Innovation Pipeline

Innovation is now the primary means for growth, prosperity
and improved quality of life. We must constantly innovate. We
have no choice.

In the U.S., it is estimated that up to 80 percent of new jobs are with small companies and 20 percent with midsize companies. Large companies, as they acquire smaller companies and consolidate workforces, actually reduce net employment.

Yet even in Silicon Valley, the gold standard for entrepreneurialism, the success rate for new companies is modest. About 10 percent of new companies will make a significant and lasting impact on the economy. To increase the success rate, we can either encourage the creation of more new companies or improve the success of the ones we create.
But why not do both?
We face many challenges: dynamic global markets, new government regulations, increased taxes and ever more savvy consumers who define and demand value on their own terms. Also, new waves of technological progress are crashing on us ever more rapidly, with some technologies improving 100 percent every 12 to 36 months. This “exponential economy,” as I call it, represents another imperative for us to dramatically improve our rate of innovation if we are to remain competitive.

Given these opportunities and challenges, how can we improve our innovation rate and be more successful at company formation? Leaving aside improvements in government policy, we can start by studying proven models.

Consider Toyota Motors. Toyota’s rule: “Whenever something or anything is
produced, there must be a systemized method for producing it. Whether the people who do the actual production fully understand those rules, that system has a deciding impact on product quality, cost, safety and all essential determinants of success or failure.”

This idea is the foundation of total quality management, which revolutionized manufacturing in the 20th century and which all manufacturing companies now use in some form. Manufacturing is today a “discipline.” It provides a family of principles to assure increasing customer quality with decreasing cost. In other words, TQM leads to increasingly higher customer value.

But is entrepreneurial innovation a “discipline” today? I suggest not. Many still believe that innovation is a semi-random event catalyzed by a lone genius in a garage. I believe it is time to make innovation a discipline too. We are, after all, engaged in a process to create new products and services, whether we fully understand that process or not. Even a small improvement in our ability to successfully innovate would have a huge impact on our economy. It is the point of
greatest leverage.

Innovation means bringing a new idea, whether an invention, business process, or new product or service, all the way to the marketplace. Successful innovation depends on a family of best practices that, if properly understood and shared, can be learned and applied.

Consider this simple example to test the understanding of innovation practices today. Walk into any company and ask an employee to quantitatively define “customer value.” If your experience is like mine, you will rarely get a coherent answer. It makes you wonder how the company can possibly be doing the
best job for its customers.

There are an increasing number of organizations working to make innovation a discipline, including Toyota, Baldor and the BBC. There is also Worcester Polytechnic Institute in Massachusetts, which has developed a revolutionary approach to technical education. WPI integrates basic innovation concepts
into the core curriculum for all students and sends small teams of students around the world to complete real projects at selected organizations. It is a transformative educational experience for the students.

At SRI International we consider best innovation practices to be so fundamental to our success that we have created a workshop called the “SRI Discipline of Innovation.” The ideas in this program are taught, to some degree, to everyone at SRI. We also offer workshops to our customers and partners so we can innovate together better. The program is based in part on the ideas of SRI alumnus Douglas Engelbart. In a remarkable feat of teamwork, creativity and innovation, Doug’s team invented the computer mouse and the foundations of personal computing.
Our workshop is based on his and other best practices for innovating rapidly and creating superior value based on customer needs.

As technologists, entrepreneurs, executives or venture capitalists, we all play key roles in the innovation process. I have spent my career working with hundreds of companies and forming many startups. I have seen many great successes and even more failures. The most important lesson I have learned is that the sustained ability to innovate requires a structured, disciplined approach.

Consider also how we can personally or organizationally support more disciplined innovation processes to increase our rate of success in delivering important innovations to the marketplace.

Curtis R. Carlson, Ph.D., is president and CEO of SRI International. He was previously a scientist at RCA and Sarnoff Corp., where he helped lead the Emmy-winning HDTV team and was instrumental in the formation of over a dozen new companies. With Dr. W. Wilmot, he will be shortly publishing a book: The
Discipline of Innovation. SRI International is a leading independent nonprofit R&D laboratory with nearly 2,000 employees and annual revenues of roughly $400 million. Dubbed “Spinoff City” and the “Soul of Silicon Valley,” SRI and its subsidiary Sarnoff Corp. have launched more than 30 companies, including
Intuitive Surgical, Locus Discovery, Nuance Communications and Orchid Biosciences.