Innovation
Some companies have made innovation a core competency. There are major distinctions among invention, innovation and commercialization and the investments necessary to generate a return on those investments. There are opportunities on both ends of the value chain.
The following figure suggests that there are three distinct segments of the value chain comprised of invention, innovation and commercialization.
Invention occurs in garages and large corporate R&D shops: IBM and Microsoft will spend a combined $15 billion on R&D in 2007. Venture capitalists invest billions of dollars every year in start-up businesses built on new digital technology. Invention requires risky investments – almost speculative investments – in technologies that may or may not mature enough to get them to the next innovation segment of the value chain.
Innovation builds on invention on its way to commercialization. It involves the development and construction of a product or a service. This segment includes prototyping and pilot applications. The purpose of innovation is to calibrate just how solid the inventive foundation on which the product or service is built really is. Real money is spent here to develop a product or service and prepare it for the marketplace. It’s important to note here that the invention-to-innovation process is not always owned or managed by the same company. In fact, this is where major interruptions in the value chain often occur. Some companies, arguably like Microsoft, are as good (or better) at innovating as they are at inventing. Cisco acquires a lot of its inventions from which they innovate new products and services. Some companies are better at innovation than they are at invention – and vice versa. The skill sets are different and often distributed across several companies, consultants and even intellectual property (IP) lawyers. Prototyping is fundamentally different from manufacturing.
Other skill sets are required to fully commercialize technology. The third segment of the value chain requires effective distribution, sales and support. Some companies are better at packaging products than they are at innovating them, just as some companies are better at sales than they are at marketing. Commercialization should be the end result of successful innovation, and successful commercialization results in a solid ROI.
We know that some companies are good at invention but relatively poor at commercialization. We know that some companies are able to monetize most of the value chain. What do the most successful companies do? What don’t they do? How have best practices changed over time? What should they look like in the early 21st century in an increasingly competitive global marketplace?
Consulting here profiles the “best” and the “worst” value chain managers by identifying the processes and organizations that successfully manage the value chain from invention to commercialization.