Mar 1, 2010

Innovations in innovation

I was talking to Doc Hall yesterday about innovation, partly about how to frame an article about the subject for Target and partly digressing about the state of manufacturing and business. Doc thinks the way we do business is rooted in the past and about to crumble as the cracks in the foundation grow wider.

Innovation, for example, is hampered by patent processes and the extensive litigation often rising around them. Another barrier to innovators, he says, is that they may be brilliant at science and technology, but they don’t know how to create a business model that can succeed in the marketplace. You need both. Then licensing innovations by companies who can take an idea to market is made less attractive by inventors who offer only nonexclusive licenses to their product or technology.

Nathan Myhrvold, former Chief Technology Officer at Microsoft, along with some partners, founded a new company, Intellectual Ventures, betting on a new model of deploying innovation. He describes this in an article, “Funding Eureka,” in Harvard Business Review (you can download it from the IV home page). He foresees making a market in invention, liberating it from “charity funding” from the government and even from corporations that are more interested in development than research. He’s assembled (if I didn’t get this wrong in my quick scan of stuff) $5 billion to buy a portfolio of patents that has already generated $1 billion in licensing revenue. His plan gives me nightmares of selling shares in targeted portfolios that average out risk, then some financial innovator making a market in derivatives, the question of who rates risk, and a debacle like the mortgage-backed securities and their derivatives we’re still recovering from.

Another company that’s been working for the past several years to make a market in innovation is Yet2.com, led by Ben DuPont. (Yes, he’s one of those DuPonts, with business development expertise gained from work he did there. Could a trait for commercializing R&D be in the family genome?) Yet2.com is an online registry of technologies available for license, combined with “Tech Needs” from companies looking to buy innovation instead of making it or looking for a solution to a technology problem. One of the company’s innovations is a standardized “Tech Pak” that makes it easy to get the gist of what’s on offer by an inventor, what stage of development it’s at, and what research data comes with the license. DuPont and other colleagues are also starting to invest in promising innovations to bring them to market by adding their business acumen to research brilliance.

NASA Tech Briefs is a publication with a long history of trying to offer innovation produced by our tax dollars to private enterprise. It now has struck a deal with Yet2.com so that its database runs in the Yet2.com framework behind the Tech Briefs web search interface. You also get the NASA technologies through Yet2.com.

You can also troll the filings in the U.S. Patent Office if you’re of a mind to. It’s all online and there are, no doubt, intelligent bots constantly spidering the website for the benefit of anyone who wants to buy or sell innovation.

These are just a few models of market innovation in innovation. Much is driven by big companies, whose financial wizards are looking at intellectual property as a collection of assets that can be “monetized.” Corporate research often turns up a promising project that just doesn’t fit their core business. Until recently, those patents, data, and even business plans have sat fallow in the vault, with no ROI, but protected from competitors wishing to bring the same idea to market. They’re asking why, and answering, why not earn some money from them?

There are also the little guys, inventing a product they believe in, but not having the resources or knowledge to take it to market. TV is full of reality shows that put inventors into competition with one another for the chance to pitch their ideas to people with money. Some companies are starting to follow the online communities that are emerging among inventors, but it really remains small potatoes and a field for all sorts of “services” to offer would-be moguls.

I have a few questions. Where’s the opportunity for lean companies freeing up capacity or lean experts who are now free agents to mine these innovation resources? If they don’t have the resources for R&D, can’t they just buy it in the new innovation market? Can they base an entrepreneurial start-up on someone else’s innovation? Would they even want to? I’d hypothesize that they ought to have an advantage over non-lean entrepreneurs, even if they invest in nonexclusive licenses.

These models all seem to fit into the emerging philosophy of Open Innovation growing out of the open-source software movement. How will it take shape? How is the money going to flow?

Food for thought. 

7 comments:

Ankit Patel said...

Karen,
I always enjoy your posts! I have to agree that innovation is trending towards "open innovation" and more importantly I think the quicker we can iterate in an open source environment the quicker we'll see innovation.

I'm a big fan of Boyd's Law applied to business and innovation and I wrote a post talking about it. The basic premise is that if you can improve quicker instead of improving at the best level of quality you will achieve a desired result faster relative to competition.

Open source is perfect for this and the competition in this case can e companies, other technologies, etc. It'll be interesting to see what else goes "open source". I'd love to see an open source WI-FI project.

Ankit
theleanwayconsulting.blogspot.com

Karen Wilhelm said...

Thanks for the comment, Ankit. I agree completely about iterative development -- smaller PDCA cycles catch problems and opportunities sooner.

I've been working in two open-source collaborative environments: Project Gutenberg and Wikipedia. Each has an evolving culture bringing stability to the process of making information accessible, and when you get really into it, the social interaction with others in the projects becomes very interesting and rewarding, with the same kinds of personalities and friendships emerging. Rules and arbiters emerge. These are interesting because they are volunteer activities. I keep having the feeling that I am just beginning to get a sense of the dynamics of new ways to work.

Anonymous said...

Karen...an interesting contrast to the effusive article penned by the NY Times on Intellectual Ventures.

Post at Techdirt

http://www.techdirt.com/articles/20100223/0129458262.shtml

robert edward cenek
www.cenekreport.com

George Rathbun said...

The key to innovation is opening up the floor to participation. Innovation can no longer come from R&D labs... they just don't have the collective brainpower to compete with companies which are crowdsourcing their problems (by that I mean, involving all players in the organization... not necesarily external players). As Ankit stated, open innovation is becoming popular, and as more companies do it, they are leveraging the process through the use of state of the art idea management software.

Karen Wilhelm said...

Interesting, George - What would be two examples of the advanced idea management software available. We all know that just putting ideas in a database isn't very helpful, what's coming to replace that?

George Rathbun said...

I'll point to a few companies (including mine, INCENT Solutions):
Imaginatik
Brightidea
INCENT

Besides a user friendly interface to collect the ideas from participants, the back end has great business intelligence tools and allows for the identification of the best ideas either by peer review (voting) or by criteria based evaluation.

Another feature of these tools is the ability to integrate external sources/partners into the process (open innovation). As ideas are posted, partners can subscribe and collaborate on them (virtual brainstorming).

Karen Wilhelm said...

Those are pretty cool. For a dispersed organization, it seems like they could leverage thinking. The ability to bring outside ideas to bear, without jeopardizing intellectual property has big potential.

Copyright @ 2005-2014 by Karen Wilhelm