Volume 15 Issue 6 - October 8, 2010 PDF
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Four Secrets of Innovation
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Scientists and business people are learning more than ever how to collaborate for innovation. Alex Soojung-Kim Pang is research director at the Institute for the Future, associate fellow at the Saïd Business School of Oxford University, and visiting scholar at Stanford University's history and philosophy of science and technology program. This article appears in the November issue of eJournal USA, “Roots of Innovation.”


Alex Soojung-Kim Pang
In today's innovation-obsessed, knowledge-intensive global economy, it might come as a surprise that for most of their long histories, science and business have had almost nothing to do with each other. Had you suggested to a silversmith working in ancient China, a captain plying the spice trade during the Age of Exploration, or a Quaker brewer in 18th-century Philadelphia that science could improve commerce, he would have looked at you as if you were crazy. Even today, describing the relationship between science and business — and figuring out how science and industrial policy can be designed to work to the benefit of both parties — is a challenge.

The task is made difficult by two things. First, both science and business are moving targets, so what works for one may be inappropriate for the other: Vast corporate research and development (R&D) laboratories that deliver incremental improvements in mature industries are likely to sink in fast-moving emerging markets. Second, scientific ideas and talent don't work like other economic inputs: They're hard to control and monopolize. Consequently, the connections between science and industry have been hard to characterize, and the economic benefits of science harder to quantify than one might expect.
Scientist Stacey Reed works in Florida for PetroAlgae, which is taking to market technology to harvest oil from algae.

While there are plenty of examples of scientific savants inventing things with commercial benefit — Galileo's telescope and Benjamin Franklin's lightning rod are examples — science contributed little to business until the birth of the chemical and electrical industries in the 19th century. These were the first fields in which scientists, guided by the latest theories and experiments, could make more substantive contributions than craftsmen working through rules of thumb or trial and error. By century's end, a few companies — DuPont, AEG, General Electric — had created in-house research and development labs to support new product development and solve the problems encountered by ever-growing technological systems. The development of penicillin, radar, jet aircraft, and the atomic bomb during World War II conclusively showed that science could be harnessed for competitive advantage. After the war, most big companies created R&D labs; some, like the Bell Labs system, employed thousands of people.

But even in this golden age of corporate research and development, it wasn't always clear how science helped the bottom line. Labs needed a measure of autonomy to do good research, but it was always difficult to bring discoveries back into product lines. In some famous cases, companies sponsored paradigm-shattering research but couldn't cash in: Xerox's Palo Alto Research Center (PARC) developed the first personal computers, but after Xerox couldn't figure out what to do with them, many of PARC's key researchers migrated to Apple Computer and its Macintosh project. (To its credit, Xerox pounced on laser printing, developed at the same time at PARC, and made billions of dollars off the technology.)

Indeed, the personal computer helped drive a new era in both science and business innovation. Along with the Internet, cheap sensors, open source software, microfluidics used in inexpensive “lab on a chip” systems, and other technologies, the personal computer has driven down the cost of high-performance technology, made it possible for small start-ups to do cutting-edge research, and turned science into a disruptive business force beyond the control of either corporate strategy or government policy. Examples such as PARC suggest that companies would be better off supporting narrower, applied projects than sponsoring open-ended research that might ultimately benefit competitors. And what's true for companies is true for countries, too: China spends far less on research and development than the United States, but American multinationals can't build R&D labs in China fast enough.

So we seem to be entering a new age in which science is more important for innovation than ever, but is more unpredictable and harder to benefit from. In an age that values innovation, companies and countries have a harder time than ever encouraging and profiting from science.

But does that mean that science policy is now impossible? Certainly not, and successful regions and countries have learned several secrets.

Cultural Considerations

Tesla Motors workers assemble an electric-motor Roadster in Silicon Valley, a place with long experience in battery design.
The first and biggest secret is that there is no simple linear relationship between science and business. The idea that discoveries in pure science inevitably drive advances in applied science that lead to new technologies and business is wrong. Moving ideas from the laboratory to the living room is not a mechanical process; it's a human one. It requires translators and intermediaries who can help product developers and companies see the commercial potential of new ideas. It often requires investors and entrepreneurs who can form organizations to support cutting-edge research and product development. And it requires companies able to manufacture, distribute, and market new products. Many countries have invested in universities and basic research, expecting some direct payoff; in fact, policy makers have to think in terms of building infrastructures and cultures.

Well-built innovation cultures don't just support innovation; they give it roots. This is the second secret: While scientific knowledge may be mobile, science-driven business is often firmly rooted in a rich matrix of local culture and craft skill. The smartest regions aren't just trying to create world-class centers for nanotechnology or alternative energy or quantum computing; not only can such ventures be outrageously expensive, but research groups organized around superstar scientists can move away when the next great offer comes along. Instead of pursuing a generic model of greatness, savvy policy makers are making more targeted bets that link cutting-edge research with local skills.

Denmark, for example, is emerging as a leading center for pervasive computing. Why? Pervasive computing — which studies how computers can be made more useful by being embedded in everyday objects — operates at the intersection of electronics, software, psychology, and ergonomics. This is a field that requires deep knowledge of how people use technologies, and Danish scientists have found that knowledge in the country's world-class design community.

Likewise, Silicon Valley is reinventing itself as a center of alternative energy by building on its long experience in battery design. It's unsexy, but the knowledge required to make laptops run half an hour longer gives electric car start-up Tesla Motors a decisive advantage. For policy makers, this suggests that it is essential to promote industries that draw on existing skills. Not only will this make new companies more distinctive and harder to steal, but it can also benefit existing industries.

Beyond the Laboratory

The third secret is that translating scientific discoveries into products is a unique talent. Science and business are pretty different enterprises, with different skills and incentives. If they're going to work together successfully, each needs its independence. A good scientist who is brilliant at putting together grants and research groups won't automatically do well in the marketplace. For one thing, the mental drive necessary to work for years on intractable problems differs from the cognitive skills necessary to build a company.

But too often we fail to recognize that new discoveries don't easily translate into new products. For example, successful “green-tech” researchers are discovering that creating a brilliant new wind turbine design or discovering a super-efficient photovoltaic material won't change the world unless you figure out how to fit these discoveries into existing utility infrastructures, satisfy the concerns of safety regulators, drive manufacturing costs down, and convince consumers that the pain of switching technologies will be worth it. This kind of translational, systems-building activity is a talent of its own, and it requires people who can move between the worlds of science and business, identify opportunities, and build networks that turn ideas into innovative technologies.

The fourth secret is that the interconnections between science and business are growing. Until recently, science has had a big impact on manufacturing and product development, but its effect on fields such as human resources has been spottier. Now it's starting to make serious inroads in new areas. New tools in neuroscience — particularly brain scanning technology such as functional magnetic resonance imaging (fMRI) — are allowing us to see the brain as it makes decisions, looks at advertisements, or responds to other stimuli.

The vast quantities of data generated by user activity on Web sites such as Amazon.com are allowing scientists to more accurately model crowd behavior and taste. Wall Street has seen an influx of physicists and advanced mathematicians applying arcane scientific theories to model financial risk. The development of new climate models and accounting tools for assessing the costs and benefits of sustainability programs is allowing companies to better assess how going green will affect their bottom line.

Finally, a few businesses are developing innovative processes based on the way science works. The open-innovation movement, with its emphasis on sharing core intellectual resources, encouraging collaboration between far-flung partners, and informally rewarding contributors, looks a lot like a scientific community.

A Complex Relationship

So the challenge for companies and countries is to invest in businesses that combine cutting-edge science with local cultural resources; to build links between science and business, while letting each flourish; and to take advantage of emerging sciences that can help industries better understand human behavior, see the long-term impact of policy and strategy, and develop new business processes.

The relationship between science and business was never simple. Today it's becoming more complex and multifaceted, and in the process more profitable — if you know its secrets.

The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.

Design & Layout : Barry Wu, The Banyan Editorial Office
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