Whoever said, "Change is good" may have talked to Mark Rice, the new Murata dean at Babson College's Graduate School of Business. Before that, he was the director of the Severino Center for Technological Entrepreneurship at Rensselaer Polytechnic Institute, where a 7-year-old research project has aimed to answer one question: How do large, established R&D-intensive companies discover, develop and commercialize radical innovations?
Ever heard of IBM, GE, DuPont and General Motors? Rice and a team of faculty and graduate students followed them and six other large, established name-brand companies in 12 of their individual innovation projects, tracking how these companies deal with the challenges of managing them. Rice and his colleagues share their results in Radical Innovation: How Mature Firms Can Outsmart Upstarts. Rice allowed me to pick his brain and spill some entrepreneurial beans:
Entrepreneur.com: What is radical innovation, and why is it relevant to entrepreneurs?
Mark Rice: The traditional definition of innovation is based on two dimensions of uncertainty, incremental uncertainty and market uncertainty. The two ends of the spectrum are incremental innovation, for which the technical and market uncertainty is relatively low, vs. radical innovation, where technical and market uncertainty are generally high. In our study, what we discovered was not only is there high technical and market uncertainty, but there's also a very high resource and organizational uncertainty. Radical innovation deals with high uncertainty in all four [areas]: technical, market, resource and organizational uncertainty.
Fundamentally, in all the projects we studied, there were multiple partners. Very often the technology started in an R&D organization of a large company but often involved partnerships with small companies, universities and government agencies, which seems to be the way these technologies make it to the market. In some cases it ends up that the company brings in outsiders who [fulfill] the entrepreneurial role, and sometimes they become spin-offs, independent of the big company.
Entrepreneur.com: What do you think is a factor in why some companies don't employ radical innovation?
Rice: Radical innovation in established companies, whether large or small, tends to go in cycles. When the leadership of the company is focused on operational efficiencies, then the whole focus of the organization is on current operations. [However,] when the leadership of the company says, "That's important, but we also need to look to the future and see the innovative products and services that are going to create the future of this company," then there's a corresponding response from the [employees] to start looking to the future. The reason some companies don't do it consistently is because of the change in the focus of the management over time.
Entrepreneur.com: How can a business motivate radical idea generation among its employees?
Rice: We saw two basic approaches being taken. One is the leadership approach, where they set the stage, set the framework, set the culture and set the context that encourages idea generation. That tends to motivate the employees to think about innovative new products and services. The second method was to create mechanisms to help employees do this activity. For example, companies would hold periodic think tanks, or issue a request for proposals, or provide a receiving space for ideas, an organizational structure that would help idea generators frame their ideas into business propositions.
Entrepreneur.com: If an established business has been more conservative in innovating, what steps can it take to change the mindset of its management toward radical innovation?
Rice: There's a competitive issue first and foremost. Very often [businesses] end up being driven by pressure from the marketplace. Competitors are out there creating new innovations that change the game. If your firm is not doing that, it tends to be caught in the game of catch-up. The second issue is that the investment community tends to reward companies that are creating the future through innovating. They have great growth prospects for the future.
Managing the ongoing operations is critically important for short-term performance, but it's the management of breakthrough innovation that creates the future. The successful companies are those that do both.