From Invention To Innovation

Sept. 21, 1998
For the R&D function, new discovery is no longer sufficient. Success today is measured in terms of creating sustainable value and competitive advantage.

Shortly after Peter Druckers 1990 predictions of industrys transformational journey to the New Manufacturing, Xerox Corp.s John Seely Brown formulated a new role for research and development ("Research That Reinvents the Corporation," Harvard Business Review, January-February 1991). As chief scientist and director of the Xerox Palo Alto Research Center (PARC), Brown saw that "R&D must do more than simply innovate new products. It must design the new technological and organizational architectures that make possible a continuously innovating company."

Since then, Brown has evolved a comprehensive approach to R&D that is helping to guide Xerox to what IndustryWeek defines as the New Manufacturing. That goal is not exclusive to Xerox. It is shared by other leaders who recognize new value potential in R&D.

Among those leaders there is a fundamental shift away from an internal R&D focus on the traditional relationships with other functional silos, observes Ronald S. Jonash, vice president and director, technology and innovation management, Arthur D. Little Inc. (ADL), Cambridge, Mass. "Now it is much more How do I manage technology and innovation to give me sustainable growth and competitive advantage across the extended enterprise? Theyre also asking, How can I put technologies together in new creative ways to provide real added value to my customers all along the value chain? And, How do I use R&D to really make the strongest linkage to my customers and partners and how can I use it to establish a gap between me and my competitors?"

Peter Drucker says the line between "basic" and "applied" research no longer exists. "There is only systems research . . . done on the basis of what is needed." Among early examples of systems research, Drucker cites the development of the atomic bomb and putting a man on the moon. "They asked: What is the end product?"

Brown replaces the traditional categories of "basic" or "applied" with an alternative he calls "pioneering" research. Implicit in the term is a new assumption, one that is intended to be the strong force for integrating research into the corporate purpose. "In pioneering research, the assumption is that invention alone is an inadequate focus," he explains. "Whats missing is the combination of invention plus innovation."

He sees pioneering research as a demanding challenge, as much for corporate managements as for research professionals. For example, a prime requisite is "a strategic mission to become a shaper not a follower, a willingness to constantly challenge background assumptions, and an understanding that new operating models may be required for new businesses." He emphasizes the pressure pioneering research puts on changing the old ways of both corporate and R&D leadership.Jonash adds an observation he attributes to General Electric Co.s Jack Welch: "Its easy to find people who can manage for the long term only -- meaning those in the traditional R&D role." Jonash describes the challenge as establishing a critical mass of people who can manage both the short and long term.

Brown offers a new model as a solution, one in which pioneering researchers have the mission of becoming strategically fluent with business tactics and helping shape the corporations strategy. "I think the breakthrough that we made here at PARC is to evolve the commitment of corporate strategists and pioneering researchers to deeply inform each other."

He believes that research should not be focused just on technology, but have the freedom to innovate across the entire value chain. He cites customer relations as one area that may be especially open to radical improvement through innovation. He observes that technology by itself represents a shrinking portion of the entire value chain of a corporation. Researchers "dont have to be world-class venture capitalists, but they really do have to understand business, to be able to hold their own in conversations about finance, corporate strategy, manufacturing, even advertising. Industry can no longer afford to isolate researchers in ivory towers."

Jonash is equally adamant that R&D is no longer the only fountainhead of innovation in corporations. He says a factor is the push for technological literacy among corporate management. In a study by Cornell Universitys Johnson Graduate School of Management, Ithaca, N.Y., more than 90% of the business organizations questioned said that it is becoming increasingly important for managers to have the technological literacy to understand the business implications of technology decisions. And approximately two-thirds agreed that their companys competitiveness would be enhanced if more senior managers had an understanding of technology and science.

Brown identifies four ways in which pioneering research creates business value. One is through incremental radicalism. His example: "Consider how a radical transformation of one component of an architected product platform might enhance value. With printers we did that with the transition from gas lasers to solid-state lasers to dual-beam and then to quad-beam solid-state lasers. The result was a complete transformation of how we think about building printers and copiers."

The second path, radical incrementalism, is designed to let the market participate in the way an innovation will be used. In effect, the intent is to have the technology and the market co-evolve. "Radical incrementalism recognizes that if you have a particular use in mind for almost any radical innovation and try to take it to the market, you will almost always be wrong." As a case in point, he recalls the early history of Xerox and the attempt to forecast the market impact of the first photocopiers. "Conceptually, the thinking was that the value of copiers would be in replacing carbon paper, which was somewhat unpromising because that would involve an extra step following typing of the original document. Unanticipated were all the other ways copiers are used today." Browns advice: "Because it is rarely possible to predict the uses for new technology accurately, set up product entries so you can experiment with the market to arrive at how innovation is actually going to be accepted and used. Try little forays, rather than a grand, carefully planned entry strategy."

The third way pioneering research creates value is in identifying the new core competencies that will bring success. But Brown points out that identification is just a preliminary step that needs to be followed by growing the competencies. Using Xerox as an example, he points out that new skills are needed as the company moves from making copiers to printers to providing enterprise document solutions. In order for research to redirect or reinvent the company, the new core competencies and product architectures must be put in place early enough to be of strategic importance.

"Mind share," his fourth path to creating business value, involves both maintaining the creative tension with the corporations mind-set as well as the issue of gaining mind share, the corporate consensus necessary to allocate resources to bring the fruits of research to the market.

From Invention to Innovation Page Two

With an ever-increasing number of transformative technologies emerging, it is strategically important not to simply follow someone elses pace, Brown adds. "As a competitive enabler, pioneering research hinges on understanding new value propositions for the customer, not just the creation of technology for itself. That especially involves getting close enough to the customer to grasp latent needs."

But updating a companys R&D strategy requires more than revising the internal focus or becoming more intimate with the customer, says Greg Papadopoulos, chief technology officer, Sun Microsystems Inc., Redwood City, Calif. For example, for R&D to be relevant in the computer industry, it needs to be performed in the context of an increasingly sophisticated and integrated market environment. The issue of standards looms large, requiring actions in concert with competitors, vendors of complementary products, and suppliers.

"The companies that prosper are the ones that recognize the interdependencies, that understand that most of the innovation takes place elsewhere, outside the context of their own R&D development," says Papadopoulos. One implementation of his strategy is in Suns new Jini concept. It seeks to leverage the growing computer processing power being built into consumer devices with the growing presence of networks. By subordinating the need for PCs and elevating the capability of consumer devices to interact via networks, Suns apparent goal is to make the need for PC operating systems an incidental issue. To help bring that about, Suns research partners include makers of a wide variety of consumer devices that previously had network capability only if connected via a PC.

Being able to appreciate such shifts in perception and understanding is at the core of managements problems with R&D, says Brown. And since the symptoms are closely associated with rapidly changing technologies, managements and individuals misunderstand and mislabel them as information overload. But he disagrees. "I think we have, not information overload, but cognitive overload. In the past, the frames of reference that we used to understand our work were relatively stable. Today, the frames are changing rapidly, and we have very little experience in building new frames or helping people build new frames for themselves. So one of the central tasks we find in corporate America today is to help the employees, middle management, and also top management learn to create new frames through which they can make sense of the world."

An emerging frame of reference for R&D is globalization. Affected by forces both internal and external to R&D, the emerging consensus is that companies without a global research strategy face increasing competitive problems. The globalization process is accelerating, and the least of the reasons has to do with using it as a means of cost reduction, observes Ashok Boghani, a senior member of ADLs technology-and-innovation-management practice.

An approach with more business validity is to access skills, says Shane Robison, executive vice president for R&D at Cadence Design Systems Inc., San Jose. "Confronted with the engineering shortage at our headquarters in San Jose, weve turned to building R&D capabilities abroad." Specializing in software for the design of sophisticated integrated circuits, the company has evolved a global R&D strategy employing 1,200 researchers with more than half of them outside the San Jose area.

How does the company select its R&D sites? As an example, Robison says its Livingston, Scotland, facility was sited to take advantage of "the availability of really top-notch talent. Universities in the area annually turn out more than 2,000 graduates in areas relevant to our needs -- computer science, mathematics, electrical engineering, and physics. The kinds of things that we get involved with require people to have a broad scientific background and some exposure to multiple disciplines."

Another driving force for globalizing R&D is access to new technologies. U.S. companies, for example, are finally getting over an American-centric view that all technologies worth considering exist at home, notes ADLs Boghani. He says ample evidence exists to support the view that overseas sites are especially effective in introducing new scientific advances into a companys R&D strategy.

Sometimes understanding an emerging frame of reference leads to the unexpected. For example, reassessing R&D at Owens Corning didnt lead to reinventing the company -- it established a new one. "The new wholly owned subsidiary, called Integrex, was established to capitalize on value we had created within Owens Corning," says Michael Gegenheimer, CEO of Integrex. (The subsidiary is located at Owens Cornings Science & Technology Center, Granville, Ohio.)

Integrex has a twofold mission, built on substantial experience. One part of the mission is in materials testing "where our established expertise had many companies coming to us for help over the years," says Julie Stahl, a 24-year Owens Corning veteran and director of testing for the new venture. The other part, litigation management, was built on the trials of adversity. Having accumulated years of litigation experience involving thousands of asbestos cases, Integrex is, in Biblical terms, trying to "get milk from thorns," says Gegenheimer.

Brown sums up: "What I find so interesting is that the game of innovation is not one that is limited to high-tech players. Innovation is a game that touches all of us at all levels in the Industrial Age. It affects low-tech, middle-tech, and high-tech firms alike."

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