Copenhagen Mba On Innovation Short


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Reflections on innovation management after a few years in the Bay Area (for a class for the Copenhagen MBA 08-09)

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  • This is the schmooze factor, the result of social capital that Robert Putnam has linked to economic growth. It’s not just Putnam who has recognized the value. Some economists have given it a name--untraded transactions. Others call it knowledge spillover. Simply, its the informal grapevines though which information, ideas, innovations travel. The coffee shops are crucial to innovation and growth on Silicon Valley, Bangladore, or Carrboro, NC. But you’re also at a major disadvantage if you’re out of the loop. Important to socially excluded populations because most employment is based on these grapevines.
  • Copenhagen Mba On Innovation Short

    1. 1. Why are we here? Philippe Baumard, Ph.D. Associate Researcher, UC Berkeley Institute of Business & Economic Research (I.B.E.R) [email_address] Visiting Professor, Stanford University School of Engineeing Dept of Aeronautics and Astronautics [email_address] Copenhagen Business School Executive MBA San Francisco Retreat 2008 Friday, November 14th 2008
    2. 2. This is what I could try to address today… The so-called « Chasm »
    3. 3. The chasm = A magma of failing ideas « How do we make sure that this relentless bubble of repetitive failures keep its existence and momentum »
    4. 4. A few scientific findings about innovation <ul><li>Finding # 1 : Innovation is unpredictable </li></ul><ul><ul><ul><li>All attempts to create a predictive model of innovation generation have failed </li></ul></ul></ul><ul><ul><ul><li>Andrew Van den Ven and his colleagues even empirically proved wrong the famous « action – reaction » loop (single loop, double loop, Type II learning, etc). </li></ul></ul></ul><ul><li>Finding # 2 : Creativity, on the other hand, can be managed </li></ul><ul><ul><ul><li>Creative individuals are driven by intrinsec motivations </li></ul></ul></ul><ul><ul><ul><li>Creativity requires a very high failure intensity and failure tolerance </li></ul></ul></ul><ul><ul><ul><li>Not everyone can be creative, but larger numbers increase the probabilities! </li></ul></ul></ul>1 + 2 Let’s create a place where a lot of talented people can repeatedly fail at being creative again …
    5. 5.
    6. 6. Part I Why the Bay Area?
    7. 7. Simply put: <ul><li>On this small rectangle, you have the same total market capitalization that the total of all French Stock Market cap. (2008) </li></ul>
    8. 8. What is so specific about the Silicon Valley? <ul><li>“What distinguishes Silicon Valley is not its scientific advances or technology breakthroughs. Instead, its edge derives from a “habitat” or environment that is tuned to turning ideas into products and taking them rapidly to market by creating new firms.” </li></ul><ul><li>“The enduring competitive advantages in a global economy lie increasingly in local things — knowledge, relationships, motivation — that distant rivals cannot match. This role of location has been long overlooked, despite striking evidence that innovation and competitive success in so many fields are geographically concentrated.” </li></ul><ul><li>Michael Porter </li></ul><ul><li>The Silicon Valley constitutes a world unmatched cluster where the cycle from idea to product is on average 30% faster than in any other clusters. </li></ul>
    9. 9. Inventors are crucial to IP licensing and valorization in the Silicon Valley (1) Jensen, R. and M. Thursby (2001) “Proofs and Prototypes for Sale: The Tale of University Licensing” American Economic Review (2) Lowe, R. (2003) “Entrepreneurship and Information Asymmetry: Theory and Evidence from the University of California” Carnegie Mellon Working Paper 2003-09 (3) Jansen, C and H. Dillon “Where do the Leads for Licenses Come From?” AUTM Journal Lead sources of licensed technologies 3 <ul><li>Survey results show inventions are rarely more than ideas and concepts at time of disclosure </li></ul><ul><ul><li>79% of inventions require considerable development (29% have no prototype, 48% have a lab prototypes) 1 </li></ul></ul><ul><ul><li>71% require ongoing inventor involvement to develop the invention </li></ul></ul><ul><ul><li>Extreme cases of inventor involvement result in inventor start-ups 2 </li></ul></ul><ul><li>Finding licensees lies on community networking </li></ul><ul><ul><li>Companies funding the research often do not license, sometimes by university’s or founders’ rules </li></ul></ul><ul><ul><li>Challenge fall to licensing professionals </li></ul></ul><ul><ul><li>Success of IP licensing in the Valley is based on interpersonal networking (from companies to licensing professionals and inventors) </li></ul></ul>
    10. 10. The IP dynamic in California: From Universities to Business <ul><li>Largest Silicon Valley’s firms are often based on university technologies </li></ul><ul><ul><li>Hewlett-Packard (Stanford) </li></ul></ul><ul><ul><li>Biotechnology: Genentech (Stanford, UC San Francisco), Chiron (UC Berkeley) </li></ul></ul><ul><ul><li>Internet software: Lycos (Carnegie Mellon), Inktomi (UC Berkeley), Google (Stanford) </li></ul></ul><ul><ul><li>University of California had two very early successes in biotech, and the Cohen-Boyer patent created much of the industry </li></ul></ul><ul><ul><li>More than 202 of current leading biotech companies started at UC Berkeley! </li></ul></ul><ul><li>Between 20-30% of Californian Universities’ licensees are start-ups </li></ul><ul><ul><li>Data suggests that ~67% of these startups involved the inventor at founding </li></ul></ul><ul><ul><li>Emerging California “pockets of entrepreneurship”: Santa Barbara (materials and electrical engineering), Irvine (pharmaceutical development) </li></ul></ul><ul><ul><li>Clusters near inventors </li></ul></ul><ul><li>California Universities hold 2 out of 5 top positions in patent rankings (2002-2008) </li></ul><ul><ul><li>1) Massachusetts Institute of Technology 134 </li></ul></ul><ul><ul><li>2) California Institute of Technology 102 </li></ul></ul><ul><ul><li>3) Stanford University 96 </li></ul></ul><ul><ul><li>4) Wisconsin Alumni Research Foundation 87 </li></ul></ul><ul><ul><li>5) Johns Hopkins University 86 </li></ul></ul>
    11. 11. What are the core advantages of the Silicon Valley in terms of IP development? <ul><li>Hard economies </li></ul><ul><li>+/- Supply chains (possibility of IP application) </li></ul><ul><li>++ Labor pools (largest engineer cluster in the US) </li></ul><ul><li>++ Specialized services (large IP licensing professionals community) </li></ul><ul><li>++ R&D and technology (Intel, Cisco, etc.) </li></ul><ul><li>++ Capital (largest US capital/employee) </li></ul><ul><li>Production </li></ul><ul><li>- - Costs (the SV has high salary rates) </li></ul><ul><li>-- More options (current trend is outsourcing in developing countries where the education level is rising quickly) </li></ul><ul><li>+/- Quicker responses (short IP to prototype cycles, but farther from production clusters) </li></ul><ul><li>Soft economies </li></ul><ul><li>++ Association (strong IP community) </li></ul><ul><li>++ Networking (contact with inventors) </li></ul><ul><li>++ Tacit learning (frequency of contacts) </li></ul><ul><li>++ Knowledge leaks (strong university-industry collaborations) </li></ul><ul><li>+/- Labor grapevines </li></ul><ul><li>Production </li></ul><ul><li>++ Collective influence </li></ul><ul><li>++ Innovation </li></ul><ul><li>++ Imitation </li></ul>
    12. 12. Part II Lessons learned about innovating while in the Bay Drawing from K. Von Braun, aged 16
    13. 13. 1 – Changing the way we do « innovation » <ul><li>Get it early, very early on </li></ul><ul><ul><li>Idea generation takes place at « lab work » level. When it has been published, it’s already too late. </li></ul></ul><ul><li>Experiment with final-end customers, suppliers and competitors </li></ul><ul><ul><li>This is what the Bay Area does the best: co-opetition, cooperating with rivals, being obsessive about customer behavior, habits, human factors. </li></ul></ul><ul><li>Scale up as fast as you can </li></ul><ul><ul><li>Ramp up exaggerately and cultivate acceptance for early failure </li></ul></ul>L ab Work – Idea generation PhD Seminars Working Paper      Submission Conferences Publication IP Prototype Market 6 months to 2 years (depending on domains) 1 year (depending on performance) 1,5 year (depending on support) PhD student Researchers PhD Advisor Researchers Labs Libraries Journal Editors Conference Reviewers Lab Open Research Seminars Databases Universities IP Offices IP licensing professionals
    14. 14. 2 – Even the most innovative have inertia <ul><li>Original early schools of innovation are already outdated </li></ul><ul><ul><li>Servicization is already an outdated solution to commoditization </li></ul></ul><ul><ul><li>The era of dominance of mechanical engineering in design is gone, despite the I p hone </li></ul></ul><ul><ul><li>Designing services innovation cannot be accomplished coming from mechanics, machines, ergonomics and human factors. That’s not the way great cooks turn into Gault & Millaut’s chefs. At least, not yet </li></ul></ul><ul><ul><ul><li>E tc, etc, etc </li></ul></ul></ul><ul><li>The shared talent of the Bay Area is its continuous listening </li></ul><ul><ul><li>Dogmas do not survive for long in the Bay </li></ul></ul><ul><ul><li>Dogmatic thinking, strong convictions, « worldviews » are rapidly washed away by VCs’ disbelief, critical peers, unforgiving market place </li></ul></ul><ul><ul><li>Hence, everybody listens very carefully </li></ul></ul>
    15. 15. 3 - As much as you can, trash these: Problem solving Deduction Induction Imitation Formal Heuristics Technological trajectories
    16. 16. 4 - As much as you can, promote these: Csíkszentmihályi, Mihaly (1996). Creativity : Flow and the Psychology of Discovery and Invention. New York: Harper Perennial Anomalies Constraint learning Creativity is “something between discovering and witnessing”. R. Moog “ Engineering is always improvisation” R. Moog evolutionary, incremental and accidental “ It’s impossible to have a disembodied intelligence” Rodney Brooks F ast, C heap A nd out of control
    17. 17. 5 – Step back, and nurture “cold cases” <ul><li>Disruptive functionalities must be greatly significant </li></ul><ul><ul><li>With an increasing commoditization, new entrants or incumbents must offer “disruptive functionalities” with an absolute cost advantage </li></ul></ul><ul><ul><ul><li>JaJah vs. Traditional call-back system (+00010..): No significant advantage (<5% price difference) </li></ul></ul></ul><ul><li>Business model resilience relies on a core proprietary core process </li></ul><ul><ul><li>Google popularity indexation, integrated to desktop search </li></ul></ul><ul><ul><li>Skype super node + P2P technology (cross-platform, clarity of voice) </li></ul></ul><ul><li>Symbiotic entries are more likely to change industry dynamics </li></ul><ul><ul><li>Itunes/Ipod/RIAA vs. Archos </li></ul></ul><ul><ul><li>Early antagonistic entries threaten sustainability (e.g. JaJah, EQO, etc). </li></ul></ul>
    18. 18. 6 - The best innovation is probably not yours, but your ecosystem is…. <ul><li>The “Dilemma Zone” is counter-intuitively the best ground for strategic rupture </li></ul><ul><ul><li>Diminish the awareness of the competition </li></ul></ul><ul><ul><li>Benefit from the causal ambiguity (of resources dependency + strategic intent) </li></ul></ul><ul><ul><li>The best way to develop a services ecosystem is to use dynamic freedom to let the customers articulate and defend the desired ecosystem (e.g. YouTube) </li></ul></ul>
    19. 19. Synthesis <ul><li>Shorter cycles from inventor’s creativity to prototyping and IP </li></ul><ul><ul><li>The density and frequency of relationships between inventors, universities, industries, and IP communities is accelerating the pipeline </li></ul></ul><ul><li>Failure rate is unavoidable, but not unlearning from failures is unforgivable </li></ul><ul><ul><li>The “secret” of the Bay Area is that it is a very large pond with very smart fish species that die very quickly </li></ul></ul><ul><ul><li>Like “Little Nemo in Slumberland”, failing is not a dramatic matter as far as the inventive production level is maintained at a high intensity </li></ul></ul><ul><li>Access to weak signals and strategic learning preemption </li></ul><ul><ul><li>From researchers’ first working papers to first claims, the average pipeline can reach 9 months </li></ul></ul><ul><ul><li>Intense collaboration between university labs and industrials allow for detection of early signals and preemptive learning strategies </li></ul></ul><ul><li>More integration, more last stages, more industrialization </li></ul><ul><ul><li>Current economic conditions fosters late stage VC investment </li></ul></ul><ul><ul><li>IP activity is likely to concentrate on applications, interoperability, industrialization (processes) and cross-platforms, cross-networks technologies </li></ul></ul>
    20. 20. Food for thought
    21. 21. Sutton – Weird Ideas that Work <ul><li>Hire “Slow Learners” (of the organizational code). 1-1/2 Hire People Who Make You Uncomfortable, Even Those You Dislike. </li></ul><ul><li>Hire People You (Probably) Don’t Need </li></ul><ul><li>Use Job Interviews to Get Ideas, Not to Screen Candidates </li></ul><ul><li>Encourage People to Ignore and Defy Superiors and Peers </li></ul><ul><li>Find Some Happy People and Get them to Fight </li></ul><ul><li>Reward Success and Failure, Punish Inaction </li></ul><ul><li>Decide to Do Something That Will Probably Fail, Then Convince Yourself and Everybody Else That Success is Certain </li></ul><ul><li>Think of Some Ridiculous or Impractical Things to Do, Then Plan to Do Them. </li></ul><ul><li>Avoid, Distract, and Bore Customers, Critics, and Anyone Who Just Wants to Talk About Money </li></ul><ul><li>Don’t Try to Learn Anything from People Who Seem to Have Solved the Problems You Face. </li></ul><ul><li>Forget the Past, Especially Your Company’s Successes. </li></ul>Sutton, Robert I. 2002. Weird Ideas that Work: 11-1/2 Practices for Promoting, Managing, and Sustaining Innovation . New York: Free Press.