Innovation: Defining, Doing, Measuring

Editor’s note: The Economist invited us to contribute an abridged version of this post, “How do you define innovation?”, which you can read at their first Innovation Summit: Fresh Thinking for the Ideas Economy blog. A separate but related Q&A interview, Creating Innovation in the PARC“, is also available at Blogging Innovation.

Innovation is a sorely overused word. Yet we are constantly asked to define it. A number of theorists and practitioners have offered up their variations: product innovation, business model innovation, technology innovation, design innovation, radical innovation, incremental innovation, disruptive innovation, open innovation…and so the list goes on. All are useful; none are complete.

I don’t have a pat answer, catchy definition, or compelling metaphor for this. But here’s what I do know: however it is defined, innovation is a valuable change, unconstrained by the way things are.

Must. Add. Value.

I think I can safely claim that we’re speaking from experience… PARC was extremely fortunate to have been given the space and freedom to create “the office of the future” (Xerox’s founding charter for us), even though no one knew at the time what the outcome would be. We were even more fortunate to have delivered on that mission – transforming the way people worked through distributed computing technologies such as the GUI, Ethernet, mail & file servers, WYSIWYG displays, laser printing, collaborative workspaces, and more. The impact on the world was indisputably valuable. Xerox adopted the results of the innovations they understood best (such as laser printing, which became a multi-billion dollar industry for them), and other companies helped commercialize their piece of the full vision (see partial list of companies here).

Today, PARC focuses on “valuable change” for all of our clients, which include large multinational companies from different industries to startups incubated on site from our own work or select entrepreneurs. The change almost always involves some kind of new business creation – from helping our clients envision what the innovation in their industry will look like, to collaboratively defining the short- and long-term goals of the innovation and co-developing the solution. So for us, the focus on innovation-as-valuable-change hasn’t changed one bit. What’s changed is who drives that change, the range of industries we now innovate in, and how we manage the process for value creation.

A Changing Model

First, let me say this: innovation today is different than it was 30 years ago. Ditch the image of a lone inventor, discard even Silicon Valley’s beloved image of two inventors in a garage. In fact, forget about the notion of captive R&D as the sole source of competitive advantage.

The fact is that innovation today explicitly involves an expansive ecology of large enterprises, VCs, government agencies, university researchers, and others. This not only engages the multiple players necessary to transform a given innovation into a valuable change, but it also provides the breadth of perspectives that we use to address a specific problem (such as flexible electronics, for example).

Government agencies can provide the leeway to pursue platform- and market-agnostic approaches, while large enterprises provide the manufacturing and value chain constraints that will make the solution viable for wide adoption. It’s not a difference of kind (public vs. private sector funding?), but degree (how much? what’s the right mix of sources) and timing (when? what’s the best stage of development to engage a particular driver).

Key Ingredients

Other key ingredients for cultivating valuable change include:

Openness. This doesn’t have to mean transparency – innovation can happen under confidentiality agreements! – but an organization’s genuine interest, flexibility, and adaptability in absorbing solutions from the “outside”.

Breadth and depth of disciplines. This is not as simple as “stick a bunch of smart people in a room” and brainstorm with sticky notes and design thinking. Valuable, transformative innovation requires deep domain expertise and scientific insights – including those of social scientists who have been immersed in diverse field settings – that enables them to see possibilities where others cannot.

Range of problems and opportunities. The problem can be one presented by a client, it can be an implicit user need made explicit through ethnographic observation, or it can be motivated by scientists’ passions to address a fundamental human need (such as clean water). Note, though, that the way the problem is defined might be different from what the problem really is. Savvy inventors need to be able to address and articulate this gap.

Market expertise. While market insight can come from many sources, for us it is provided by the client (“here’s what I need/ where I want to be”), embedded business development (“what are the valuable applications for this technology”), and/or EIRs (“what’s next?”). Xerox PARC cultivated three decades of deep expertise that were applied to a very specific set of markets, but today PARC, as a commercial innovation center, is taking that expertise into different industries. For example, the same science behind manipulating toner particles in copiers has led to a potentially valuable hydrodynamic separation technology for the water and industrial filtration industries – but to make this a marketplace reality, we need partners who can qualify the best potential application values.

None of these ingredients is a secret. The hard part is managing the mix so that we – and thus our clients – stay on the positive side of the value equation.

Measuring and Managing for Value

Every year, companies go through an annual patent-counting contest as the key indication of their innovative capacity and value. But we reward our scientists for the quality – not quantity – of their patents. We force them to examine the claims they’re characterizing, and to really define what they (and others outside their domain at PARC) think is valuable. Ultimately, we get rewarded for protecting our intellectual property by the value that security helps create for our clients.

Patents alone don’t tell the whole story though, and since we don’t directly commercialize products or services, this makes success a little different and difficult to measure. Our solution: a PARC approach to portfolio management. We allow leeway for ideation, but manage the risk and investment through a process that balances core and sustained competencies with new options.

The trick of course is to validate the opportunity: test early… build prototypes (I don’t mean just paper prototypes but engineered, industrial-strength ones)… conduct lab and field experiments to define a confidence interval for assumptions…

And sometimes, you do have to be patient to see the results.

 

6 thoughts on “Innovation: Defining, Doing, Measuring

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  3. Ralph-Christian Ohr

    Hi Mark,

    Thanks for your great post. Finally, I have made it to put down some thoughts your post has induced:

    First of all, I embrace your definition of Innovation as “valuable change” since innovation is fundamentally determined by these two criteria: value-add (for all partners) and change of status quo. Independently from the concrete “specification” and objectives, all innovations have these two criteria in common.

    I also agree with you that defining innovation is challenging due to its variety. As you have greatly pointed out, the proper definition of a problem significantly determines the solution of it. In this sense, innovating partners need to agree upon definition and objectives up front as well as case by case in order to choose an appropriate approach. Otherwise innovation activities are at risk to be failing due to a lack of common understanding and misalignment. Tim Kastelle (@timkastelle) further pinpoints this issue in one of his posts.

    You further address another two issues that seem quite important to me for innovation, particularly in view of dealing with high technology:

    1) Ecosystems: During the past decades, innovation has been shifting from primarily R&D- and technology-oriented activities towards consideration of entire ecosystems. Not only users/customers, but complex value networks determine how new ideas are adopted and valued. They in turn influence users/customers as one part of this ecosystem. This requires another “key capability” of deep understanding and influencing specific ecosystems/industries. I think, innovation is not only about customer orientation and “insight”, but also about “holistic foresight” of these complex systems in order to be able to anticipate market developments and technology requirements.

    2) Innovation portfolio: While I was thinking about your post, Tim released another great one, using your model as a prime example of portfolio approach for innovation management. I would like to hook in here as I fully agree to the view of a portfolio approach. Again, I think innovation capabilities have been changing from a predominant R&D- and technology centricity towards a systematic matching of markets and technologies across different time horizons. I think it will be crucial for future success to select and manage the right approach – from ideation to launch – for particular innovation purposes. Research findings indicate that incremental improvements need a different setup than radical innovation, e.g. development of entirely novel offerings. This fact is very well reflected in R. Verganti’s latest post “One Size Does Not Fit All in Innovation (and Never Will)”.

    Overall, successful innovation is really about finding the right “mix of key ingredients”, as you name it. This mix does not solely focus on technology anymore – as mostly the case in the past – but on “matching of what is possible with what is needed”, as Rowan Gibson puts it. Particularly in high tech industries, we are at risk of a technology-dominant innovation understanding. I think markets / ecosystems adopt the value delivered by innovative products and technologies. In this sense, innovation is the process of creating value by a holistic approach, rather than just developing technologies and products.

    Obviously, PARC has greatly accomplished this transition towards an integrative thinking and future-oriented innovation partner – congrats for that!

    Ralph

  4. Mark Bernstein

    Hello Ralph,

    We appreciate your taking the time to leave a thoughtful comment and useful pointers. I particularly like the way you parsed my definition of innovation and turned it into criteria (value add for all partners + change to status quo).

    Some thoughts on your thoughts:

    * Our experiences with clients have certainly shown us that agreeing upon definitions/ objectives up front is helpful… but there’s an art to the early meetings process (which involves matching interests, identifying champions, and validating the opportunity) that gives both parties the confidence, and context, to do this well.

    * “Holistic foresight” is a beautiful concept but difficult to execute in practice. This is where ethnography – particularly when it includes technology insights – plays a powerful role in innovation. I think it also supports your point about technology centricity since market matching must involve some element of understanding the people, activities, and settings in those markets.

    * I agree that one size doesn’t fit all. But because portfolio management impacts what people are working on or attached to, there’s an interesting element of acknowledging the passionate instinct/ developing vision with the calculated risk/ known variables.

    Thank you for the congratulations. But there’s more! Ultimately, we want to see our clients – and their customers/end-users – succeed.

  5. Jennifer

    This is a wonderful, insightful discussion. I want to learn and hear more. I hear a lot about innovation, but not enough of the holistic value… and it’s the vision with holistic practice, that I feel our society is missing. If Xerox/ACS and its affiliates can use this approach to influence our agencies and leaderships… we all could succeed. Thank you for your passion.

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