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This chapter is from the book

The Allure of Innovations in Innovation

The question remains: Why did so many good managers chase after what, at least in retrospect, seem to have been so many questionable ideas? Why did so many great companies pursue with abandon each of the latest and greatest innovation fads and fashions? Whatever their flaws in practice, there were at least three key reasons why all these "innovations in innovation" gained so much interest and momentum.

First, and most simply, innovation really had become more important than ever. It wasn't just a slogan or empty words. Heightened global competition meant that established industry leaders were pressured to generate new low-cost ways to compete or ever-more differentiated products and services to preserve their margins. Product lifecycles had accelerated, meaning "new and improved" had to come more often. Paradigm-shifting scientific breakthroughs in computing, communications, and life sciences, among other areas, started to transform the fundamental processes and products of invention in key industries. Radical new technologies threatened to upset existing business models and alter fundamental industry economics. The pressure for greater and faster innovation became a more central fact of business life. Each innovation fad and fashion, in turn, flourished as companies anxiously sought new and improved means to this end.

The second reason each idea proved so appealing is simply because the old model for innovation sputtered; it was no longer working. Everyone knew it. Everyone felt it. It was on the front page of the paper every day. The classic, brand-name, established success stories of yesteryear—truly original and enormously successful innovators in their own right and time—seriously stumbled. R&D labs that had been the envy of their global peers simply no longer produced. From IBM to GM, from AT&T to P&G, the products and services of former technology and market leaders appeared to grow ever-more stale and tired. It seemed like almost every blue-chip company was either reeling from slumping sales or was threatened by some new upstart. Established companies wanted to escape their musty legacies. They needed renewal. Corporations sought a new model for innovation, especially an alternative to their traditional and bureaucratic R&D approach.

The third reason all these innovation fads and fashions proved so alluring is because each really did offer some novel and valuable contribution. Unfortunately, the limitations and qualifications of each approach usually garnered a footnote at best. Executives and entrepreneurs consequently rushed to adopt each new tool or tactic with few inhibitions. Little thought was given to the critical details of application (when, why) or execution (exactly how). Despite these difficulties in application and execution, each concept did offer some fresh and useful new thinking. They were all useful additions to the innovation toolbox. As with any tools, however, their effectiveness depends on the judgment and skill with which they are used.

Mixing and Matching Tools and Tactics

Our intent, therefore, is not to debunk or discard any of these approaches to innovation. Indeed, our goal is to help rescue the good ideas from being needlessly discarded. Just as there are value stocks, there are value ideas. Value stocks get their value precisely because they are out of favor, yet they retain substantial, enduring intrinsic worth. Likewise, we believe all these innovation tools and tactics, despite having lost their initial luster, offer real, lasting, and essential advances in thinking about innovation.

However, none is the singular solution so often hoped for. No one approach can ever be a one-size-fits-all or cure-all solution for the variety of innovation problems confronting different firms in very different circumstances. Even a single given firm typically is a diverse portfolio of ventures, in different industries and at different stages of their respective lifecycles. Yet, what most often has been prescribed are universal templates extrapolated from a single anecdote or idiosyncratic exemplar company. Managing innovation frequently became driven by the pursuit of some superlative best practice, without considering the context and limitations of the particular approach. If everything could be reduced to a simple formula, innovation would be unremarkable and routine. It's clearly not.

Our practical approach is that context and contingencies matter. Antibiotics are great for fighting bacteria, but they won't do anything to kill the common cold virus. A glass or two of wine per day might improve your health and extend your life span, but binge drinking most certainly has the opposite effect. Innovation fads and fashions tended to ignore such judgment, selectivity, and balance.

What's more, each of these innovation prescriptions had a core problem. They tended to address superficial symptoms instead of underlying causes. The patient was left temporarily feeling better even as his fundamental health deteriorated. Future chapters discuss this critical core problem in greater depth and detail. It is a central issue for diagnosing what went wrong with the application and execution of each new idea, and for building and implementing a better model for innovation.

Innovation is a strategic and organizational problem as much as a technical or creative one. This is another key lesson of the past few years, and a central message of this book: The how matters as much as the what. Even Enron and Webvan had some good ideas. But their timing and execution certainly lacked. The message is that how a company chooses to pursue innovation has profound implications for its success. The choice of strategy and organization (e.g., venturing or spinout, alliance or acquisition, etc.), and its execution, determine whether a good idea flourishes or fails as much as the inherent worth of the idea itself. The how determines whether questionable ventures get terminated in good time and good order, or are instead allowed to swell to become enormous boondoggles. Quite simply, success or failure depends on exactly how a company chooses to pursue innovation as much as on the basic idea or invention itself.

Venturing, licensing, alliances, acquisitions, and spinouts therefore all have critical roles in the innovation mix. Knowing when and how each has its place in the mix and when and how to implement each is the critical knowledge. Learning from the ups and downs of each innovation idea requires more critical thinking about when and how these models apply and—just as importantly—when and how they do not. Applied for the right purposes, at the right time, and in the right ways, all of these tools and tactics can help build a more comprehensive innovation strategy and robust overall innovation portfolio. Rather than chasing the latest "magic bullet" or panacea, managers must understand all the different tools available in their innovation arsenal, when and how to use them, and how to combine all of them for maximum effect. The end game is to be able to assemble and juggle a more dynamically optimal mix of all these innovation options to create and capture value on an ongoing basis.

Much like assembling a good investment portfolio, superior performance does not come from any single innovation approach. Instead, the enduring worth—a successful, sustainable, value-creating company—comes from assembling and managing the complex and evolving mix of tools and tactics necessary to bring innovation to fruition. This is a critical feature of new and emerging models for innovation, a subject to which we return in the final chapter.

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