Even the startups that remain face formidable challenges. The financing supply chain is badly broken, which means that the surviving ants are slowly starving, along with their innovations. In addition, corporations that once paid premiums for startups, or their products and services, have gone conservative, hesitating to buy from struggling entrepreneurial companies.
A host of other factors makes investing in innovative products too risky. One is that in tougher times, people aren’t as willing to wait the five or 10 years, or even longer, for a return on their investment that bringing an innovation to market often entails. The recent accounting scandals haven’t helped, either, making executives even more averse to the risks of implementing innovation, since the bookkeeping regulations for such ventures are fuzzy at best and almost invite scrutiny.
This situation leaves us with a greatly underappreciated challenge: how to unlock the benefits stored in the increasing backlog of innovations, prevent further disruptions in the innovation-to-implementation flow, and avert the looming crisis. Efforts to meet that challenge should be undertaken at the same time that we begin documenting the extent of the innovation backlog, so that the burst of creativity that produced it isn’t lost forever. I have some suggestions for how to proceed.
Adopt alternative industry models: Think of universities, research hospitals, and large corporate labs as innovation sources. They can be characterized as R&d (big research and small development) organizations. Most companies, with their marketing and production arms, would be d&D (small development, big delivery) enterprises. The lack of a strong connection between these groups is partly responsible for today’s innovation backlog. Therefore, we need more “linkage” companies to bridge the gap. These are rD&d organizations. They have some research capability in order to link to the sources of innovation, and a delivery component that helps get products to market, but their main activity is in developing innovations for market.
These companies are nothing new. Sarnoff is one example, having morphed from RCA’s main lab into a for-profit enterprise whose services run from contract research to collaborative R&D. I was pleased to discover that Arthur D. Little’s Technology and Innovation group (not to be confused with its management consulting operations) was founded more than a century ago as just such a linkage organization as well. While synthetic penicillin was invented at MIT, the Technology and Innovation group enabled its commercialization and can boast similar successes in auto air conditioners, lithium-ion batteries, and other areas. To avert the looming innovation crisis, we need more of these companies. There is plenty of business to go around.
Loosen university intellectual-property rules: University-based research thrived in the 1980s and ’90s because of extensive company sponsorships that spawned new innovations, as well as startups. That coupling is much weaker now, partly for reasons already mentioned, but also because the intellectual-property policies of universities have become so complex and money-oriented that companies find it increasingly difficult to structure deals. These restrictive policies may also cause academics to lose their entrepreneurial spirit. I suggest that universities allow faculty members to keep a much bigger share of the intellectual property they create, and also change their rules to encourage the transfer of intellectual property, focusing more on their fundamental mission than on revenue generation.
Create federal incentives: The U.S. government could create a series of incentives to encourage innovation implementation. For instance, Small Business Implementation grants could provide tax credits or other incentives to companies that license or purchase innovations and bring them to market. This would encourage implementation in much the same way that R&D credits encourage idea generation.
These are a few specific ideas for reducing the innovation backlog. But we also need a culture change. In the technology-happy 1980s and ’90s, entrepreneurship centered on innovation. The founder/technologist was an entrepreneurial hero. But it has become abundantly clear that while innovation is important, it is perhaps only 5 to 10 percent of success. The other 90 to 95 percent is implementation. We need to find “implementation entrepreneurs” and make them our new heroes.