Tech Companies: Inventor, Innovator, or Neither?

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Companies often talk a good game about innovation. Usually they talk better than they act. Has anyone ever heard anyone say that innovation was bad? Of course not, but the same people that pay lip service to the creative process are often the same ones who create financial and organizational disincentives to the process. It’s sort of like what the federal government says – and does – about alternative energy: politicians talk a good game but haven’t raised spending on the problem in years.

There’s an important distinction among invention, innovation and commercialization that we should acknowledge.

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Invention occurs in garages and large corporate R&D shops: IBM and Microsoft will spend a combined $15+ billion on R&D in 2007. Venture capitalists invest billions of dollars every year in start-up businesses built on new digital technology. Invention requires risky investments – almost speculative investments – in technologies that may or may not mature enough to get them to the next innovation segment of the value chain.

Innovation builds on invention on its way to commercialization. It involves the development and construction of a product or a service. This segment includes prototyping and pilot applications. The purpose of innovation is to calibrate just how solid the inventive foundation on which the product or service is built really is. Real money is spent here to develop a product or service and prepare it for the marketplace.

It’s important to note that the invention-to-innovation process is not always owned or managed by the same company. In fact, this is where major interruptions in the value chain often occur. Some companies, like Microsoft, are as good (or better) at innovating as they are at inventing. Cisco acquires a lot of its inventions from which they innovate new products and services. Some companies are better at innovation than they are at invention – and vice versa. The skill sets are different and often distributed across several companies, consultants and even intellectual property (IP) lawyers. Prototyping is fundamentally different from manufacturing.

Other skill sets are required to fully commercialize technology. The third segment of the value chain requires effective distribution, sales and support. Some companies are better at packaging products than they are at innovating them, just as some companies are better at sales than they are at marketing. Commercialization should be the end result of successful innovation, and successful commercialization results in a solid ROI.

So where is your company on this invention–innovation–commercialization continuum? Put another way, what do you do well – and what should you do well?

Do companies usually know what they do well and poorly? Not as often as they should, that’s for sure.

The model I like the best is Cisco’s acquisitive approach to “new.” They buy new. Of course they spend heavily on R&D but they also plug their technology holes with acquisition after acquisition. Microsoft continues to confuse me: they spend a ton on R&D and yet struggle to invent whole new computing models and technologies. IBM chugs along but concentrates its invention in a few hardware and software areas, like database technology.

Do you know where you excel – and where you need help? The toughest assessments are self-assessments. Think realistically about who you are, and if you have trouble figuring out what to do, think Cisco.