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Introduction to Innovation
by Rogelio Nochebuena, President, Nochebuena R&D
The first paragraphs of this newsletter assist to reader to get better acquainted with what really is innovation by quoting to of the most respected authorities in the field. Prof. Clayton Christensen from Harvard Business School and the late Dr. Peter F. Drucker one of the most brilliant and accomplished geniuses in the field of Management Science ever. Then we build our case on "How to Improve Innovative Skills in any Industry". By following seven sources of innovation as Prof. Drucker pointed out in his classic paper "The Discipline of Innovation" that Harvard Business Review first printed in 1985 and then reprinted for the special issue on Innovation in the Aug 2002. We will consider the following items and how to use them as building blocks to improve any organization skills and infrastructure to innovate.
Unexpected Occurrences
Incongruities
Process Needs
Industry and Market Changes
Demographic Changes
Changes in Perception
New Knowledge
In the last part of this newsletter we issue a challenge to Senior Management to commit themselves to fostering innovation across their organizations. Such a challenge has a promise along with it if they devote the time, energy, financial, intellectual and emotional support to this venture. That promise is that they will be able to compete more successfully, that they will generate sustainable growth and that their organization will be the "Leaders of the Pack" rather than relegated to "Submissive Follower". The concluding items cover the specific parts of innovation to be discussed in subsequent issues of this newsletter.
Overview: Supporting Systems for Innovation in Los Angles and Southern California
One of the most quoted and often misunderstood words today is Innovation. People think that the only sources of true innovation are R&D labs that are the exclusive domain of high technology companies and also that innovation can be equated with creativity. Harvard University Prof. Clayton Christensen, one of the best-known innovation gurus, defines innovation as:
"It is the process to find ideas for new products and the challenge to uncovering new markets. But in addition it includes the organization's planning methods, the systems through which manager's performance is measured and rewarded and the formal and informal mechanisms used to allocate resources across competing projects. Thus influencing the types of ideas that get surfaced, pushed forward and adopted."
"Innovation and the General Manager", McGraw-Hill, 1999
The late Dr. Peter Ferdinand Drucker, another world-renowned author in Management Science, at Claremont College, wrote this in his landmark paper "The Discipline of Innovation", which was first published in 1985 and reprinted by Harvard Business Review for its special edition on Innovation in the August 2002 issue:
"Purposeful, systematic innovation begins with the analysis of the sources of new opportunities. Depending on the context, sources will have different importance at different times.
Innovation is both conceptual and perceptual, therefore innovators must also go out and look, ask, and listen. Successful innovation is both analytical and experimental once an innovation is discovered it must be validated by market forces.
An innovation is simple, very focused. "Indeed, the greatest praise an innovation can receive is for people to say, 'This is obvious! Why didn't I think of it? It's so simple!'"
Innovations start small despite of their humble origins being able to blend multiple ideas, concepts and markets is the engine for growth and penetration. Apple didn't start in a fancy lab or with deep financial backing. In that same paper, Dr. Drucker says the following: "By contrast, grandiose ideas for things that will 'revolutionize an industry' are unlikely to work."
Innovations always start with a goal in mind to become the leader. Even if some of the objectives are not achieved, it is possible to become the trend-setter—the de facto "ring leader" who indicates where the industry is moving. Again Apple is not the biggest in their field but they are the people at which the industry looks for leadership. Quoting Dr. Drucker one more time:
"But even if the results are modest, the successful innovation aims from the beginning to become the standard setter, to determine the direction of a new technology or a new industry, to create the business that is-and remains-ahead of the pack. If an innovation does not aim at leadership from the beginning, it is unlikely to be innovative enough.
"Above all, innovation is work rather than genius. It requires knowledge. It often requires ingenuity. And it requires focus. There are clearly people who are more talented innovators than others, but their talents lie in well-defined areas.
"In innovation, as in any other endeavor, there is talent, there is ingenuity, and there is knowledge. But when all is said and done, what innovation requires is hard, focused, purposeful work. If diligence, persistence, and commitment are lacking, talent, ingenuity, and knowledge are of no avail."
Harvard Business Review, Aug 2002. Vol 80. Issue 8 Pages 95-103
Prof. Drucker also discusses in that paper the seven dimensions that serve as sources of innovation. He listed them as:
Unexpected Occurrences
Incongruities
Process Needs
Industry and Market Changes
Demographic Changes
Changes in Perception
New Knowledge
The dimensions listed above provide us with the main materials on which I would like to focus my attention for the remainder of this article.
Unexpected Occurrences Savvy entrepreneurs and business leaders always create supportive systems to capitalize on unexpected events. One example of this phenomenon comes from a recent paper published in the Feb 28th issue of the journal Nature in which researchers from Caltech announced a new method for creating "Tough Metallic Glass". Even though the concept of metallic glass has been known for some time and has been used in making golf clubs and other products, previous metallic glass was too brittle for many applications. Hoffman et al started their innovation by identifying the characteristics that could make it more resilient and they discovered that particle size is a key contributor, which they use it to their advantage. The second characteristic is that the material needs to be softer than its surrounding materials. By increasing the particle size to the millimeter range instead of looking at the nanometer regime, which had been the expected solution to this problem, they were able to produce more resistant and economical "Metallic Glass". More information please visit www.nature.com
Incongruities Have you ever found yourself in a situation where despite the technology development that has permeated almost all levels of society, you notice that people are still doing things using very ancient tools? Such conditions present a very high probability of success in improving things by implementing innovative solutions that expedite processes, increase competitiveness and reduce operational cost.
Many companies are engaged in wasteful and unnecessary activities just because that is the way the company has traditionally operated. However, many things have changed and there are a plethora of tools that can greatly remove the fat from a "business as usual" situation. Why not get rid of all redundant, expensive and irrelevant activities? Streamlining some procedures makes a company more competitive and also unleashes employees' creativity. Companies doing this indeed are as Prof. Christensen indicates, innovating.
Process Needs Prioritizing company needs is easy to say, but difficult to implement. In the new product development arena, there are often projects with a low probability of success that consume valuable resources just because they are pet-projects of someone with authority or are the legacy of previous administrations. If we are able to successfully bring discipline to New Product Development Initiatives, such as through the use of Prof. Wheelwright's "Product Development Funnel", we would be able to eliminate unnecessary projects and free valuable human and financial capital to better compete in the global economy.
Being able to distinguish between what you need and what you want and focus on your needs can always help you to be innovative.
A good example of what is happening in the Los Angeles area related with prioritization of needs takes place at the USC Viterbi School of Engineering where they recently opened a facility to assist seniors by giving them access to a new lab where they can build sophisticated parts and equipment such as a wing for an aerospace project.
Linda Rock, Associate Dean for Administration, also points out that it will be open for "student inventors" in the same press release and we learn that, "Along with such immediate applications, maybe we can also see the lab as the nucleus of a multidisciplinary fabrication and design facility with excellent potential to reach out into the community."
She points out that Los Angeles County is one of the largest manufacturing hubs in the country and, with a bit of traction, the new lab could become the focal point of collaborations between students and industry partners. More information please see http://www.usc.edu/uscnews/stories/14987.html
Industry and Market Changes Dislocations in industry and markets always present very divergent outcomes. Companies and individuals who are capable of perceiving this as an opportunity will capitalize on such changes, allowing them to grow and move ahead of the competition. Those who cling to the old paradigms will find themselves unable to cope with such conditions and incapable of prospering.
Market and industry changes are also very fertile ground for innovation. As indicated by Prof. Drucker at the beginning of his talk, "Purposeful, systematic innovation begins with the analysis of the sources of new opportunities." Therefore, one of the main responsibilities of Senior Management is to look for possible changes in the competitive landscape that can help their companies grow. In my humble opinion one of the best tools to achieve that objective is to have "Scenario Planning Sessions" where people can discuss "what if conditions" on regular basis in order to design contingency plans that can be implemented when some of the predictions come true. This generates roadmaps that help companies benefit from such conditions.
Let me present you with a challenge. What kind of innovative things can your company do to reduce transportation costs generated by oil being at $100/barrel? What if it goes to $110 or $120? Will you be doing things the same way that you did when it was only $40/barrel? I hope not, otherwise you are losing your competitiveness. Will you be willing to ask your employees for suggestions on what to do to reduce operational costs? If you do, you will be fostering innovation in your company.
Demographic Changes As populations in most of the developed countries of the world age, a new set of challenges suddenly appear such as healthcare costs and a reduction in the number of skilled workers in some industries, including the size of the faculty at many universities. Simultaneously a variety of opportunities also appear due to the fact that senior citizens are the wealthiest segment of the population and with their disposable income have purchasing power that other segments of the population lack. Prof. Drucker has told us that innovation is perceptual and conceptual and that we need to talk, investigate and listen. Are you taking time to talk with your clients that are reaching retirement age? I am sure that if you do so you can create specific products or services that meet their needs; by doing so you will be involved in the process of innovation and also increasing your core competencies.
At a recent press release by CNSI (California Nanoscience Institute) UCLA/UCSB there is an item that some people might be able to use to meet the needs of an aging population. The author is Dr. Andre Nei, Chief of Nanomedicine at CNSI:
"Eat your broccoli! That's the advice from UCLA researchers who have found that a chemical in broccoli and other cruciferous vegetables may hold a key to restoring the body's immunity, which declines as we age.
"Published in this week's online edition of the Journal of Allergy and Clinical Immunology, the study findings show that sulforaphane, a chemical in broccoli, switches on a set of antioxidant genes and enzymes in specific immune cells, which then combat the injurious effects of molecules known as free radicals that can damage cells and lead to disease.
"Free radicals are byproducts of normal processes, such as the metabolic conversion of food into energy, and can also enter the body through small particles present in polluted air. A supercharged form of oxygen, these molecules can cause oxidative tissue damage, leading to disease - for example, triggering the inflammation process that causes clogged arteries. Oxidative damage to body tissues and organs is thought to be one of the major causes of aging." For more information please visit the CNSI website http://www.cnsi.ucla.edu/news
Changes in Perception We have the tendency to change our views about things as a function of time, things that were considered awful in the past may now be tolerable or even expected. On the other, hand we may now dislike things that were commonly accepted or praised in the past. What has been modified so that now we tolerate some things while rejecting others? Often times that change is motivated by scientific discoveries. For example, we now have the tendency to eat certain foods because they have lower levels of cholesterol, or we engage in weight reduction programs because being overweight is not accepted in a hedonistic society. You can see these changes in the concepts of beauty and health if you look at paintings done in the 17th-19th centuries. The ideal of a beautiful woman as portrayed in these paintings would be considered overweight by today's standards because the definition of who was healthy in those days included having a few extra pounds. While this was equated with being in a sound condition back then, today those people are considered to be in a high-risk category health-wise.
Being environmentally friendly is fashionable today, but also it has financial benefits and can be a source of innovation for many companies. Wouldn’t you like to reduce energy expenses if for instance you were able to use the heat generated in many of your normal production processes that now is wasted when it is sent into atmosphere via your smokestacks? Would you not rather use a heath exchanger that will allow you to heat water and produce stream to generate electricity in situ and thus reduce pollution and increase your profit margins? By changing our views about certain things we may also improve our innovation skills and profit from them.
New Knowledge We have heard many times in the past that "knowledge is power". If that expression has ever had any value, it is in today's society because the majority of us live in a "knowledge society". Indeed, across the world we see that the most marginalized social groups are those who have the least cumulative amount of knowledge. Having access to knowledge helps us to best our competition in the global economy by allowing us to attain information before the competition and make better decisions. Even if we receive information at the same time as the competition, we have an advantage over them if that information is packaged in a way that we can digest faster.
Examine how you disseminate information throughout your organization. If your employees have the knowledge they need to carry on with their work to the best of their abilities, moral and productivity will be at a high level, thus knowledge becomes a motivational tool for the benefit of the organization. Be not surprised if your company is admired for its innovation and drive-proper acquisition and use of knowledge will separate you from the pack.
I will like to end this section by challenging the Senior Management that have access to this paper to look at innovation as the only means by which you have to compete in a complex world where events that you have no control over will affect your organization. I would also like to challenge you to give your full support to innovation within your organizations.
Ray Stata, the Chairman of the Board at Analog Devices, has the following statement about management and innovation:
"Usually, innovation is thought of in terms of technologies that give rise to new products or improvements in existing products. However, product and process innovation is not the primary bottleneck to progress. The bottleneck is management. US firms lag most in the management of innovation required to take full advantage of their technology leadership."
Ray Stata, Chairman of Analog Devices, 1992
Many companies talk about innovation and praise themselves of being innovative, but in reality are just fooling themselves. Why? Because Presidents, CEOs and others are not supporting this effort financially, emotionally and intellectually. You cannot be innovative if you do not setup the necessary infrastructure, if you not invest in training and development, and if you not look at human capital as your most valuable asset and treat them as such. Do so and let your employees use their ingenuity, let them stay focused on solving your present and future problems. Otherwise as Prof. Drucker so eloquently indicated:
"But when all is said and done, what innovation requires is hard, focused, purposeful work. If diligence, persistence, and commitment are lacking, talent, ingenuity, and knowledge are of no avail."
Innovation starts at the top. Half-hearted efforts from Senior Management on innovation will translate into mediocre performance, while all-out dedication will yield above average benefits. Hence for the next five issues we will be analyzing the very intricate fabric and support systems that foster innovation in the Los Angeles Basin, including collaborations between academia, diverse industries, local and federal government, and community.
In the following installments of this newsletter we will discuss the following topics:
Technology Licensing: The role that the Office of Technology Transfer and Licensing has in influencing the promotion of innovation in universities and in helping industry solve problems.
IPR (Intellectual Property Rights) and IP (Intellectual Property): The relationship between IP ownership, company valuation and the role of innovation.
Investment/Financing: What to look for while conducting Technology Assessment.
Management Part One: Building a Successful Management Team.
Management Part Two: How to Grow your Business.
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