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What is the problem with innovation?

Peter Hallett, industry programme team leader at SPIE, says innovations need customers to succeed

Is your company outpacing your rivals with new innovations – as measured by new products and customers? If so, keep pushing, because your competition is relentless. If you are not winning the race or are too focused on technology (vs. needs), now is the time to review your innovation strategy.

Innovation equals invention plus commercialisation (Freeman, 1982). Innovation is a new way of doing things that is commercialised (Porter, 1990). Innovation is the profitable implementation of strategic creativity (Merrifield, 2005). In the words of John Kao at the recent SPIE Photonics Innovation Summit in San Francisco: ‘Innovation is creativity for a purpose that provides value.’ If one believes innovation is the conversion of knowledge into money, it becomes apparent that customers are the ultimate judge. If your technology roadmap doesn’t point to articulated customer needs, ask: ‘Why are we doing this?’

Not all discoveries or promising inventions turn into successful products. In fact, very few do. The process of innovation includes discarded projects, missed opportunities and high levels of uncertainty. This is more a game of poker than chess. It costs money to reduce uncertainty and money is tighter than ever. The best way to improve the odds is to connect more deeply with your target customers – because they alone determine whether you have an innovation.

Companies with the best understanding of need (including latent need or projected need) combined with the ability to produce more technical possibilities (that’s where R&D comes in) have a strategic advantage. Being able to connect possibilities with needs is the essence of innovation. One cannot successfully commercialise technology without understanding the market, including specific applications, target customers and alternative solutions.

Bravo for basic research and a robust technology pipeline. Yet, few companies can afford an internally focused ‘if we build it they will come’ strategy (let alone research with no customer in mind). Developing a common understanding of real problems to solve and a sense of urgency about delivery to the customer are critical management issues.

Resource allocation decisions that focus minds and money on the right opportunities are the most important management issues, especially when budgets are lean. Steve Jobs once said: ‘Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.’

Gaining an accurate understanding about what will generate value (customer need, market opportunity, changes in the world… ’getting it’) requires more than a review of the technical literature, though that is important to understand problems and possibilities.

Jennifer Ernst, director of business development at PARC (Palo Alto Research Center – an organisation credited with an amazing amount of innovation), suggested at the SPIE Innovation Summit that innovation happens at the overlap between technical possibilities and customer needs. She said: ‘I believe getting close to the market as early as possible is the cornerstone of accelerating innovation.’

Getting close to the market helps you better understand needs and search for changes to exploit. Management guru Peter Drucker tells us that most innovation opportunities emerge from seeing surprises, incongruities or changes. Relatively few innovations come from an inventor’s ‘bright idea’ or even from new scientific knowledge. This means that the innovation process depends primarily on people looking outward. Or, as one successful executive told me recently: ‘What good is a scientist or engineer who doesn’t know what’s going on in the world?’

The most cost-effective way to connect with the market is to go where a critical mass of intelligent people from multiple disciplines, many organisations and different viewpoints are already gathering. SPIE Photonics West is such a place – a breeding ground for innovation, where you can learn new possibilities, talk with customers and get a better sense of market needs, and see for yourself what is changing.

Innovation happens best when people stretch the boundaries of their knowledge, or cross boundaries and share time in an environment where ideas can flow freely among scientists, engineers, entrepreneurs and executives.

The market data is unequivocal – innovation, and only innovation, drives value creation on a sustained basis in good economic times or bad. What is the plan to improve your understanding of technical possibilities and customer needs? How will you educate yourself about what’s changing in the market? How will you align R&D with defined customer problems? Each of these actions drives innovation. This is the work that distinguishes leaders from followers.