Innovation Inside and Out: Part 1 Outside the Corporate Setting

Stephen DeAngelis

March 7, 2011

Patricia Cohen writes, “Since the Austrian economist Joseph A. Schumpeter published ‘The Theory of Economic Development’ in 1934, economists and governments have assumed that the industrial and business sectors are where ideas for products originate. A complex net of laws and policies, from intellectual property rights to producer subsidies and tax benefits, have flowed from this basic assumption.” [“Innovation Far Removed From the Lab,” New York Times, 9 February 2011]. In this two-part series, I will explore ideas and innovation inside and outside of the industrial/business setting. I’ll begin with “outside” ideas since they are the subject of Cohen’s article. She continues:

“Pathbreaking research by a group of scholars including Eric A. von Hippel, a professor of technological innovation at M.I.T.’s Sloan School of Management, suggests that the traditional division of labor between innovators and customers is breaking down. Financed by the British government, Mr. von Hippel and his colleagues last year completed the first representative large-scale survey of consumer innovation ever conducted. What the team discovered, described in a paper that is under review for publication, was that the amount of money individual consumers spent making and improving products was more than twice as large as the amount spent by all British firms combined on product research and development over a three-year period. ‘We’ve been missing the dark matter of innovation,’ Mr. von Hippel said from his office in Cambridge, Mass. ‘This is a new pattern for how innovations come about.'”

I’m surprised that the R&D figure for “home-cooked” ideas is twice as large corporate R&D spending; but maybe I shouldn’t be. If you’ve ever watched any of the reality television shows involving inventors (like Discovery Channel’s PitchMen, BBC’s Dragons’ Den, or ABC’s American Inventor), you realize that there are a lot of people out there hoping to get rich by coming up with a great idea. And many (if not most) of those “inventors” have spent a lot of money pursuing their dreams. As I noted in a post entitled Hard Times for Inventors, hitting it big with an idea is almost as difficult as striking it rich by winning the lottery. Cohen reports that some scholars wonder if government policies don’t add to the difficulties faced by garage-based inventors. She continues:

“Carliss Y. Baldwin, a business administration professor at the Harvard Business School, called the research remarkable, adding: ‘What makes Eric’s work so significant is that it is unprecedented to try to measure the extent of user innovation. He shows that we’ve had on a set of mental blinders.’ To Ms. Baldwin and others who study innovation, the results point to the necessity of rethinking patent law as well as government incentives for research and open sourcing. As Stian Westlake, executive director of policy and research at the British National Endowment for Science, Technology and the Arts, put it in a report: ‘This democratization of innovation has potentially critical implications for innovation policy.'”

To be honest, not all individual ideas or home-grown inventions are good. In my earlier post, I cited an article that reported, “Competition is fierce. AllStar Products Group LLC, a private Hawthorne, N.Y., company perhaps best known for its marketing of the sleeved-blanket Snuggie, receives more than 10,000 submissions a year from inventors, says Scott Boilen, founder and chief executive.” Out of those 10,000 submissions, the company annually licenses fewer than 100. I’m not sure that Cohen was intending on making that point in her article, but she does. Here are few of the ideas she includes in her article:

“One woman colored two halves of a clock dial different shades to teach her children how to tell time; a man concocted a device made from a fishing rod and a large hook to trim his treetops; another reprogrammed his GPS unit to make it easier to use and tailored to his needs.”

The larger point that Cohen is trying to make is that information age technologies have made it easier for garage tinkerers to fool around with their ideas. She continues:

“The Internet is an obvious engine of consumer innovation in the digital realm. Twitter’s List and Retweet features, for example, were inspired by users. While consumers have always fiddled with products, the Web makes it so much easier for people with similar interests to come together and form online communities like DIYbookscanner. The very study of collaborative user innovation is a relatively new phenomenon that began only in the mid-1990s when advocates for open-source software began to argue that computer code should be freely available for thousands of independent minds to play with and improve. ‘They overturned the widely held model,’ Ms. Baldwin said. The Western tradition of the isolated heroic genius toiling away in a lab or study is based on myth as much as fact, she added. That model has had a powerful impact, helping to discount the more collaborative aspects of innovation, but it is ‘completely dated,’ Ms. Baldwin said.”

Frankly, I’m not so sure that Hippel and his colleagues “overturned” anything. If anything, they simply reinforced what has been known for some time. In post entitled A Few More Thoughts on Innovation, I cite a book review written by John Gapper [“An inventive take on innovation,” Financial Times, 13 October 2010]. In that review, he wrote, “Most of the most significant inventions of the past two centuries have not come from flashes of for-profit inspiration but from communal, multilayered endeavor – one idea being built on another until a breakthrough is reached.” In still another post, I wrote, “In his book The Art of Innovation, Tom Kelley wrote, ‘The myth of the lone genius can actually hamper [an organization’s] efforts in innovation and creativity. … Loners are so caught up in their idea that they are reluctant to let it go, much less allow it to be experimented with and improved upon.’ He goes on to note that Thomas Edison, who is often pointed to as a lone genius, had a team of fourteen people that helped him conceive, build, and market his inventions.” The fact that collaborative innovation is increasing is a good thing — even if the odds of making a bundle remain long. The current conundrum is that much of this collaboration is affecting consumer products for which others hold patents and other intellectual property rights. The result in an understandable tension between tinkerers and product manufacturers. Cohen concludes:

“As consumer innovators proliferate, the tensions with producers have escalated, and the courts are increasingly going to be called in to adjudicate, Mr. Fisher predicted. He is skeptical that easing intellectual property law would significantly spur economic efficiency, but he does say it would foster creativity and community. In a recent article in the Minnesota Law Review, Mr. Fisher argues that altering equipment — like music, novels and other cultural artifacts — is a way of expressing creativity, and that the law should take that into account. ‘User innovation,’ he writes, ‘offers opportunities for self-fulfillment.'”

A quick side note about ideas and self-fulfillment. I’m sure that inventors feel some level of self-fulfillment in getting their ideas to market. But Bill Buxton claims that such fulfillment doesn’t last very long. He writes, “The better we do, the bigger the problem we make.” [“The Problem with Great Ideas,” Bloomberg BusinessWeek, 9 June 2010]. He explains:

“Great design takes hold, gets traction, and takes on its own inertia—which makes it hard to replace. And replace it we must: Everything reaches its past-due date. Design is no different. You might think that your great new product and innovation will be different, will have longevity, and that the associated business will continue to grow. But, quite apart from the fact that your product or process will inevitably provoke innovation from your competitors, expectations always grow faster than the ability to deliver. In his 1980 book, Unpopular Essays on Technological Progress, Nicholas Rescher persuasively argues that the faster expectations are met, the faster they escalate. In fact, he wrote, ‘progress produces dissatisfaction because it inflates expectations faster than it can actually meet them.’ So the bad news is that our great new idea will satisfy neither customers nor society in the long term. The good news is that no matter how well we do, there is a constant and ongoing need for design and innovation.”

So much for self-fulfillment. But, as I wrote in a previous post, “All of this sounds very discouraging. The fact of the matter is, however, that people are going to continue to have ideas and some of those ideas are going to become blockbuster hits. It would be tragic if people stopped inventing just because the odds are against them achieving significant financial success.” G. Michael Maddock, chief executive officer, and Raphael Louis Vitón, president of Maddock Douglas, an innovation consultancy, look at the topic of “outside” innovation differently. They claim that luck plays a big role in it [“Why Innovation Is Beginner’s Luck,” Bloomberg BusinessWeek, 24 August 2010]. They write:

“ITunes? Beginner’s luck. NetFlix? Beginner’s luck. eBay? Beginner’s luck. Twitter, Cirque du Soleil, and Mountain Equipment Co-op are examples of companies started by people with no industry experience. So were personal finance Mint.com and scores more we could mention, from Amazon to Zipcar. You could almost hear the things that people in the music, movie rental, and auction business (just to pick three examples) were saying when iTunes, NetFlix, and eBay came along. ‘What are these people thinking? Don’t they know about the existing rules, the channel headaches, the legal hurdles, the technical hurdles, what’s been tried before and failed, the demands of the sales agents, the way our products and services are purchased, the demands of our customers and their customers?’ Uh, no, they didn’t. And neither will the competitor who will seemingly come from out of nowhere to upend your industry. And that is your takeaway.”

Of course, ideas that begin outside the industrial/business setting must eventually join that arena if they are going to be classified as innovations. As I have noted before, the formula definition of innovation is: innovation = new x valuable x realized. If any of those parts is missing (i.e., if any of those traits = 0) then you can rest assured whatever you’re discussing is not an innovation. I suspect that a lot of garage tinkering results in ideas that may be new and valuable, but are never realized. Maddock and Vitón offer some advice about how companies can bring outsiders in (hopefully along with a little luck) to make them more creative. They write:

“Think of intentionally infusing a bit of beginner’s luck into your program. Here are a few ways you can do it:

“• Stop hiring leaders from your industry. Ask recruiters to look for a specific problem-solving ability instead of industry experience. Find leaders who have created the results you want in a unique way. For example, if you are faced with disintermediation issues—and all service companies are—look for experts who have tackled disintermediation. It’s likely better that they know nothing about sump pumps or whatever your business is, because it will enable them to solve your problem and challenge your paradigms. Beginner’s luck.

“• Infuse outside experts with the details of your challenge. Every aspect of the innovation process can be enhanced by reviewing it through the eyes of pros from outside your industry (‘beginners’). They will see things you don’t see, get you excited about ideas you may pass over, and keep you from making the mistakes they’ve made trying to solve a similar challenge.

“• ‘Parallel engineer.’ We like to encourage this politically correct form of stealing. Send your peeps to conferences, educational events, retail establishments, other businesses, etc., that have nothing to do with your business. Have them talk to the experts there about your problems. Ask those experts to solve it, and tell them the craziest idea wins the prize. In effect, you are liberating them to look at your challenge through the ideas of a beginner.

“• Ask the newbies. Your newest hires and the youngest people in your firm carry with them what resembles a look of confusion. Frequently, it is actually the fleeting glow of a new idea desperately trying to be born. Ask them what they see. Ask them how they would solve the problems. Desperately try not to cut them off or offer your ‘expert’ opinion. They just may give you an idea that will make you a hero.

“Using these techniques will result in competitors viewing you as a little bit crazy and a-lot-a-bit lucky.”

The bottom line for most of the experts cited above is that a “not invented here attitude” could, at worst, prove fatal to a business. On the other hand, being open-minded about where ideas and insights come from could prove valuable (even business saving). Savvy business executives should actively look for people with new perspectives that can help them see their industry and future in a new way. My only caveat is to remember that not all ideas have equal value. A good executive knows how to weigh ideas and when it makes sense to take a risk supporting of potentially high payoff idea.