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February 14, 2006
Focus on innovation, rather than invention
John Hagel and John Seely Brown have written a telling critique of our current innovation plans in Business Week - Funding Invention Vs. Managing Innovation
George W. Bush's proposal to increase federal government R&D spending is revealing on two levels. It suggests a growing sense of urgency about the need for the U.S. to strengthen its innovation capability. At the same time, it provides insight into the mindsets that are making the U.S. more vulnerable to global competition.
While executives of large Western companies and policy-makers of Western governments continue to view innovation through 20th century lenses, entrepreneurial companies in Asia are harnessing the opportunities of the flat world to pursue broader forms of innovation appropriate for the 21st century.
In the West, we still confuse invention with innovation. Even worse, we tend to focus narrowly on breakthrough technology or product invention -- that's what really gets the adrenaline going. Anything else is marginal and uninteresting.
They go on to say:
In the 20th century, scale and efficiency became key sources of economic value. Companies spent a lot on R&D and standardized and automated the rest of their operations, constraining opportunities for creativity outside the lab. As competition intensified, companies squeezed their R&D budgets in the quest for cost savings, while still looking for the "silver bullet" that would insulate them from competitive pressures. Given that mindset, it's understandable that CEOs hammer on the government to spend more to help them find the next breakthrough.
But if we shift our attention from invention to innovation, we begin to see a much broader horizon. Innovation -- the ability to create and capture economic value from invention -- is what really drives both the economic prosperity of nations and the shareholder value of corporations.
Innovation isn't just confined to commercialization of new products. It can also build upon creative new practices, processes, relationships, or business models, and even institutional innovations such as open-source computing -- invention occurs in all these domains. And while breakthrough innovations can generate significant economic value, sustaining that value requires a capacity for continual incremental innovations.
Agreed, but unfortunately Hagel and Brown offer us only generalizations as solutions:
There's now an opportunity to connect with creative talent wherever it resides and build relationships that enable all parties to innovate more rapidly and to get better faster by working with each other. Fully exploiting this opportunity will require a fundamental re-think of our approach to mobilizing resources, creating much more scalable pull platforms to support large numbers of participants, in place of the push approaches that constrain our innovation opportunities.
Of course, this is a very different vision from the one embedded in the proposal to increase federal spending on R&D programs. Rather than centralizing spending on a national level, this vision sees the potential created by more distributed approaches to innovation management on a global level. If Western executives don't embrace this vision more aggressively, they will become increasingly vulnerable to competition from companies that do. No amount of spending on R&D by Washington will save them from this fate. Only a shift in mindset will.
Far be it for me to downplay the need for a mindset shift; I have been calling for a shift in mindset for years. But such a shift also requires a shift in practical actions. This is where the vision falls short. For example, are Hagel and Brown calling for increased offshoring of R&D? Or better mechanisms for small and medium size companies to tap into the knowledge crated in other nations? What would a "distributed approaches to innovation management on a global level" look like? And how does it produce incomes and jobs in the United States?
I realize that these are not questions that they may have the answer to immediately. But they are the type of questions that need to be answered before we buy to much more into "the vision." It is time to move from generalities to specifics. I hope that is their next article.
Posted by Ken Jarboe at February 14, 2006 1:19 PM
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Comments
Thanks very much for the kind comments. Unfortunately, there is only so much that one can accomplish in a 1,000 word article. But you are right - our next article to be published in the McKinsey Quarterly for the second quarter of 2006 will focus much for specifically on the topic of creation nets and the management practices required to make these successful. Stay tuned.
Posted by: John Hagel at February 24, 2006 11:30 PM