Fostering a Spirit of Innovation in Mature Industries LO14767
Wed, 27 Aug 97 09:11:50 -0700

Replying to LO14752 --

Mike Gort said:

>Consider the general failure of large corporate R&D. Despite billions of
>corporate investments in R&D, how many technological innovations do we
>see coming from small startups? Why was Netscape a startup instead of a
>new venture from Microsoft, IBM, Apple or other major players? Over the
>past several years, we have seen new technologies sprouting up from all
>kinds of small, new, flexible and entrepreneurial organizations. Larger
>companies, to get the technology they need, frequently buy up the
>startups. But why doesn't the R&D function in the large organization,
>which is probably better funded and staffed with excellent technologists,
>develop the needed knowledge themselves.

The answer is simple: money to the individuals. See the _Business Week_
issue of 8/15/97 that talks about what drives Silicon Valley.

The legendary process works like this: young companies get venture capital
financing. They hire risk-preferring engineers and give them lots of stock
options. The company goes public via the famous initial public offering
(IPO) process, and the individual engineers get rich and retire at age 30.

Note that this process is more myth than reality. In general, only about 1
in 100 young companies get venture capital financing. Of those that are
funded, less than 10% ever go public, and of those that go public, less than
10% have their stock prices increase enough to make their employees rich.
The odds are better than the lottery but not much.

Still, there are enough widely publicized winners to keep on fueling the
process. And no one records the "business experiments" that, while not
becoming sources of wealth, become valuable learning experiences.

Also I would disagree that corporate labs are not sources of innovation.
Hewlett-Packard, for example, has annual revenues of about $40 billion.
About $20 billion of that each year comes from products introduced in the
past two years. That's a LOT of innovation!



Learning-org -- An Internet Dialog on Learning Organizations For info: <> -or- <>