Fostering a Spirit of Innovation in Mature Industries LO14781

Michael Gort (
Thu, 28 Aug 1997 15:00:37 -0400

Replying to LO14767 --

Joe Podolsky wrote in LO 14767:

>The answer is simple: money to the individuals

> 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.

> 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!


Can the answer really be reduced to just money? Hewlett-Packard is
well-known for its culture of innovation, but how true a standard is HP
when looking at the companies that make up the Fortune 500 or 1000. Money
is a factor, but the failure rate of start-ups is well known to the
innovators that go that path.

I can't help but believe that there is a more systemic explanation. The
Bureaucratic, hierarchical structure of so many companies truly does, in
my experience, innovation. Further, the "blaming system" that exists in
so many companies has a field day dealing with true innovators who are
continuously learning by failing.

Yes, there are remarkable R & D innovations coming from within large
corporations. But at what cost? IBM spends $4.1 Billion on R & D every
year, Microsoft is approaching or just over $2.0 Billion, Intel is over $2
billion. Do those companies get a fair return? How many of IBM's 38,000
patents have actually been developed to produce profti?


Michael A. Gort (203) 637-9279

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