Jim Euchner, From the Editor, Research-Technology Management Vol. 62.1
Change before you have to.
I moved recently and, as a result, had occasion to go through boxes of old papers that had been buried in my basement for many years. I have had a long career in innovation, so some of the documents were papers about the secrets of a few innovation icons: Xerox, Lucent, Kodak, and Enron. Those papers are a stark reminder of how little we yet understand about sustained corporate innovation. Each of these companies was an innovation giant in its day. But with the exception of Xerox, which is a shadow of its former self, all of them are out of business or absorbed by others.
And yet they did many things right. Xerox set out with a bold agenda: to invent the office of the future. The scientists at PARC did a remarkable job of fulfilling that mission in an astoundingly short period of time. Xerox, however, was fighting the incursion of low-cost competitors from Japan and an agreement with the US Federal Trade Commission that removed intellectual property as a barrier to entry. Taking advantage of the innovations of PARC would have required significant managerial attention just as these other business challenges loomed largest. The company was not set up to capitalize on these innovations—so others did. Large new businesses in computing, networking, and software were created from the seeds of Xerox innovation. In Fumbling the Future (1988), Douglas K. Smith and Robert C. Alexander tell the story of the company’s remarkable invention of the first personal computer and its equally remarkable failure to exploit that innovation. The story they tell is compelling, but it always struck me that you cannot fumble the future if you do not invent it. I continue to this day to admire the magic that created PARC’s success in the 1970s and 1980s.
Lucent, the former Western Electric, was unleashed when it was spun out of AT&T in 1996. Born at a moment when the market for telecommunications services was exploding, the company had among its assets the technology of the former Bell Labs. At the time, it characterized itself as a “127-year-old startup” focused on 11 hot markets, including wireless communications, microelectronics, and optical networking (Lazonick and March 2011). The company’s leadership invested in innovation to take advantage of its opportunities, doubling R&D spending to $5.1 billion in 1998. But Lucent could not survive the dot-com bust. Between 2000 and 2002, revenues declined by 70 percent; they fell another 31 percent in 2003. In the cost-cutting that followed, the entrepreneurial culture the company had sought to develop gave way to old bureaucratic ways, and innovation was stifled. Lucent was eventually purchased by Alcatel, one of its former rivals.
Kodak was another true American icon, and the inventor of the digital photography technology that eventually brought it down. At its core, Kodak was a film and chemicals company, but its EasyShare digital camera and docking photo printer led for a while in the market for digital cameras (although with a model closest to its traditional business model). New leadership, however, folded the digital division into the film camera division to avoid duplicate overheads. The demise of the digital NewCo was utterly predictable, although it is questionable whether anything Kodak might have done in the digital camera business could have defended it against the convergence of phones, cameras, PDAs, and GPS systems. The story, which Clay Christensen discussed in some depth in my 2011 interview with him, is a classic tale of disruption.
Enron is another example, though one tainted by scandal. In its heyday, it was an icon, lauded for the innovative Internet business models it used to create new brokerage businesses in industry after industry. The company was staffed with brilliant, enthusiastic innovators, and its model was studied by professors and innovators. Gary Hamel’s call to action, Leading the Revolution, was based heavily on Enron’s model. Many of the company’s innovations were sound, but it was later revealed that Enron funded its revolution, in part, with off-balance-sheet accounting; when the model collapsed, the ensuing scandal brought down both Enron and its accounting firm, Arthur Andersen. The pressure of the expectations it had built may have been at the root of its unraveling.
We can make judgments about these companies, but all of them did many things right. They had big visions and cutting-edge technology; they invested in their visions and sought to organize to drive innovation. But they all operated in very complex business, regulatory, and cultural contexts, with crosscurrents that made it difficult to maintain a focus on innovation: new sources of competition, regulatory change, massive swings in the market, and the relentless pressure of near-term Wall Street expectations.
What can we learn from these failures? RTM, after all, is a journal devoted to understanding emerging best practices for innovation, technology, and research management. As shown by Vanessa Shum and her coauthors in “A Bibliometric Study of Research-Technology Management, 1998–2017,” RTM has long been a leading voice in the discussion of new paradigms and techniques for innovation, including open innovation, portfolio management, and Stage-Gate processes, among other techniques that are now widely practiced. IRI, RTM’s publisher, has, through its Research on Research (now PILOT) program, contributed numerous practical studies on breakthrough innovation in corporations. Increasingly, authors are turning their attention to the contextual and organizational factors required for success.
This issue’s Innovation C-Scape profile is an example of how knowledge of best practices can play out in the real world. Mark Karasek, Chamberlain Corporation’s CTO and Vice President of Engineering, discusses his 20-year innovation journey, during which he has helped transform Chamberlain from a maker of garage door openers to a company that provides access services. The journey has included implementing a stream of techniques and approaches, including Stage-Gate, Agile development, design thinking, and Lean Startup—all topics RTM has covered in some depth.
The onslaught of potentially transformative technologies continues, and they are coming faster and in combinations that can be hard to predict. They are no longer just transforming industries; now, they’re eliminating the traditional boundaries among them. Blockchain is one such emerging technology, having been invented only 10 years ago. In this issue’s Conversations interview, Don Tapscott, coauthor (with his son, Alex) of Blockchain Revolution, discusses how blockchain will fuel the emergence of a “trust economy” and the Internet of value, which he believes will have greater transformational impact than the Internet itself. Given how many times he has been right in the past, his arguments are worth considering.
In “What Machine Learning Can Learn from Foresight,” Christian Crews discusses machine learning, another technology with broad and potentially transformative application. As a specialist in foresight, he brings an interesting perspective to the discussion. He observes that machine learning is all about improving our ability to predict things, something that futurists have been attempting to do for some time. He argues that AI professionals can learn from foresight, particularly concerning “three core problems that plague any forecasting effort: disbelief in the forecast, lack of strategic context, and delegation of foresight thinking.” The key, he argues, is including humans in the machine learning process.
The stars may not always align for transformative innovation in corporations. Executive foresight and commitment, a manageable core business, and tractable industry shifts may be necessary conditions, but they are not guarantees. Still, our companies will not have a chance if we don’t engage with emerging best practices to bring innovation to the point of possibility. Perhaps some future innovation archaeologist will find our lessons critical to her success.
Jim, This article resonates for me, having worked at Xerox and then Pitney Bowes, both shadows of their former selves. Working on paper handling designs was great until the need for this work was so thoroughly disrupted. For me, the analogy of this process is like plate subduction in geology. As one great company, or tectonic plate, is crushed and melted below the earth’s crust, the minerals and elements are recycled by volcanism and new companies are born from the technology and processes that were developed previously. This recycling of human talent and technology is the dynamism seen in technology hubs like Silicon Valley and Boston. Real human progress is the continuity of intelligence and understanding, not a specific company or industry.
Best regards, Jim Salomon