When is an Innovation? @Medici_Manager @timkastelle

by  on 3 March 2013 in innovation

Greg and I have been talking about whether or not innovation needs a purpose.  While we agree on many points, we can see two differing views on the question.  I will argue that within an organisation, innovation does need a purpose, and here is Greg’s post arguing the other side.

Let’s start by looking at a case study.  When Watson and Crick published their paper revealing the structure of DNA in 1953, they close the paper by saying:

It has not escaped our notice that the specific pairing we have postulated immediately suggests a possible copying mechanism for the genetic material.

In their annotated version of the paper, the fantastic Exploratorium in San Francisco says this about Watson and Crick’s statement:

This phrase and the sentence it begins may be one of the biggest understatements in biology. Watson and Crick realized at the time that their work had important scientific implications beyond a “pretty structure.” In this statement, the authors are saying that the base pairing in DNA (adenine links to thymine and guanine to cytosine) provides the mechanism by which genetic information carried in the double helix can be precisely copied. Knowledge of this copying mechanism started a scientific revolution that would lead to, among other advances in molecular biology, the ability to manipulate DNA for genetic engineering and medical research, and to decode the human genome, along with those of the mouse, yeast, fruit fly, and other research organisms.

In many respects, even though these applications were noticeable in 1953, it’s really only been in the past 10-15 years that we’ve started to see a significant economic impact from the discovery of the structure of DNA.

So, was the discovery of the structure of DNA an innovation?

DNA double helix horizontalDNA double helix horizontal (Photo credit: Wikipedia)

There are two ways to look at this.  Some say that it’s not an innovation if there isn’t an economic payoff.  Or even more strictly, that without a new product, it’s not innovation.  Others say that innovation is driven by discoveries like this – that we must engage in search and discovery activities even though we have no idea what practical applications will arise.

Even though these seem like opposites, you must do both –  This is another innovation paradox.

On the one hand, if you want to stay in business, the ideas that you execute need to create value.  Then you have to convert that value into something that helps you pay the bills. If you’re not innovating around your core, you are vulnerable to competition from people that are.

So while it’s not true that you’re not innovating if it doesn’t create a new product, it is true that you need to create value with your innovations so that you can generate some sort of return.

When we think about corporate groups that have engaged in pure search and discovery, the two big examples are probably Bell Labs and Xerox PARC.  It’s no coincidence that both parent firms effectively had monopolies when they made these investments – they didn’t have to care as much about returns.

The answer to the question: was the discovery of the structure of DNA an innovation? depends a lot on timing.  And it raises three important points about managing innovation.

  1. Innovation is a process.  I’ve said before that innovation is actually the process of idea management.  Lukas Fittl tackles this issue nicely by talking about the distinction between ideation and execution – what he refers to as the flipping the ideation switch:the_ideation_switch1For our purposes here, ideation is the period when you are doing the searching, which may not have much of a market focus, and execution is when you zero in on building a profitable business model for your idea. Fittl talks about this as a very directed process even in the exploratory state.
  2. You face uncertainty throughout this entire process.  There are a couple of persistent, damaging ideas that pop up here. One is that when you get to the execution phase of an idea, there isn’t any uncertainty anymore.  Unfortunately, this is not true.  Any time we are working with new ideas, we can never be certain that they will work.Roger Martin addresses this in a great post about strategy and uncertainty:

    Contrary to popular opinion, strategy is not about turning uncertainty into certainty. Lots of bureaucratically inclined board members and corporate executives want and expect this to be the case. When reviewing strategies, you can hear them asking for proof that the strategy will be successful.
    The reality is that strategy is about making choices under competition and uncertainty. No choice made today can make future uncertainty go away. The best that great strategy can do is shorten the odds of success.

    Greg has made the point that strategy and innovation are often conflated. In this case, Martin’s comments on strategy do apply to innovation as well.

  3. The business problem with exploration is that the gap between the discovery and the economic payoff is usually very long.  This gap is almost always longer than we expect.  Look at the DNA example.  Watson and Crick published in 1953, and at the time, they noticed that the idea had commercial potential.  But the first biotech firm, Genentech, wasn’t founded until 1976, and their first product didn’t come out until 1982 – nearly 30 years after Watson and Crick’s article!Sketch-DiffusionIf Watson and Crick had been working for a company in 1953 when they made their discovery, how would it have managed to stay in business until 1982? You’d need a lot of venture capital to support that…

One way to address this is to manage your innovation activities as a portfolio using a 70/20/10 split in your innovation effort.  70% goes to improving your core business with incremental innovations, so that you can continue to stay in business.  20% goes to finding adjacent markets that you can extend into.  And 10% goes to blue sky ideas that might change the world, but we just don’t quite know how yet.

Once again, it’s not an either/or question – it’s both/and.  We need to be both evolutionary and revolutionary.

However, in practical terms this means that innovation does need to have a purpose.  You can do all the discovery that you want, but if you don’t use it to create value, you won’t be in business for long.

About Tim Kastelle http://bit.ly/ZoTYFa

Idea Connector – Studies innovation networks – author, speaker & consultant on innovation – University of Queensland Business School – links to academic papers, twitter, and so on can be found here.

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