“How can we become innovative, like MIT, and the startup companies of Route 128 and Silicon Valley?” That’s the most frequently asked question I’ve heard in the last 25 years, as individuals and organizations in Europe and Asia, but also in the United States, strive to get on the bandwagon of high-tech innovation. Thousands of books and magazine articles purport to answer this question. Yet the ones I’ve seen don’t quite match the ingredients I have found to be important among the most successful of the MIT Lab for Computer Science’s 60-some startups.
Two ingredients, risk-aware capital and a high-tech infrastructure, are obvious, but rarely in place. In Europe and Asia investors talk about risk, but their psyches propel them toward the comfort of guarantees. They are not prepared to lose 10 startups for a 100-fold appreciation in the one that makes it big. In the United States, where capital is usually risk-aware, it is often greedy and lacks staying power-two additional avenues to failure. And in many regions of the world, there is little infrastructure in the form of silicon foundries, design houses, and the human experts behind them to ensure that a fledgling high-tech company will have quick and easy access to such key resources.
Perhaps the most important ingredient of successful innovation is the creative technological idea that serves a pressing human need. This kind of creativity, in turn, requires a schizophrenic combination of rationality and insanity that’s outside our ordinary experience. Imagine that all current inventions in the world and all their possible logical extensions and uses are inside a huge balloon. People are pretty good at extending these ideas further, using logic and common sense. But their results, being logical extensions of what’s already there, stay within the balloon. To escape these old ideas and come up with something that is radically new, the balloon must be punctured with something that defies reason-a new idea that is akin to a form of insanity. Yet most insane ideas fail to be creative; they’re simply insane. That’s why successful innovators, after coming up with an idea that seems crazy, must be able to shift seamlessly to a rational dissection of the idea’s merits and pitfalls. When this interplay between insanity and rationality converges, look out! A creative idea has been born.
Conventional marketers and venture capitalists react to creative technological ideas with indignation-“all you have is a solution looking for a problem”-or the mantra-“you better start with a market need, otherwise you have nothing.” These phrases play well in the how-to books, but not in my experience: the successful startups I have known began with what we affectionately call a new hack-a radically new technological idea-like the Ethernet (3Com), the spreadsheet (Lotus) and public key cryptography (RSA). Sure, a market story is always there, next to the technical idea, but at the beginning, the market is often incorrectly identified: When we invented time-shared computers, we did it to distribute the cost of a million-dollar processor among many users. Today, with powerful processors at a few hundred dollars, banks and airlines use this technology for a totally different reason-to share information. The Arpanet, too, was invented to keep costs down by enabling Defense Advanced Research Projects Agency contractors to do their computing on each other’s machines. Nobody did that. Instead, the new networking capability gave rise to e-mail, file transfers and, eventually, the Internet. In short, the debates on whether the market or technology should lead innovation are irrelevant: Successful innovators apply their drive and flexibility toward looking for and blending these two forces wherever they crop up, always striving to zero in on the key ingredient-a creative idea that serves a pressing human need.
The other important ingredient of innovation in my experience is an entrepreneurial culture centered on passion: Besides being expert in their craft, the winners are believers, committed unconditionally to their creative idea. To understand how important passion is to innovation, look at “technology transfer” through inanimate designs: In my experience, the people who are handed someone else’s invention have no stake in it; sooner or later they find an excuse to abandon it. People think entrepreneurs start companies to make big money. Not the ones I know: They do it first for passion, and only then for money. And where there is no passion, there is usually no money. The right entrepreneurial culture, too, requires a strong leader, who fuels passion and keeps everyone focused on the main mission. And when they fail, the best innovators are ready to move on to their next startup without a second thought.
All four ingredients-risk-aware capital, a high-tech infrastructure, a creative idea that serves a pressing human need and a passion-oriented entrepreneurial culture-are rare. It’s even rarer for them all to come together in a startup. Perhaps that’s why so few succeed. But when they do, the rewards are ample: Entrepreneurs derive satisfaction in translating their dreams to useful products and services. They and others become wealthy. And the siren song gets louder, beckoning more newcomers to the seductive promise of innovation.