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Why Innovation Can Be Dangerous for Business

Why Innovation Can Be Dangerous for Business

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Published by Walter Adamson
Businesses which get misguided into focusing on invention are putting their entire business at risk.
Businesses which get misguided into focusing on invention are putting their entire business at risk.

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Categories:Types, Business/Law
Published by: Walter Adamson on Jul 02, 2010
Copyright:Attribution Non-commercial

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07/25/2010

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Innovation is dangerous for your health! 
 
- 1 -
©2002 Walter Adamson. All Rights Reserved.
You may reprint or distribute this document as long as it hasnot been modified and proper credit is given to Walter Adamson and Digital Investor Pty Ltd.The original published at:http://www.digitalinvestor.com.au/  
First Published 
: April 2002,
Revised: 
August 2002.adamson@digitalinvestor.com.au 
A Position Paper by Walter AdamsonCEO, Digital Investor Pty Ltd
www.digitalinvestor.com.au April 2002, amended August 2002
Government spending promoting innovation has never been bigger or interest more active. But a large portion of this innovation industry is dangerous because it distracts companies into thinking about inventions and intellectual property issues and away from the core process of innovation as an outcome of change leadership. Companies that get distracted by invention and intellectual property issues, and whodo not understand the role of innovation within change leadership, face the real prospect of destroyingshareholder value and company assets
1
. That is why “innovation” as it is currently promoted is dangerous for their health. For most companies the answer lies in not confusing invention and innovation, and in focusing on change leadership.
Beware the Innovation Industry
The innovation business has never been bigger. There has been a billowing of government organizations,non-government organizations, quasi-autonomous non-government organizations, government innovationcentres, innovation councils, innovation ministers, innovation grants, government-led innovationconferences, and of course even innovation columns in the business press. Even discussion of aninnovation-led recovery can be credibly promoted by innovation-industry backers.Yet it can be confidently predicted that any such “innovation-led recovery” will, in the fullness of hindsight, falter. Worse, it can
distract companies from the real business
of focusing on value-generating strategy and execution.
Why is this so?
Consider innovation and invention – and here is a truism: as a core competence
more than 90% of companies need to innovate and less than 10% of companies need to invent
. Distracting companieswho need effective innovation with topics centred on invention is both risky and wastes time and money.Yet this
misguided focus
seems to be the somewhat relentless message emanating from the currentinnovation industry.
There is confusion between invention and innovation
There would appear to be two main reasons for this unhealthy state. The first culprit is the confusionbetween invention and innovation. On the one hand companies seek and listen to advice from theinnovation industry which they believe will help them with innovation. Most unfortunately the majority of this so-called innovation advice is about patents and intellectual property protection – mostly focused onbeing inventive or on creating inventions. This type of advice then leads some companies to distract theirfocus and resources from innovation into invention
when the latter is totally unsuited to their businesspurpose or core competencies
.
1
 
S
top Press:
 
Brandrill chief says board erred – Australian Financial Review, August 22, 2002.
 Read how shareholders lost 90% of their share value and IN ADDITION a further 90% of the remainingassets had to be pledged to creditors after an operations contracting company confused innovation forinvention and spend more than their total profits during the period on a failed commercialization of R&D.The CEO lost his job; the shareholders lost their money and their assets – read the full story on Page 2.
 
Innovation is dangerous for your health! © 2002 Walter Adamson 
- 2 -
Digital Investor
– 
Business Reinvention Strategy; Commercialisation; Innovation as Change Leadership 
.The original published at:http://www.digitalinvestor.com.au/ adamson@digitalinvestor.com.au
The cold facts are
that the core competencies of invention and commercialization are possessed byvery few firms
. And this is both sensible and reasonable because
most firms need to be much better atinnovation then invention
. Commercialization of inventions is a very high risk undertaking, and forexample Australia has been particularly poor and trailing world benchmarks in “its understanding,management and commercialization of intellectual property” (see Innovation Summit 2000 Report,published by the Australian Federal Government, 2001).
 
Invention Competencies ARE NOT Innovation Competencies
INVENTION and commercialization areextraordinary events and therefore are not andneed not be within the core competencies ofmost companies and organizations.INNOVATION should be within the corecompetencies of all organizations and be anintegrated part of their management practices – particularly change leadership.
Confusing innovation and invention is dangerous and value-destroying
Fig. 1 – Distinction between innovation and invention and their role in the firm.
A recent study published by the US Association of Technology Managers (2001) revealed that of 184,000invention disclosures (reports) at US institutions from 1991 to 1999 only
0.8%
resulted in licenses thatbroke-even or better on their costs of commercialization. Stanford University’s Office of TechnologyTransfer (OTT) reports (April 2001) that over a
31-year history of invention only one in 4500 licensesbecomes a big hit
. Katherine KU, Director of OTT says “commercialization of research is very very highrisk…”
Therefore most companies should not become distracted by invention because they will destroyvalue, and they should ensure that the current innovation industry does not lead them towardsbecoming an “inventive” firm.
If this warning sounds extreme check the breaking news story below.
 
The innovation industry sells a solution to the wrong problem
The confusion between innovation and invention is a fundamental reason for the misdirection of assets -
but not sufficient
. The second reason, and the most substantial, is that
innovation, like the learningorganization and like knowledge management, is a cause without a home
. Without a home the
 
22 August 2002. Australian Financial Review
. Brandrill, an ASX-listed mining contract operationscompany announced a “rescue package” which delivers up to 90% of the equity of company into thehands of creditors. This is
on top of
a fall in share price from $2.90 in November 2000 to a last tradeprior to suspension of $0.175. The Chairman was quoted as the company saying that “made a mistakeby focusing too much effort on growing … technology at the expense of its core contracting business”.During the past 4 years Brandrill invested $35 million attempting to commercialise technology for non-explosive breaking of rock. That sum is about SIX times the reported profit for the same period.Over the same period Brandrill invested approximately $13 million in the development of its SouthAfrican contracting business for the prime purposes of establishing a vehicle for the introduction of thetechnology. The Companies core contracting business reportedly “has a solid order book”. Yet thecompany destroyed its shareholder assets and more than its lifelong history of profits
by becomingdistracted by R&D and commmercialisation – areas where it lacked core competencies
.
 
Innovation is dangerous for your health! © 2002 Walter Adamson 
- 3 -
Digital Investor
– 
Business Reinvention Strategy; Commercialisation; Innovation as Change Leadership 
.The original published at:http://www.digitalinvestor.com.au/ adamson@digitalinvestor.com.au
objectives and culture and methods of the innovation industry search for a grounding, and often miss themark in the majority of corporate environments.The grounding is not in the legal department, corporate licensing, the research labs, or the commercialteams – although that is where the patent and intellectual property and licensing paraphernalia emanatingfrom the innovation industry focus their attention.It appears blindingly obvious that none of those departments or functions, unless part of research-drivencompany, are going to drive the business forward and generate “benchmark plus” wealth.
However, if thatis all the innovation industry has to sell then that is what it will sell.
And that is the fundamentalreasons they are selling solutions to the
wrong problem
– selling solutions to help companies becomeinventive or to manage their inventions and intellectual property and
not to become innovative
.
There IS a “right problem” for innovation – and a home
Yet there
is
a home for the vital message of innovation - but for some reason identification of that home isunclear in current readings. That home, and the governing framework for these components, is
in themanagement practice of change leadership
.
Innovation as strategy must beincorporated into the overarchingpractice of change leadership.
AsWilliam Pollard noted, “
without change there is no innovation…
From change,and from observing and understandingchange, comes innovation. And fromcontinuous innovation invention
 may
 arise.Thus, from the above simple notions,
emerges the framework and relationship for innovation andbetween innovation and invention for the vast majority of firms.
 The essential management practice of, and competence in change leadership builds a
platform for thedeployment of innovation skills, knowledge management skills
and tools, and gives
meaning to theimplementation of the learning organization
.The learning organization has no purpose if not to be better at changing, better than the competitors, andbetter with respect to markets and customer value and staff, for example.
Innovation is part of the framework of strategic change leadership
Therefore the key contention being made here is that innovation
methodologies, techniques & tools
arepart of the enabling kit assisting in the outcome of the
implementation of strategic change leadership
, just as knowledge management and “the learning organization” also assist and help enable the samepurpose of change leadership. These tools are part of the practice of change leadership – a core andessential practice for every successful company.The insight that innovation is part of the enabling framework of strategic change management, and that soare knowledge management and the learning organization, is important in explaining past failures. It cannow be seen why, when learning or innovation or knowledge management is promoted in the absence of ahome and framework, they fail to find root and cause, and fail to be able to deliver value. They fail because
 
Without change there is no innovation, creativity,or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable.
William Pollard, author of “Soul of The Firm” 2000.

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