Monday 14th November 2011
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The route that most companies take to commercialising new ideas is almost fated to failure.
Innovation and hence business growth can seem like a random and unpredictable process, and the majority of valuable new ideas are never used, EverEdge IP chief executive Paul Adams said at a public sector IP roundtable in Wellington.
“Commercialisation solutions aren’t easy,” Adams said. “That is why only 10% of companies grow sustainably over the long term. But innovation and therefore growth can become more predictable by understanding how it occurs.”
Internal company pressures cause management to make apparently rational decisions which actually retard or ignore innovation, resulting at best in incremental growth, he said. Major growth comes from disruptive technologies, with radical increases in value from new products, markets and processes.
Ironically, said Adams, too many ideas can be worse than having too few.
Commercialisation is expensive, and selecting the wrong ideas creates major long term problems. For every $1 spent on innovation, it typically takes $7-$15 to commercialise it. At the same time, company manager incentives and compensation are back to front, he said.
“If a manager promotes an idea that is wildly successful, they often receive little or no direct reward,” said Adams. “If they promote an idea that fails, then they’re often punished with a loss of career prospects. Such an all-risk, no-reward situation tends to the promotion of safe, well-known ideas that are rarely high growth.”
Adams said that the fact that talented managers are rapidly promoted means they don’t have time to understand the area well enough and tend to focus on innovations that pay off in a short period of time. But managers aren’t stupid he said, and are rationally responding to their environment.
Those companies wanting to innovate and grow need strong and committed senior management support to protect it against distraction, along with an environment and culture that not only accepts failure but rewards initiative and risk taking.
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