial payoffs don’t work as incentives for real innovators.

Extrinsic motivation is driven by outside forces, whether the motivation is a carrot or a stick (Amabile). Rewards express and reinforce the values and norms that encompass corporate culture and are used by managers to communicate desired attitudes and behaviors to employees. This prompts innovators to do their job to get something desirable, monetary compensation or status, or to avoid negative repercussions, demotion or firing. The most common extrinsic motivational reward is cold hard cash.  Through extensive research that spans decades, Amabile shows that in the short-term money does not start or stop innovators from innovating. In fact, monetary rewards negatively impact the process because “they eventually lead people to feel that they are being bribed or controlled” It can also prompt an influx of people who are not interested in innovation or even good at it to become attached to that line of work just because of the financial gains.

Bloomberg Tech put out a report on February 13, 2017, highlighting the fact that monetary reward is counterintuitive to corporate entrepreneurship, citing overcompensation as one of the reasons Google’s car project lost essential veteran employees. According to Bloomberg, the problem stemmed from an “unorthodox system” implemented in 2010, where Google agreed to pay key employees bonuses and equity along with the typical salary. On top of the awards a multiplier was added a couple of years later. This multiplier was based on small accomplishments of the car division, instead of the divisions overall performance. “Part of the problem was that payouts snowballed after key milestones were reached, even though the ultimate goal of the project…remained years away.” The snowballing eventually resulted in large numbers of staff members leaving the car division by late 2015.The veteran staff members left because the financial gains were so large, accumulating to over seven figures, that they no longer needed the job security.

The irony of it all is that Google used this reward system to keep valuable employees from going to competing companies. But in the end, the exact thing they were trying to prevent manifested itself. Some of the engineers that left went to work for rival companies or became rival companies by developing their own ventures in the same market. For instance, the previous leader of the self-driving car project, Chris Urmson, left the company in August and formed a startup that develops self-driving software. Similarly, in 2016 the director of hardware development, Bryan Salesky, left Google and became the co-founder and CEO of Argo AI, which was recently awarded a $1 billion investment by Ford to develop a virtual driving system. Google car projects co-founder Jiajun Zhu, and software lead engineer, Dave Ferguson, went on to start Nuro.ai, another self-driving startup.

The moral of the story is that money as an extrinsic reward should not be relied on to motivate corporate entrepreneurship because there is no ideal amount that can ever satisfy everyone. If a person is paid too little, or too much they will eventually leave the company in search for a better opportunity. As Jon R. Katzenbach puts it, “the more you rely on money as your weapon of choice, the more likely you are to encourage self-serving behavior.” Therefore, the answer to the title question is “No you cannot buy innovators.”

-De Andra Salley

[1] Choi, Byung-Chul. O’Connor, Gina. T.Ravichandran. Navigating a Risk Averse Culture: The Effect of Strategic Human Resource Management Practices on Breakthrough Innovation(BI) in Large Firms.RpI working paper available from first author

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