Innovation Expert Mark Rice

What you can learn from established companies to inspire innovation in your own company

By April Y. Pennington

Opinions expressed by Entrepreneur contributors are their own.

Whoever said, "Change is good" may have talked to MarkRice, the new Murata dean at Babson College's Graduate Schoolof Business. Before that, he was the director of the SeverinoCenter for Technological Entrepreneurship at Rensselaer PolytechnicInstitute, where a 7-year-old research project has aimed to answerone question: How do large, established R&D-intensive companiesdiscover, develop and commercialize radical innovations?

Ever heard of IBM, GE, DuPont and General Motors? Rice and ateam of faculty and graduate students followed them and six otherlarge, established name-brand companies in 12 of their individualinnovation projects, tracking how these companies deal with thechallenges of managing them. Rice and his colleagues share theirresults in Radical Innovation: How Mature Firms CanOutsmart Upstarts. Rice allowed me to pick his brain andspill some entrepreneurial beans: What isradical innovation, and why is it relevant to entrepreneurs?

Mark Rice: The traditionaldefinition of innovation is based on two dimensions of uncertainty,incremental uncertainty and market uncertainty. The two ends of thespectrum are incremental innovation, for which the technical andmarket uncertainty is relatively low, vs. radical innovation, wheretechnical and market uncertainty are generally high. In our study,what we discovered was not only is there high technical and marketuncertainty, but there's also a very high resource andorganizational uncertainty. Radical innovation deals with highuncertainty in all four [areas]: technical, market, resource andorganizational uncertainty.

Fundamentally, in all the projects we studied, there weremultiple partners. Very often the technology started in an R&Dorganization of a large company but often involved partnershipswith small companies, universities and government agencies, whichseems to be the way these technologies make it to the market. Insome cases it ends up that the company brings in outsiders who[fulfill] the entrepreneurial role, and sometimes they becomespin-offs, independent of the big company. What doyou think is a factor in why some companies don't employradical innovation?

Rice: Radical innovation inestablished companies, whether large or small, tends to go incycles. When the leadership of the company is focused onoperational efficiencies, then the whole focus of the organizationis on current operations. [However,] when the leadership of thecompany says, "That's important, but we also need to lookto the future and see the innovative products and services that aregoing to create the future of this company," then there'sa corresponding response from the [employees] to start looking tothe future. The reason some companies don't do it consistentlyis because of the change in the focus of the management overtime. How can abusiness motivate radical idea generation among its employees?

Rice: We saw two basicapproaches being taken. One is the leadership approach, where theyset the stage, set the framework, set the culture and set thecontext that encourages idea generation. That tends to motivate theemployees to think about innovative new products and services. Thesecond method was to create mechanisms to help employees do thisactivity. For example, companies would hold periodic think tanks,or issue a request for proposals, or provide a receiving space forideas, an organizational structure that would help idea generatorsframe their ideas into business propositions. If anestablished business has been more conservative in innovating, whatsteps can it take to change the mindset of its management towardradical innovation?

Rice: There's acompetitive issue first and foremost. Very often [businesses] endup being driven by pressure from the marketplace. Competitors areout there creating new innovations that change the game. If yourfirm is not doing that, it tends to be caught in the game ofcatch-up. The second issue is that the investment community tendsto reward companies that are creating the future throughinnovating. They have great growth prospects for the future.

Managing the ongoing operations is critically important forshort-term performance, but it's the management of breakthroughinnovation that creates the future. The successful companies arethose that do both.

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