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The Innovation Revolution?

  • 31 October 2011

GlaxoSmithKline, for example, made the tacit admission that its own R&D was not working as it should by dividing its facility into 80 smaller groups.

Other pharmaceutical groups have bought up smaller biotechnology groups, oil companies buy out smaller exploration groups, media giants buy in social media expertise and so it goes on.  

Large companies borrowing innovation from smaller groups has become a wider trend, as this BBC article explores.

PepsiCo

It highlights a strategy within PepsiCo. The company is providing financial help to a group of UK and European technology start-ups in return for helping out with ‘innovative marketing’.

Ian Ellington, general manager of Walker's Crisps, part of global giant PepsiCo, says in the article:

“The genesis of it was: look, this landscape is shifting very, very quickly, we're kind of living in a little bit of a bubble in a big corporation. I think at its simplest the idea was how can we get ourselves really at the leading edge of some of those new technology ideas as an organisation?"

“They kill the spark in the company”

But in the same article Shikhar Ghosh, a senior lecturer at Harvard Business School, warns against large corporations imposing the same working practices on their acquisitions that have hindered innovation in their own companies:

“They think that the company will continue to innovate in its old form as part of their big bureaucratic organisation. When they do that, they usually kill the very thing they've bought. They kill the spark in the company."

An Innovation Revolution?

Will Hutton, in the Observer, argues coherently that innovation has stalled and we are no longer seeing the radical industrial advances of the early part of the 20th century – the car, the plane, the television. He blames a reliance on the market and believes that governments need to intervene.

It is an unfashionable view: Commenter johnstuartmill suggests: “The development of India, China and Brazil is unleashing huge amounts of funds that are being ploughed into science and technology. Plus, millions of extra high quality scientists and engineers are being educated in these countries.”

“I predict a scientific and economic revolution over the next few decades. The US and the UK will inevitably see their positions weaken, in a relative sense, but it will be a remarkable thing for the world as a whole.”

“Will doesn't mention that every developed country has an innovation strategy and most are racing each other to increase their R&D spend as a percentage of GDP (the UK being a notable exception under the Tories).”

Commercial Success

Mindful Money blogger, Shaun Richards believes that the trouble with government intervention is that it is not always focused on the most commercially adept areas. He gives the example of Concord – a fantastic feat of British engineering, but a commercial dud.

He adds: “It is a problem of our time that we are heading in the wrong direction. Some of our domestic businesses do a very good job. If the others got out of the way, we might head in a better direction.”

Collaboration

Some have felt the solution lies in drawing expertise from across different disciplines. This report from ‘innovation experts’ Nesta suggests that bringing together professional or academic teams from various disciplines can help develop new solutions to complex problems or research questions.

This approach is also used, to some extent, by the group  Theatres Of Thinking. It runs innovation workshops with speakers from different industries, who each talk about how they have handled innovation in their industries. It includes so-called ‘theatres of thinking’, which are ‘facilitated design workshops involving a range of physical media’.

The site also contains some discussions on innovation in all its guises.

Emerging Markets

Innovation is not just a problem for developed economies. China and other emerging markets will have to innovate to support their growth into developed industrial economies.

Many have no track record of innovation. However, they are catching up. This NY Times article suggests that there has been a well-documented surge in patent applications in China. 

Emerging market governments are also doing all they can to support local industries. Chris Palmer, manager of the Henderson Emerging Market Opportunities fund, says:

“The development of local industry is at the heart of policy for many emerging markets. The domestic brand portfolio is growing in many countries.” He suggests that some of the most creative partnerships have in fact come from developed and emerging markets working together.

Perhaps this is the best conclusion to be drawn on the future of innovation. The best innovations tend to come from a fresh perspective. Therefore, emerging and developed markets working together, or different disciplines and industries working tog
ether, are likely to come up with the best ideas.

More from Mindful Money:

Company life cycles: from birth to death

Going east to prevent finances going west

Capitalism in crisis: Time to turn to new ideologies?

Creativity and financial crisis: Will this provide the answers?

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