Home > Articles > Software Development & Management

Making Sense of Innovation Fads and Fashions

With the recent bout of Innovation-Mania, it's easy to become swept up in the frenzy and innovate yourself to death. This chapter charts the rise of the drive to innovate, and what forms this fad has taken over the past few decades.
This chapter is from the book

"Innovate or die!"

—Various

Innovate and die. In evolutionary terms, that's usually what happens. Most mutations fail. Few truly new things survive, and even fewer of them thrive. This is just as true in the business world as it is in biology. The record of various innovation fads and fashions during the past few years certainly is consistent with this harsh fact.

For much of the past decade, however, management gurus, media, and markets preached a different doctrine. It was a "cult of innovation at all costs," an unquestioning, single-minded belief in the power of innovation above all else.1 The risks of innovation seemed passé. The need for novelty took precedence. The real risk was not to innovate. Managers became mesmerized by the passionate but also threatening mantra of "Innovate or die!" Survival was a compelling enough reason to take heed of their urgent call to action. But beyond simple survival, the innovation enthusiasts promised much more.

It was a New Economy. The Old Rules did not apply. To the quick and bold pioneers of innovation would go faster and more fabulous riches than anything the traditional, tired ways of doing business could offer.

Innovation Excitement, Then Disillusionment

Swayed by this powerful mix of fear and fortune, many executives and entrepreneurs frantically rushed to innovate almost literally at any cost. A great number of companies seriously stumbled or even outright failed in the process. Their big, rushed bets on raw technologies and unproven business models did not pay off. Victims of this innovation obsession included enormous, globe-spanning, blue-chip corporations and new technology startups alike.

It's difficult to overstate how powerful and pervasive the innovation mania was during this time. It's useful to briefly reflect and recall the prevailing spirit. Something more than a bit of infectious zeal was going around. In retrospect, it all seems a bit surreal or unreal, even though we all experienced and participated in it just a short time ago. What were we thinking? How could all this possibly have happened? For many investors and employees, much of it probably does seem like a bad dream. In each case, the new theories and new models for innovation promised much, yet disappointed—or even worse.

The World's Most Innovative Company

Remember, for example, when Enron was the innovation exemplar, the exalted leader of a new breed of corporate innovator? From 1996 through 2001, Fortune magazine had proclaimed Enron the "Most Innovative" company among all its Fortune 500 peers. Each year, Enron placed far ahead of even hi-tech powerhouses such as Intel, Microsoft, and Cisco Systems. Fortune explained, "If any Old World company could thrive in the Internet era, it's this one."

Enron was also featured as the new model for corporate innovation in innumerable consultants' how-to books, academics' business-school case studies, and business-media cover stories. Enron was an old-line company that had become a master of corporate transformation and radical innovation. It was "leading the revolution." Management gurus noted Enron's "almost magical mix of entrepreneurship inside with the ability to leverage enormous scale and discipline to get things done." It was successfully pioneering new ventures and entirely new industries, from energy trading to broadband to weather derivatives. In just a few short years, Enron soared from a sleepy gas-pipeline company to one of the largest companies in the world, with a play on almost every new business imaginable. One book published in 2001 boasted that, "[T]he Enron model was New Economy before the New Economy got started."

How did Enron manage to innovate so much so quickly and successfully? Its internal "wars for talent" and powerful rewards and incentives (e.g., generous awarding of phantom stock and options to new venture leaders) fueled creativity and ignited its high-octane brainpower. These novel human resource practices let it attract and retain top innovative talent for the most promising new ventures. Enron's liberating organizational structures (e.g., autonomous corporate venturing units, novel partnerships and alliance structures, carve-outs and spinouts) also were featured as another key innovation enabler. These nimble and flexible structures freed new ventures from the corporate bureaucracy, giving them unprecedented entrepreneurialism. Likewise, Enron's cutting-edge financing, valuation, and risk management techniques (e.g., "real-options" approaches and "mark-to-market" accounting) were featured as powerful leverage for innovation. This sophisticated financial engineering let Enron more aggressively fund and better value and vet new ventures. All these tools and tactics were featured as templates for other would-be corporate innovators to follow—or else be left behind.

Of course, in retrospect, all these factors were subsequently cited as precisely the key contributors to Enron's rapid collapse and massive bankruptcy. Enron was innovation out of control. Any accounting gimmicks were little more than a sideshow to cover up the true underlying problem—its failed innovation strategies, structures, and processes.2

Not-So-Disruptive Technologies

The startup world offered other innumerable examples of innovation mania. Few paused to doubt that the Internet was a pervasive "disruptive technology." The web changed all the rules and threatened to transform and disrupt almost every aspect of commerce. But the imminent threats to incumbent retailers looked like fantastic and certain opportunities for e-commerce upstarts.

Online grocer Webvan was one of the best-funded and best-staffed new business ventures in history, for example, and was equipped with all the latest and greatest technology. Its management and technical talent came from some of the biggest and best global information-technology companies. It was funded and advised by some of the most successful venture capitalists (VCs). Even after burning through $1 billion in capital, however, Webvan still could not figure out how to deliver a gallon of milk to customers' doorsteps efficiently, effectively, and profitably. Webvan went bankrupt and liquidated just two years after its founding. The number of other failed e-commerce ventures, some of them also spectacular flameouts in their own right (from eToys to Pets.com), is too long to list. Disruption came not to the incumbents, but to the upstarts.

Incubating Half-Baked Ideas

The explosion of the much-heralded incubator concept was another cause and symptom of the innovation craze. Incubators were neither typical corporate innovators, nor typical startups, nor were they simply financial investment vehicles like a venture capital fund. Instead, the incubators were a unique, New Economy hybrid designed to offer both the scale and scope advantages of a larger parent company along with the best nimble, flexible, and entrepreneurial features that startups had to offer. The incubators were a new organizational form made especially for the Innovation Age.

Incubators typically offered their incubees a wide variety of different types of service and support (for example, office space, lab space, IT resources, internal consulting, and other types of shared services). Moreover, by being part of a larger parent that could raise capital and trade as a publicly held company (something a fresh young startup could never do on its own), each of the incubees could get more ready access to preferential funding and, thus, a powerful financial head start. The concept of the incubator was to be an innovation enhancer—bettering the odds of success—as well as an innovation accelerator—powering ideas to market faster in an era in which speed mattered most.

Idealab, CMGI, ICG, and U.S. Technologies were among some of the better-known incubator names. They raised billions in capital because the concept just seemed to make perfect common sense. Combine the best of big and small: public company and startup. Provide seed capital and follow-on funding. Share services, support, and expertise among the incubees and thereby realize powerful synergies.

The Economist succinctly captured the tremendous allure of the incubator model:

The very notion of a business incubator is intoxicating. Just imagine a floor or two of buzzing proto-companies, bursting with potential, sharing space, services, and ideas under the tutelage of well-connected industry experts. The time, too, is right: an explosion of Internet startups needing help meets a chronic office-space shortage. No wonder the past year has seen the launch of more than 300 Internet incubators, two-thirds of them in America—a rate of six a week.3

Despite its compelling intuitive appeal, in practice, the concept did not work so well. The ambitious and newfangled incubator model seemed to offer little advantage over the more well-established and well-defined venture-capital approach. What's more, the complexities of the incubator concept—being neither pure investment vehicle, pure startup, nor a real operating company—brought into play all sorts of heightened costs and tensions. Complicated legal, financial, and organizational issues soon followed. Rather than being advantaged, member startups became crippled by their incubator affiliations. Lawsuits from investors alleged conflicts of interest or worse (e.g., Idealab, U.S. Technologies). Numerous incubators went bankrupt or simply closed up shop.

Remnants of the grand incubator concept survived, but in much less ambitious forms. Non-profit and university incubators continued, and even increased, their modest operations. But most of the for-profit incubators survived only by morphing into more traditional VC firms and much simplified financial-holding companies, or by trying to morph into workable businesses that offered basic office space and services to startups.

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020