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Clifford L. Spiro

From Bench
to Boardroom
The R&D
Leader’s Guide

Foreword by
William F. Banholzer
From Bench to Boardroom
Clifford L. Spiro

From Bench
to Boardroom
The R&D Leader’s Guide
Foreword by William F. Banholzer
Clifford L. Spiro
Savannah, GA, USA

ISBN 978-3-319-64154-6    ISBN 978-3-319-64155-3 (eBook)


https://doi.org/10.1007/978-3-319-64155-3

Library of Congress Control Number: 2017948759

© Springer International Publishing AG 2018


This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the mate-
rial is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting,
reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval,
electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter
developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does
not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective
laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this book are
believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors
give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions
that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps
and institutional affiliations.

Printed on acid-free paper

This Copernicus imprint is published by Springer Nature


The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
This book is dedicated to the late Henry Taube, the late Robert Gagne, Jim Comly,
Philip Kosky, Gene Kimura, Bill Banholzer, the late Herman Finkbeiner, Farhad
Mazandarany, Wayne Delker, Alex Hasson, Michael Idelchik, Bill Roe, and Bill
Noglows. This represents the complete set of immediate supervisors throughout
my professional career, and to whom I owe many of the insights and observations
presented in this book on leading innovation.
Foreword

Getting innovation right creates tremendous value—it defines who wins and
who is doomed to life as a commodity player. Wall Street recognizes this by
rewarding similar cash flows with different price-to-earnings multiples. The
degree to which innovation is executed is vital to an enterprise’s ability to cre-
ate real shareholder value and earn a return above its weighted-average cost of
capital.
This book is appropriately focuses on leading innovation rather than on
leading invention or leading R&D. Innovation embodies impact. It is common
to equate invention with innovation, but there is an important difference.
Ask anyone on the street who invented the telephone, the light bulb, the
radio, the automobile—and you will hear Bell, Edison, Marconi, and Ford.
But…none of these men actually invented these technologies. Edison did not
invent the light bulb; Ford did not invent the automobile; Bell did not invent
the telephone. So why do we associate these men with these technologies?
Because these men were innovators. They took these initial ideas and made
them practical, reliable, and affordable. They brought these ideas to commer-
cial production. They took a new technology and created something people
wanted to buy. Simply put, innovation is an invention that creates value—
that people will pay for. This does not imply invention is unimportant, but it
is insufficient to ensure commercial success.
The Chief Engineer/Technology Officer is typically the person most
responsible for creating a sustainable competitive advantage. People often
assume the CTO is just the smartest person in the function. This role requires
much more than just being smart with the right experience. Like all other
C-suite roles, success is defined as much by leadership as technical expertise.
This book, From Bench to Boardroom, is a vital resource for acquiring the

vii
viii Foreword

leadership skills unique to R&D. It covers every major topic necessary to


manage an innovation organization. From talent acquisition and onboarding,
through portfolio management, IP, metrics, etc., Dr. Spiro provides expert
advice. This is not a sterile check list for success. Using real examples from his
extensive career, Dr. Spiro illustrates his key points. This makes the book as
entertaining as it is instructive.
Appropriately, a significant amount of the book is focused on talent devel-
opment, organizational/team dynamics, and portfolio management.
Acquisition and effective use of talent is vital in every function. In technology,
you start out recruiting already behind, and it only gets worse. Less than 50%
of high school seniors have the math and science skills required to enter tech-
nical degree programs in US universities. This is not the case in business,
finance, HR, communications, or other nontechnical roles in a corporation.
This limited potential talent pool is further reduced by the fact that many new
graduates choose to avoid the rigors of a STEM (science, technology, engi-
neering, and math) education. Supply and demand principles work well, forc-
ing many companies to compete for a scarce resource, for example by
increasing wages. Entry engineering graduates typically earn 50–100% more
than business graduates. An additional leadership challenge is that the
demands of an engineering/technical education often limit liberal arts and
business exposure and its associated growth in communication skills and
emotional intelligence, leaving new graduates only partially prepared for a
career as individual contributors in a commercial organization, let alone to be
able to lead innovation. How do you hire and evaluate talent, create a learning
organization, organize to maximize output, balance long vs. short-term objec-
tives, and operate in a global environment? From Bench to Boardroom provides
essential insights to optimize scarce innovation leadership resources.
Among the most vital success factors that Dr. Spiro covers are tips to
improve communication. It can be argued communication is the key differen-
tiating factor between success and failure for innovation. It touches so many
aspects: giving feedback to employees; finding the best ideas; advocating for
high risk programs; and explaining the value proposition to customers. A
great idea is worthless unless you convince people as to why it is a great idea.
It is hard to find a good innovation leader who is not an effective communica-
tor. The same is probably true of any successful leader, but science is just so
hard to communicate to even very sharp, but nontechnical, business people.
This is not to suggest that communication is a substitute for good judgment.
To use some logical rhetoric, this is an “and function” meaning you need both
judgment and communication. Having just one is not sufficient. From birth-
day cards, weekly messages to donut breakfasts, practicing important talks,
Foreword
   ix

and leading by example, From Bench to Boardroom is full of useful tools to


excel in this vital area.
“If you can’t measure something, you really don’t know much about it” is a
common business mantra. Most functions measure quarterly results. Sales,
production, variable cost, income, hiring, acquisitions, divestiture, etc., all
can be evaluated with accuracy at a high frequency. This is not the case for
R&D. Disruptive new products take years and even decades to reach fruition.
So how should one measure R&D? Short-term-focused leaders view it as a
cost, not an investment. While it is true that within a quarter or a year, reduc-
ing R&D could improve business net income, in the long term, without
innovation, the enterprise is doomed. Being an investment does not imply
R&D should be thought of as an entitlement or obligation. Spending
on R&D is not a requirement. It is not mandated by articles of incorporation.
R&D spending is a privilege that the function earns through creating new
products and processes that delight customers enough that they are willing to
pay for them. Obviously, R&D spending is still an investment and should be
scrutinized like any other investment. In Chap. 11, From Bench to Boardroom
explores the complicated issues of metrics unique to R&D. It provides con-
crete advice on how to be an effective advocate for the function while also
ensuring productivity is a way of life. This is especially critical in today’s pub-
lic companies which are dominated by a “what have you done lately”
mentality.
Economic cycles further complicate measurements. Recessions seem to
occur regularly every 6–8 years. The natural business response to a downturn
is to temporarily reduce spending, especially on projects with longer time
frames. Why not reduce spending on something that is 3–4 years out? You
can ramp back up when times improve, right? Wrong. Start/stop approaches
to R&D destroy value. Most innovation projects will eventually pass through
a downturn. During these periods, metrics and portfolio management are
really tested and hopefully the challenged innovation leader will have read this
book ahead of time to ensure she is prepared.
In Chap. 14 Dr. Spiro reviews the benefits and risks of external collabora-
tions and acquiring technology outside your organization. This is often an
overlooked area of R&D leadership. The larger the organization, the more it
tends to be ignored. This is logical. Small companies must rely on others to
assemble all the elements of a disruptive technology. As companies expand,
they often have all the needed resources internally and reduce their external
interaction. However, there is a real risk. Even the largest companies don’t
have a monopoly on creativity. In fact, they sometime become blinded by the
x Foreword

way they have always done something. This occurred in what was GE’s
Superabrasives business.
Superabrasives are more commonly known as Man-Made® diamond and
cubic boron nitride. Chemically they are the same as those found in jewelry,
but the crystals are smaller and look like grains of sand. Everyone knows dia-
monds are the hardest material on earth. Industrially they are used for cutting
and polishing. The last time you had a cavity drilled by a dentist or a new
granite counter installed, it benefited from industrial diamonds. GE invented
the process in 1954, which uses extremely high pressures and temperature to
transform graphite—think pencil lead—into diamond. This was a break-
through and for many decades there were only two companies in the world,
GE and DeBeers, who could produce true synthetic diamonds. Man-Made®
diamonds have very reproducible properties, giving them an advantage over
natural materials. Over decades GE improved its process, continuing to file
patents as well as keep many key elements trade secrets. GE was so secretive
that visitors, including those from GE, were not allowed onto the production
floor. Since they invented the process and enjoyed a large market share GE
believed they had a sustainable monopoly on the best technology.
The diamond business, while not huge, was lucrative, eventually attracting
significant competition. It took over 40 years, but in the 1990s others started
developing the capability to produce diamonds that competed with GE’s best
products. GE Superabrasive’s first response was to increase its own R&D
efforts. Wasn’t that logical? GE invented the process, arguably had more expe-
rience than anyone else, and had access to GE’s formidable Central Research
Group. While this effort did improve productivity, eventually, the most expe-
dient solution was to negotiate with a customer/competitor to acquire their
technology. There were elements internally who advocated against acquiring
the technology license. They were biased because of GE’s prior success and
considerable experience. They wondered, “How could a small company lack-
ing GE’s experience have anything valuable or understand the production
intricacies?” This “not invented here” syndrome is very common and perva-
sive. It can cause a company to lose perspective and miss out on key advances.
We all have a degree of vanity to think we are the best. Working with outside
groups, be it universities, national labs, contract research organization, or
even customers, broadens the skills and, more importantly, gives an objective
context to evaluate and benchmark technology.
In the GE diamond case, controlling the particle size distribution of the
diamonds was a critical cost element. Customers required diamonds with a
specific size for each application. Diamonds that were too large or too small
decreased salable yield. Over the years, GE had experimented with size c­ ontrol
Foreword
   xi

and developed what they believed was the optimum procedure. After licens-
ing technology, they learned that the new process had vastly superior control
on the diamond size distribution. Ironically the method they used to achieve
this superior process control had been investigated and dismissed earlier by
GE as not viable. Had it not been for GE reaching beyond its own walls and
acquiring the external technology, they never would have benefited from the
improved particle size control. While some elements of the licensed technol-
ogy were inappropriate for GE’s equipment, others proved to be synergistic.
By combining the best of GE’s internal and the acquired external technology,
we quickly increased product quality and lowered cost well beyond what
either technology alone could produce.
In fact, a willingness to acquire external technology is actually the highest
praise for your team—it tells them that you are confident that they will be
able to leverage the acquired technology to an even greater advantage.
Let me remind you of one caution regarding university research. As Dr.
Spiro points out, there are many benefits in collaborating with academic insti-
tutions, such as access to future employees and new ideas. Leading innovation
in a commercial entity means you are ultimately responsible for creating a
sustainable competitive advantage. That usually means generating something
proprietary, whether contained in patents or trade secrets. Universities are
primarily concerned with publications, prestige, and money. As Dr. Spiro
points out, they tend to overestimate their contributions and underestimate
the cost and time to bring a product to market. As government funding is
reduced, some universities are looking to their technology transfer offices for
additional revenue. This can create real conflicts between a commercial enter-
prise and the university.
In 2011, Dow Chemical initiated a revolutionary 10-year program to fund
$250 million dollars to 11 of the premier US universities. This effort had
many expected benefits from talent pipeline development to collaboration on
disruptive new technologies. Dow paid full overhead rates and offered a novel
scheme in which universities were given a 10% bonus of unrestricted addi-
tional funds in exchange for an exclusive license to practice any new technol-
ogy that might be developed as part of this effort. The vast majority (>90%)
of university-sponsored research does not result in a commercial product, and
even those that do require 5–20 years to generate any profits. An unrestricted,
10% bonus paid at the start of a program, regardless of commercial success,
has a terrific financial return for the schools. There was also a bonanza clause
that said if sales did occur exceeding a certain threshold, addition royalties
would be paid. This is a terrific deal that most universities quickly accepted.
However, there were a few exceptions. One prominent East Coast university
xii Foreword

argued their tax-free status prevented them from accepting predetermination


of royalties. Needless to say, that institution did not participate in this pro-
gram to their detriment. The key lesson here is that universities are in a com-
petitive environment like everyone else, although they sometimes fail to
appreciate this dynamic. Technology transfer offices should help facilitate
interactions, but a few misguided institutions are arrogant and view spon-
sored research as a road to riches. Shop around. Great people are everywhere.
If there is someone with unique skills but their technology transfer office is
proving difficult, you can remind them you always have the option of hiring
their faculty member as a consultant. With consultants, you only negotiate
with the professor over intellectual property, and all funds go directly to the
professor with no overhead for the university. As long as you don’t need any
background rights, this circumvents the university from the negotiations. You
could even hire a postdoc to work at your facility under the supervisions of
the professor.
In summary, I highly recommend that active and future research directors
from all industries read this book and capture the elements most relevant for
their situation. From Bench to Boardroom will truly help CTOs maximize their
results and better prepare for an uncertain future. It is a resource that you will
return to time and time again.

William F. Banholzer, Ph.D.


June, 2017

William F. Banholzer is currently Research Professor at the University of


Wisconsin’s Chemical and Biological Engineering Department,
Chemistry Department, Wisconsin Energy Institute, and the Wisconsin
Institute for Discovery. Prior to his appointment at UW, Banholzer
served as SVP and CTO of Dow Chemical, where he managed an annual
research budget of nearly $2 billion, and where he enjoyed a remarkable
track record of success. Bill was also VP of R&D for GE Materials and
for GE Lighting. He also served as Director of Engineering for GE
Superabrasives, following an illustrious tenure at GE’s Corporate
Research and Development laboratories. Banholzer holds a B.S. from
Marquette and a Ph.D. in Chemical Engineering from the University of
Illinois. In 2002, Bill was elected to the National Academy of Engineering
and has won numerous national and international awards.
Preface

According to the Industrial Research Institute’s 2015 annual report [1], 2016’s
global R&D expense was 1.948 trillion dollars, trillion with a “t!” That strikes
me as a very big number, and something you would want to manage well.
R&D/innovation is even more important than the numbers might indicate.
The free world is only as stable as its underlying economy, and innovation is
the engine that powers its growth. Fellow researchers—please know that the
fate of the free world is resting on your shoulders. No pressure, indeed!
I personally do not believe that innovation is well-led, and I suspect that
most CEOs, CFOs, investors, and even the vast numbers of researchers who
consumed a couple of trillion dollars last year would generally agree. This book
is for all of you who want to know why, and want to do a better job of it.
Good leadership is vital for individuals and organizations to achieve growth
and success. It has oft been discussed and there are many great students and
authors of leadership principles. Some of my favorites include John C. Maxwell
[2–4] who has written no less than 65 books on leadership, Jack Welch [5, 6],
John P. Kotter [7–9], John Wooden [10], Peter Drucker [11–13], Clayton
Christensen [14, 15], Daniel Pink [16], Robert Cialdini [17], Mark
McCormack [18, 19], Dale Carnegie [20]… this list goes on and on. I encour-
age the reader to pick up several of these. A Google or Amazon search will
generate several lists of: “The Ten Best…, The 25 Greatest…, The Seven
Books on Leadership You Must Read Before 30,” and so on.
One of my CEOs told me, “Once you’ve read three of them, they are all the
same.” I disagree. I have probably read or listened to 15 of Maxwell’s books
and have gotten rich insights from each of them. Maybe my boss is a quicker
study than I am.

xiii
xiv Preface

Given the extensive literature on this all-important topic, you rightfully


should ask, “Who is this guy Spiro and what does he have to add to this
important and already vast body of work?” Fair enough.
Innovation is a small but important subset of the more generic category of
leadership, and one that I can add to from a practical perspective. Certainly
there are many aspects of leading innovation that have been examined in the
literature including Clayton Christensen’s, The Innovator’s Dilemma [14], and
Geoffrey Moore’s Crossing the Chasm [21]. These are must-reads for innova-
tors. The Harvard Business Review has dedicated articles and whole issues
toward Innovation, and Research-Technology Management is a journal whose
entire focus is R&D direction.
My perspective comes less as a formal student of innovation and its theo-
retical foundations, and more as a front-line practitioner. I did not sit in the
ivory towers of academia, but actually slogged my way through the trenches
of innovation in several industrial laboratories, and in numerous roles ranging
from individual contributor, project leader, group leader, section manager,
general manager of engineering, VP of R&D for two public companies, Chief
Technology Officer, founder and tech-entrepreneur of my own company,
consultant and innovation-career-coach, expert witness in patent litigation,
leading business development for another start-up, serving on four Boards of
Directors, and four Academic/Scientific Advisory Boards. In my career, I have
been based in the US, but with labs and employees in Germany, Japan (2),
Hungary (2), the British Isles (3), Mainland China, Finland, Singapore (2),
Korea, and Taiwan (2). During my tenure, five of these labs were constructed.
I have participated in—and consulted others over—the acquisition of tech-
nology, its due diligence, and integration. My perspective is from the innova-
tion school-of-hard-knocks, from participating in—and leading—hundreds
of individual projects.
I am very practical and tactical in this book. I explore putting together
innovation teams and project plans, keeping them on track, killing off lagging
projects when necessary, achieving results, and rewarding and recognizing the
participants. I delve extensively into the cross-functional nature of innovation
and the need for cross-business alignment to achieve success.
If you are a practitioner of innovation and want to get better at it, this book
is for you. If you are in a significant business leadership role and want to
understand why your organization’s innovation output is too low, or too slow,
this book is also for you. It is quite prescriptive, and not at all theoretical. We
explore real products and real situations.
I have written two other books, R&D Is War—And I’ve Got the Scars to
Prove It (2012) [22] and Up Yours—What to Do With an Engineering, Research,
Preface
   xv

and Innovation Career (2013) [23]. The first is a series of amusing and inter-
esting war stories of actual research projects from my career, and especially
ones that went badly awry from the many mistakes I made along the way. The
second is a career guide for innovators. This book will borrow from the other
two books, but has a very different approach that I hope you will find both
complementary and useful.
To assist the reader, I have italicized a few key phrases in the text, which
appear in a glossary at the end.
Savannah, GA, USA Cliff L. Spiro
March 2017

References
1. Global R&D Funding Forecast. https://www.iriweb.org/sites/default/files/2016
GlobalR%26DFundingForecast_2.pdf
2. Maxwell JC (1998) The 21 Irrefutable laws of leadership. Thomas Nelson Press,
Nashville, TN
3. Maxwell JC (1993) Developing the leader within you. Thomas Nelson Press,
Nashville, TN
4. Maxwell JC (2011) The five levels of leadership. Center Street Press, New York, NY
5. Welch J, Welch S (2005) Winning. Harper Business, New York, NY
6. Welch J, Byrne JA, Barnicle M (2001) Straight from the gut. Warner Books,
New York, NY
7. Kotter JP (1999) On what leaders really do. Harvard Business School Press,
Boston, MA
8. Kotter JP (1996) Leading change. Harvard Business School Press, Boston, MA
9. Kotter JP, Cohen DS (2012) The heart of change. Harvard Business School Press,
Boston, MA
10. Wooden J (2005) Wooden on leadership, McGraw Hill Professional, New York, NY
11. Drucker P (2003) The essential Drucker. Regan Books, New York, NY
12. Drucker P (2001) Management challenges for The 21st century. Harper Collins,
New York, NY
13. Drucker P (1980) Management in turbulent times. Harper-Collins, New York, NY
14. Christensen CM (1997) The innovator’s dilemma. Harvard Business School
Press, Boston, MA
15. Christensen CM (2003) The innovator’s solution. Harvard Business School Press,
Boston, MA
16. Daniel HP (2009) Drive. Penguin Publishing Group, London, UK
17. Cialdini RB (2016) Influence the psychology of persuasion. Blackstone
Publishing, Ashland, OR
18. McCormack MH (1984) What they don’t teach you at Harvard Business School.
Bantam Doubleday Press, New York, NY
xvi Preface

19. McCormack MH (1990) What they still don’t teach you at Harvard Business
School. Random House, New York, NY
20. Carnegie D (1936) How to win friends and influence people. Simon and
Schuster, New York, NY
21. Moore G (1991) Crossing the chasm. Harper Collins, New York, NY
22. Spiro CL (2012) R&D is War—And I’ve got the scars to prove it. Lulu Press,
Morrisville, NC
23. Spiro CL (2013) Up yours—What to do with an engineering, research, and
innovation career. Lulu Press, Morrisville, NC
Contents

1 What Do I Mean by “Innovation?”����������������������������������������������   1


Summary����������������������������������������������������������������������������������������   9
References�������������������������������������������������������������������������������������   9

2 Can Anyone, and Should Anyone, Lead Innovation? ������������������  11


Summary����������������������������������������������������������������������������������������  14
References�������������������������������������������������������������������������������������  14

3 Do You Have What It Takes to Lead Innovation?������������������������  15


It’s Not My Job������������������������������������������������������������������������������  15
Centralized or Localized R&D?����������������������������������������������������  16
You Need a Track Record to Have Credibility������������������������������  17
Leading Nerds��������������������������������������������������������������������������������  20
The Mistake of Promoting Your Best Scientist������������������������������  20
Summary����������������������������������������������������������������������������������������  21
Reference ��������������������������������������������������������������������������������������  21

4 Putting a Good Innovation Team Together����������������������������������  23


R&D as a Zoo��������������������������������������������������������������������������������  24
Should You Hire PhD’s?����������������������������������������������������������������  25
Rock-Turners and Worm-Pullers ��������������������������������������������������  26
Should We Assign Technicians?����������������������������������������������������  26
How to Staff Well��������������������������������������������������������������������������  27
Winnowing Down Your Candidate Pool����������������������������������������  30
Hiring Leaders/Managers��������������������������������������������������������������  32
You’ve Made a Bad Hire����������������������������������������������������������������  33

xvii
xviii Contents

Properly Onboarding New Employees������������������������������������������  34


Summary����������������������������������������������������������������������������������������  36
References�������������������������������������������������������������������������������������  37

5 Getting the Right Portfolio Mix of Projects ��������������������������������  39


Derivatives ������������������������������������������������������������������������������������  39
Platforms����������������������������������������������������������������������������������������  41
Breakthroughs��������������������������������������������������������������������������������  44
Productivity Projects����������������������������������������������������������������������  45
Firefighting/Quality Excursions����������������������������������������������������  48
New Science/New Methodologies������������������������������������������������  50
Populating Your Portfolio with People and Projects����������������������  51
Budget and Planning����������������������������������������������������������������������  56
Summary����������������������������������������������������������������������������������������  60
References�������������������������������������������������������������������������������������  61

6 Innovation Project Execution�������������������������������������������������������  63


Stage Gate or Phase Gate Methods������������������������������������������������  63
Five Great Questions for R&D Managers to Ask Every Time������  67
Almost All Projects Fall Behind����������������������������������������������������  69
Customer Delays������������������������������������������������������������������������  69
Internal Processes Causing Delays����������������������������������������������  69
Pilot Plants ��������������������������������������������������������������������������������  70
Overloading and Shifting Prioritization��������������������������������������  71
Rogue Projects����������������������������������������������������������������������������  72
Strategic, But Dumb Projects������������������������������������������������������  72
Moving Targets and Scope Creep������������������������������������������������  72
Killing Projects������������������������������������������������������������������������������  74
Success, Rewards, and Recognition����������������������������������������������  76
Summary����������������������������������������������������������������������������������������  78
References�������������������������������������������������������������������������������������  79

7 Creating a Culture of Creativity����������������������������������������������������  81


Be the Angel’s Advocate ��������������������������������������������������������������  84
Employee Swaps with Other Departments������������������������������������  85
Summary����������������������������������������������������������������������������������������  88
References�������������������������������������������������������������������������������������  88

8 Creating a Learning Organization������������������������������������������������  89


Company Internal Reports������������������������������������������������������������  89
Project Reviews ����������������������������������������������������������������������������  91
Technology Day����������������������������������������������������������������������������  92
Contents
   xix

Storytelling������������������������������������������������������������������������������������  93
Learning Directly from Coworkers������������������������������������������������  93
External Sources of Knowledge����������������������������������������������������  94
The Role of Performance Management
in Creating a Learning Culture������������������������������������������������������  95
Summary����������������������������������������������������������������������������������������  96

9 Human Resources Issues for Innovation Organizations��������������  97


Ranking and Forced Distribution��������������������������������������������������  97
Three Simple Questions for Performance Management����������������  99
Impact��������������������������������������������������������������������������������������������  99
Growth ������������������������������������������������������������������������������������������ 100
Career�������������������������������������������������������������������������������������������� 101
Raise, Bonus, and Equity Allotment���������������������������������������������� 102
Dual Ladders���������������������������������������������������������������������������������� 106
Termination of Technical Employees�������������������������������������������� 107
Layoffs/Reductions in Force���������������������������������������������������������� 109
Summary���������������������������������������������������������������������������������������� 110
References������������������������������������������������������������������������������������� 111

10 Globalization of Innovation and Leading Remote Teams������������ 113


Summary���������������������������������������������������������������������������������������� 116

11 Measuring Innovation Effectiveness �������������������������������������������� 117


Several Useful Measures of Innovation Effectiveness������������������ 119
Profit Margin������������������������������������������������������������������������������ 119
Market Share������������������������������������������������������������������������������ 119
Vitality Index (VI)���������������������������������������������������������������������� 119
Price-to-Earnings Ratio�������������������������������������������������������������� 121
Independent Market Survey���������������������������������������������������������� 121
Several Misleading Proxies for Innovation Effectiveness ������������ 122
R&D Spending as a Percent of Sales ������������������������������������������ 122
Patents and Publications ������������������������������������������������������������ 123
Industry Awards�������������������������������������������������������������������������� 124
Formulae������������������������������������������������������������������������������������ 124
How to Convince Your Business Partners
That R&D Is Worth It�������������������������������������������������������������������� 126
Summary���������������������������������������������������������������������������������������� 130
References������������������������������������������������������������������������������������� 131

12 Earning Followership�������������������������������������������������������������������� 133


Go Faster���������������������������������������������������������������������������������������� 133
Demand Rigor and Good Science������������������������������������������������� 134
xx Contents

Walk the Talk: Credibility and Safety�������������������������������������������� 135


Weekly Messages�������������������������������������������������������������������������� 136
Birthday Cards ������������������������������������������������������������������������������ 137
Donut Breakfasts �������������������������������������������������������������������������� 138
Christmas Presents������������������������������������������������������������������������ 138
Meetings���������������������������������������������������������������������������������������� 138
Open Door Policy�������������������������������������������������������������������������� 139
Your Role as Advocate������������������������������������������������������������������ 140
Building Strong Relationships with Other Departments �������������� 142
Performance Management Roll-Ups �������������������������������������������� 144
Trust ���������������������������������������������������������������������������������������������� 145
Summary���������������������������������������������������������������������������������������� 145
References������������������������������������������������������������������������������������� 146

13 Patents and Intellectual Property�������������������������������������������������� 147


The Decision-To-File Process�������������������������������������������������������� 149
Some Things You May Not Know
About the Patenting Process���������������������������������������������������������� 151
Infringement���������������������������������������������������������������������������������� 152
Patent Trolls ���������������������������������������������������������������������������������� 153
Theft of IP�������������������������������������������������������������������������������������� 153
Other IP Protection Tactics������������������������������������������������������������ 155
Summary���������������������������������������������������������������������������������������� 155
References������������������������������������������������������������������������������������� 155

14 Acquiring and Integrating Technology ���������������������������������������� 157


Buying Technology������������������������������������������������������������������������ 157
Mergers and Acquisitions (M&A)������������������������������������������������ 159
Summary���������������������������������������������������������������������������������������� 161

15 The C-Suite, Boardroom, and Beyond������������������������������������������ 163


The Leadership Team�������������������������������������������������������������������� 166
Board of Directors ������������������������������������������������������������������������ 169
Investment Community������������������������������������������������������������������ 170
You’re a Director �������������������������������������������������������������������������� 171
Summary���������������������������������������������������������������������������������������� 172

16 Closing Thoughts�������������������������������������������������������������������������� 175


The Four E’s���������������������������������������������������������������������������������� 177
References������������������������������������������������������������������������������������� 184

 lossary ���������������������������������������������������������������������������������������������� 185


G
About the Author

Cliff L. Spiro was born in the Bronx in 1954 and grew


up in Willoughby, Ohio. He received a Bachelor of
Science degree in Chemistry with honors from Stanford
University in 1976. In 1980, Cliff was granted a Ph.D.
in Chemistry from Caltech where he shared the Herbert
Newby McCoy prize for the top thesis in chemistry and
chemical engineering. In 1980, Cliff joined GE’s
Corporate Research Department in Schenectady, NY,
where he worked as a research scientist and manager for
15 years. His research included projects in energy and
fuels, synthetic diamonds, and advanced metallurgical
and ceramic coatings. In 1995, Cliff transferred to GE Silicones where he led the sili-
cone rubber R&D section. In 1988, he was named General Manager of GE’s Halogen
Lamp Engineering Department. In 2000, he was drafted to lead the due diligence
and integration of Honeywell’s materials technology segment into GE, an effort that
was eventually thwarted by the European Union’s antitrust commission. In 2001,
Cliff left GE to become VP of Research and Development for Nalco, a world leader
in water, energy, and paper chemicals, where he led a global staff of 700. After a pri-
vate-equity takeover in 2003, Cliff left Nalco to become VP and eventually CTO of
Cabot Microelectronics, the world leader in CMP—Chemical Mechanical
Planarization—a critical process in the production of leading-edge semiconductors.
While at Cabot Microelectronics, he helped establish new labs in Japan, Taiwan,
Singapore, and Korea. Cliff left Cabot Microelectronics in 2011 to pursue writing,
speaking, offering innovation workshops, consulting, career-coaching, and serving
on corporate and academic advisory boards.
Cliff holds 21 US Patents and has published and presented well over 100 technical
papers to international audiences and universities. He is the author of R&D Is War—
And I’ve Got the Scars to Prove It (2012), a collection of R&D war stories and lessons

xxi
xxii About the Author

learned, and Up Yours—What to Do With an Engineering, Research, and Innovation


Career (2013), both from Lulu Press.
Cliff has served on five corporate boards of directors: Maxdem, Inc. of Duarte,
CA; The Mississippi Polymer Technologies Corporation of Bay St. Louis, MS;
Strategic Diagnostics (SDIX- NASDAQ) Corporation of Newark, DE; Araca Inc. of
Tucson, AZ; and Entrepix Medical of Tempe, AZ. Cliff has served on three academic
advisory boards at the University of Chicago, Northwestern University, and the
University of Arizona, and currently serves on the advisory board of NanoTerra. Cliff
also served for 6 years on the Naperville United Way Board of Directors, and was
elected Commissioner of Niskayuna Fire District #2 where he served for 2 years.
Cliff was a volunteer firefighter at Niskayuna Fire District #2 and is currently a
volunteer firefighter at the Southside Savannah Fire Department, Skidaway Island,
Savannah. He has two grown children, four grandchildren, and lives with his partner,
Linda Artley, in Savannah, GA.
1
What Do I Mean by “Innovation?”

Just so we are all on the same page, let’s make sure that my definition or
description of innovation fits with yours. I can tell you that this isn’t that
simple of an exercise, especially when you are being measured on innovation
and there is conflict over what gets rewarded. I’ll give some examples in a
moment, but let me start with my most generic definition.
To me, an innovation is a product or service that is new and/or improved, that
creates more value for a customer, and that successfully enters the marketplace.
When I say the word “Innovation,” you probably think of big, bold, obvi-
ous world-changing innovations such as Apple’s iPhone, iPod, iPad; Google’s
search engine, eBay, PayPal, Facebook, Oracle, Cirque du Soleil, maybe the
suite of 3M’s or GE’s vast product portfolio, Boeing’s 777, Toyota’s Prius or
Chevy’s Volt? The big stuff is easy to grasp and is highly visible. These are some
of the home runs of innovation, and my guess is that you would dearly love
to be responsible for finding and delivering the next one.
There are also countless examples of less visible “singles” in innovation, and
while it is easy to forget about them, the lion’s share of effort, and maybe even
impact, belongs to this class. Perhaps you don’t even consider them as innova-
tions—just tweaks. I hope, in the next few paragraphs, to convince you oth-
erwise. And looking ahead to Chap. 5, we will examine an innovation portfolio
that includes a mix of simple derivatives such as line extensions, gap fills, and
small modifications to your current portfolio of products in order to meet
changing customer, supplier, and regulatory changes. We will also look at
platforms that have step-out performance changes that allow you to leapfrog
your competition in existing markets. Finally, we will look for home-run
breakthroughs that create new markets and step-out growth opportunities.

© Springer International Publishing AG 2018 1


C.L. Spiro, From Bench to Boardroom,
https://doi.org/10.1007/978-3-319-64155-3_1
2 From Bench to Boardroom

Yes—these are all innovations in my book, but there are still more to consider.
Let’s look more closely at some of the specifics in the definition. You may
know that for an invention to be patented in the US, it must be new/novel,
generally an improvement over existing products/services, and not obvious.
Innovations are not the same as patents. Many innovations are completely
obvious with ample prior art. So what, as long as it sells?
I use the expression “new and/or improved” to allow for tremendous breadth
in the definition of an innovation. Let’s consider a product that you currently
manufacture. Perhaps it is a system such as a car or plane, a subsystem such as
a transmission or clutch, or a material such as a compounded rubber or com-
posite. It seems perfectly obvious to me that it is desirable to make any one of
these products cheaper. After all, if you can charge the same for the cheaper
model, you get more profit. If you can charge less by passing the savings on to
your customer, you can grow your market share or grow the overall market, or
at least, you can maintain your share or not slip faster or further. In any event,
I hope you and I are in broad agreement that making anything cheaper is an
improvement. But is it an innovation?
Simply making something cheaper is often outside the scope of patentabil-
ity, but to me, it is very much an innovation, and probably represents the
single largest fraction of all classes of innovations and associated activity when
viewed in aggregate.
Let’s consider the efforts required to make something cheaper. In order to
cut costs, we need to substitute the existing material and design with some-
thing cheaper. This isn’t as easy as it might seem. Let me illustrate with a few
examples from my past that went very badly.
A minor disaster occurred once when my company manufactured a chemi-
cal formulation used in semiconductor processing. Semiconductor manufac-
turers are extremely uncompromising regarding any changes in their process,
and have rigorous “significant change” and “copy exact” review procedures.
Making the process cheaper is their raison d’être, insofar as Moore’s Law requires
that each biennial generation of processor or memory chip doubles in perfor-
mance and halves in cost, a law that has held up for 40+ years. Chipmakers
are really good at cutting costs while improving performance.
Depending on the complexity of the chip, for example, a relatively simple
memory chip that stores photographs, compared to a processor chip used in
high-end computation, there can be a couple hundred on up to over 500
distinct manufacturing steps commencing with the production of silicon
metal through to the final assembly and packaging of the processor. If you are
unfamiliar with the concept of rolled throughput yield, let me quickly summa-
rize that if each step doesn’t run perfectly, tiny losses add up quickly. In the
example of the chip, if each of the 500 steps yielded 99% successful product,
1 What Do I Mean by “Innovation?” 3

by the time you finished making say 10,000 chips, only 6 would work! Yipes!
No wonder they take “significant change” and “copy-­exact” religiously.
In this particular example, we happened to use 99% purity ethanol in one
of our process steps, and someone on our supply chain team found a cheaper
version of 99% ethanol. Surely this is no innovation, right? Wrong! It turned
out to be a disaster for our customer, not because of the 99% ethanol, but
because something in the 1% left over caused one of their process steps to go
awry and led to a yield loss. At the time, this was considered to be so minor a
change that we took the Nike approach: “Just Do It.” We didn’t tell anyone at
the time, figuring this was a no-brainer, and it wasn’t until the customer came
back screaming, “What did you change?” that we even discovered the change
ourselves. I can assure you, we never made material substitutions like that ever
again without fully clearing it with the customer and thoroughly evaluating it
before implementation.
So by my book, this simple solvent substitution is still an innovation
because of the extreme sensitivity of the process to minor but perhaps obvious
changes in order to reduce cost. After all, someone had to identify a new and
cheaper source of the raw material, and someone else had to go through a
careful protocol of vetting it in the lab and fab before it could have been
implemented. This is a real work and requires expenditure and time. Moreover,
the net benefit of making the change needs to be compared with the full cost
of vetting to see if the qualification protocol eats up all the benefits. It is an
innovation if it ends up being used, and adds value.
The second case of a simple cost out is more insidious. Like human hands,
certain molecules also come in left-handed and right-handed versions, and
they actually rotate polarized light in opposite directions. They are called
enantiomers and nature often produces pure versions of left- and right-handed
enantiomers in order to fit into very precise binding sites in the complex folds
of proteins. Generally, synthetic chemical processes to manufacture the same
molecule often yield 50–50 mixtures of left- and right-handed molecules, the
so-called racemic mixtures. This science of left- and right-handed molecules is
called “stereochemistry,” in case you’re interested.
In one of our products designed for the hard disk drive industry, we had
developed a product using a pure version of a particular enantiomer; sorry I
forget if it was the left- or right-handed version. One of our purchasing people
discovered a much cheaper racemic 50–50 blend of the raw material, and our
production folks did a quick-and-dirty test on the product to see that it met
the catalog specifications of our product and that it worked the same in our test
facility which more-or-less replicated the customer’s process. Both the spec and
performance were met, the substitution was made, and as you might suspect,
4 From Bench to Boardroom

it failed miserably at the customer. There is often a significant difference


between meeting a product specification versus actually working in an applica-
tion, and there is a huge difference between “more-or-less” and “quick-
and-dirty” replicating a customer’s process and actually running a customer’s
process reliably, day in, and day out. We lost our customer’s trust and business
for quite a while by failing to appreciate this.
So once again, I stand by my definition that even an obvious and simple
material substitution to produce a cheaper final product is an innovation. And
frankly, had the racemic mixture worked as planned, we would have enjoyed
several hundreds of thousands of dollars of increased profitability, while one
of our Sourcing people would have been a hero and gotten a big fat bonus
check.
A third example of an innovation, in my opinion, may seem even more
controversial, yet turned out to require far more effort and innovation than
our business managers ever suspected when they took on an assignment over
my vehement objections.
One of our customers who manufactured silicone rubber gaskets for auto-
motive engine sealing had been buying raw materials from GE Silicones, my
employer at that time. They purchased from us the silicone gums, the fillers,
the pigments, and additives, and using their in-house recipes, compounded
their own rubber which they subsequently molded into gaskets. One day, they
simply decided that, rather than making their own compounds, they would
give the recipes to us and we would do the compounding for them. After all,
they were in the molding business and were good at it, and we were in the
compounding business and were good at it—why not? Oh, and they wanted
the compounded rubber for a lower price than they were paying for the raw
materials! I didn’t like the idea of us doing more work and getting paid less,
but our commercial leaders were afraid that if we didn’t comply, the gasket
manufacturer would go elsewhere with their business. Frankly, given the huge
requalification costs, I knew this was a bluff and fought the project vehe-
mently, but I was overruled and we took on the project.
Surely this is not an innovation, yes? After all, they manufacture the stuff
and already have the recipe and all we need to do is copy it and make it our-
selves. Ahh, what looks so simple on paper is far from reality for several rea-
sons. To begin with, if we simply followed their recipes, the products would
fail to meet their own specifications. Specifically, once the rubber was com-
pounded, for quality assurance, we would routinely cure it and test it for
properties like elongation, compression, tear strength, and so on. Typically,
about a third of the time, the rubber compounded as per the recipe would fail
one of the tests. The customer’s practice was to throw the out-of-spec batch
1 What Do I Mean by “Innovation?” 5

back into the mixer and add some stuff—gum, filler, or additive using rules of
thumb they had developed over the years—then test it again after a few hours
of mixing. Most of the time, the adjusted rubber would meet spec and they
would use it to produce gaskets for a few weeks until they ran out of it and
had to make it again.
Since our mixers were much larger, and were fully booked weeks in advance,
we did not have the luxury of stopping, dropping, testing, tweaking, and
remixing iteratively until the rubber eventually worked. This would have been
a cost and logistical nightmare. And we weren’t about to scrap a third of our
product because it failed to meet spec.
Moreover, silicone rubber, as manufactured, has the consistency of a Tootsie
Roll—gummy but malleable enough to squish into the shape of a gasket in a
high-­pressure molding machine. But after a month or so, a natural process
known as crepe hardening takes place in most silicone rubber formulations,
and the Tootsie Roll turns into Peanut Brittle which crumbles into dust when
put into a mold. Since the molder made small batches on site that were con-
sumed in a few weeks, this rarely happened to them, but since we made much
larger batches off site, adding days or weeks to the fulfillment cycle and weeks
or months to its shelf life, crepe hardening was inevitable. Once the batch
crepe-hardened, it could not be reworked.
In other words, what appeared to our commercial team as simply copying
a known recipe turned out to be a major effort of 10+ man years to reformu-
late to meet specs, achieve acceptable (but not great) yield, and sufficient
product shelf life. You better believe this was a major innovation on our part,
and ended up costing us a lot of money both directly, and in opportunity
costs as my development resources were occupied on this loser project instead
of working on winners for the electronics, consumer goods, and health care
markets.
Yes, 20 years later, I am still angry! Time to get over it, Spiro.
Certainly less controversial, regarding the definition of an innovation,
would be a design change that affords equal or better performance at a lower
cost. This could take the form of part redesigns and substitutions that have
different shapes and sizes, or even more simply, a subassembly that requires
fewer final assembly steps. Without a doubt, making a truck bed out of alu-
minum and a composite car door is replete with innovation. Just think of all
the new manufacturing processes, design, performance, and safety testing
which are required for a major change like this.
Would you say a simple pigment change in, say, a paint or caulking com-
pound is an innovation? I do. I know it seems so simple, and yet, someone needs
to select the pigment, evaluate it for performance and durability, someone else
6 From Bench to Boardroom

needs to write the specifications, another to find multiple sources, and of course,
there is the production wheel, the cleanout process, the material safety data
sheet—all requiring lots of work on the part of the innovators. What seems so
simple—a mere stroke of the pen by someone in the marketing department on
the 14th floor of a skyscraper at headquarters, and we add Prussian blue to our
line of exterior weatherable paints—turns out to be not so simple. There is
always a fair amount of work even if it all goes according to plan, and a major
disaster including excursions, field failure, and litigation can result when it all-
too-often goes awry.
I think I have belabored the point enough that even the most simple of
improvements take a lot more work than is obvious or apparent and that,
when done poorly, innovations like these can come back and bite you.
Now let’s look one more time at the definition of innovation, a product or
service that is new and/or improved, that creates more value for a customer, and
that successfully enters the marketplace. I lastly want to focus on the “success-
fully enters the marketplace” clause.
To me, there are lots of inventions. There are over nine million issued US
patents for all sorts of inventions (I personally hold 21) and this represents a
very small fraction of the total number of inventions. According to Stephen
Key, writing in AllBusiness [1], 97% of all patents make no money. This doesn’t
surprise me and I would even guess the real figure is higher. Ideas are a dime a
dozen. Edison told us that innovations are 1% inspiration and 99% perspira-
tion. Folks—it is really, really tough to bring a new product to the market place.
If you aren’t convinced yet, by the time you have finished this book, I’ll make a
believer out of you. I liken the process to salmon swimming hundreds of miles,
upriver, through countless hazards and over dams, rapids, and levees to spawn.
A large salmon may lay 17,000 eggs, but only handful hatch, and it is consid-
ered a good production if merely three make their way to the ocean, live a full
enough life, and eventually return to their spawning grounds [2]. New product
development is just like that, only harder! And yet, the shelves of Walgreens and
Home Depot are replete with products, many of them labeled “New and
Improved,” every one of which has run the gauntlet from ideation to develop-
ment, prototyping, testing, financing, manufacturing, marketing, and sales.
Wow! A miracle! It is easy to believe that the plethora of products suggests that
getting them to the shelves is somehow easy. But behind each product on the
shelf is a team of successful innovators who are modestly happy and perhaps
well-rewarded, but there may also be a graveyard of innovators who missed the
window, came up short, and who got beaten up or put out on the streets. I hope
you think about that the next time you go shopping. One of my consulting
associates invented the drawstring trash bag, a product I just love, and every
1 What Do I Mean by “Innovation?” 7

time I take out the trash, I smile and say to myself, “Thank you Michael [3].”
Sadly, most inventors remain nameless, faceless, and unappreciated.
Because of the huge barriers to commercialization, I define an innovation as
something that has successfully entered the marketplace. Whether it stays there
is another thing altogether. According to Robert Cooper in Winning at New
Products [4], even after running the gauntlet to commercialization, fully a third
of new products fail to recover their development costs. Still, who am I to
declare than a Ford Edsel or Chevy Volt wasn’t/isn’t an innovation, just because
it may have failed to recover its costs. I’m comfortable that to be called a
successful innovation, it merely must reach the marketplace, but if you want to
take it further to require financial success and longevity, go for it.

To summarize, in my definition, virtually everything that is an item of


commerce anywhere represents an innovation, or more likely, several
innovations.

OK—one last example. At GE Lighting, we really had a doozy of an


­innovation called the Halogen IR lamp. In a halogen lamp, there is a tiny
pressurized capsule of quartz called a filament tube that contains the tungsten
light bulb filament, along with an inert gas and a small amount of bromine
that serves to keep the tungsten from blackening the bulb. In an engineering
tour de force in the 1990s, GE engineers figured out to how to produce a para-
bolically symmetric filament tube coated with dozens of alternating layers of
transparent metal oxides with carefully prescribed thicknesses (to the nearest
hundred atoms or so), and each layer with a different index of refraction. The
net result was to create something called a dichroic mirror which allowed only
visible light to transmit the coated tube, with the infrared heat radiation recy-
cled back to the filament. The lamp was so energy-efficient because the mirror
effectively recycled what was normally 90% waste heat and turned it into vis-
ible light. Though costly, it paid back in electricity, three times the retail pur-
chase cost in 2 years or less. It won Popular Science’s prestigious Best of What’s
New Award, and it was over 10 years before the competition had anything
like it. There is no doubt that this was an innovation by anyone’s definition.
A decade after the Halogen IR’s introduction, I became the GM of Halogen
Engineering at GE’s famous NELA Park in Cleveland, Ohio. Most of the time
when we introduced a new lamp, we simultaneously developed 130, 120, and
110 volt versions for domestic and foreign markets. People who live very close
to power plants require the 130 V version because the 120 V lamp will burn out
8 From Bench to Boardroom

too fast, and in Japan, 110 V is more common. Some of our contractors were
placing the 130 V lamps in 120 V sockets in very high ceilings such as in
churches and foyers. Granted the lamps put out 10% less light with a slightly
yellower color, but most people can’t notice the difference, and the 130 V lamps
last twice as long as 120 V lamps because they are down-volted.
A couple of innovators on the technical and commercial side decided that
the longer life would be something we could sell, and so they packaged the
130 V lamp in a 120 V package, changed the ratings for lumens, watts, and
life. As you might suspect, the lumens-per-watt energy-efficiency rating went
down, but the life of the lamp doubled. In 2000, we introduced the GE
Halogen UltraXL (extended life) lamp (Fig. 1.1)—and it sold like hotcakes,

Fig. 1.1 GE’s Halogen UltraXL lamp


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