Industrial basic research brings practical problems to strong networks

Industrial basic research and industrial total R&D was performed in a few sectors by a few companies in the US in 1984

Industrial basic research and industrial total R&D was performed in a few sectors by a few companies in the US in 1984 [1, 2]

Industrial basic research plugs industry networks into universities

Most basic research in the United States is conducted within the university community, but in order to “plug in” to these research centers and to exploit the knowledge that is generated there, a firm must have some in-house capability. The most effective way to remain effectively plugged in to the scientific network is to be a participant in the research process.

When basic research in industry is isolated from the rest of the firm, whether organizationally or geographically, it is likely to become sterile and unproductive.

The history of basic research in industry suggests that it is likely to be most effective when it is highly interactive with the work, or the concerns, of applied scientists and engineers. This is because the high technology industries are continually throwing up problems, difficulties and anomalous observations that are most unlikely to occur outside of a high technology context.

High technology industries provide a unique vantage point for the conduct of basic research, but in order for scientists to exploit the potential of the industrial environment it is necessary to create opportunities and incentives for interaction with other components of the industrial world. …the performance of basic research may be thought of as a ticket of admission to an information network.

Industrial basic research often is the unplanned byproduct of paying talented people to work on great practical problems

…the history of basic research in… industry suggests that a very large part of this research has been unintentional.

…if… Sadi Carnot… had been asked… what he thought he was doing, his answer would have been that he was trying to improve the efficiency of steam engines. As a byproduct of that particular practical interest, he created the modern science of thermodynamics.

If Pasteur had been asked what he thought he was doing back around 1870, he would have replied that he was trying to solve some very practical problems connected with fermentation and putrefaction in the French wine industry. He solved those practical problems – but along the way he invented the modern science of bacteriology.

Industrial basic research at Bell Labs, for example, started with practical problems and ended up producing scientific advances

Back at the end of the 1920s when transatlantic radiotelephone service was first established, the service was poor because there was lots of static. Bell Labs asked a young man, Karl Jansky, to determine the source of the noise so that it could be reduced or eliminated. He was given a rotatable antenna to work with. Jansky published a paper in 1932 in which he reported three sources of noise: Local thunderstorms, more distant thunderstorms, and a third source. which he identified as “a steady hiss static, the origin of which is not known”. It was this “star noise”, as he labelled it, which marked the birth of radio astronomy…

…Bell Labs decided to support basic research in astrophysics because of its relationship to the whole field of problems and possibilities in microwave transmission, and especially the use of communication satellites for such purposes. It turned out that, at very high frequencies, rain and other atmospheric conditions became major sources of interference in transmission. This source of signal loss was a continuing concern in the development of satellite communications. It was out of such practical concerns that Bell Labs decided to employ Arno Penzias and Robert Wilson. Penzias and Wilson… first observed the cosmic background radiation, which is now taken as confirmation of the “big bang” theory of the formation of the universe, while they were attempting to identify and measure the various sources of noise in their antenna and in the atmosphere. Although Penzias and Wilson did not know it at the time, the character of the background radiation that they discovered was just what had been postulated earlier by cosmologists favoring the “big bang” theory. Penzias and Wilson appropriately shared a Nobel Prize for this finding.

Industrial basic research at Bell Labs also started with practical problems and ended up producing practical advances

…basic research can provide valuable guidance to the directions in which there is a high probability of payoffs to more applied research. In this sense, William Shockley’s education in solid state physics during the 1930s may have been critical to the decision at Bell Labs to look for a substitute for the vacuum tube in the realm of semiconductor materials – a search that led directly to the invention of the transistor.[2]

  1. National Science Foundation. National Patterns of Science and Technology Resources 1986. NSF 86-309. 1986, pp. 59, 56.
  2. Rosenberg, Nathan. “Why Do Firms Do Basic Research (with Their Own Money)?” Research Policy 19.2: 165-174.

Serving customers best requires radical innovation

Paths from market orientation to new product success illustrate that serving customers best requires radical innovationThree market orientation–learning style–innovation–new product success paths.

Market orientation is expected to be positively related to generative learning (1)
and negatively related to gleaning (3)
but is not expected to be related to adaptive learning (2)…

Serving customers best still takes incremental innovation

…market orientation may be characterized as ‘‘ pervasive commitment to a set of processes, beliefs, and values reflecting the philosophy that all decisions start with the customer and are guided by a deep and shared understanding of customers’ needs and behavior, and competitors’ capabilities and intentions, for the purpose of realizing superior performance by satisfying customers better than competitors’’…

Although market-oriented firms are expected to be adept at adaptive learning inspired incremental innovation,… it is expected that this will also be true of most firms regardless of their market orientation.

Typically, innovation takes the form of brand or line extensions, modifications to existing products, or repositionings. There is a comfort to the learning and innovation that takes place in this mode because organizational members are not questioning the successes of the past. They are merely improving on them.

Although the results show that this type of innovation is the most common and least variable in the sample of firms, they also show that it is not related to market orientation. Incremental innovation was the most common form of innovation in firms. The priority firms place on it, however, was not related to new product success.

Serving customers best requires more radical innovation, and less imitation

In general, radical innovations have greater value to firms than incremental innovations, particularly when radical innovators have deep pockets and strong market power… New product concepts have greater value than line extensions… and technological breakthroughs are more profitable than incremental improvements… [Researchers] reported… product advantage and product innovativeness—two correlates of radical innovation—to be strongly related to new product success. Radical innovation priority was positively related to new product success; imitation priority was negatively related to new product success.

Market orientation had a direct positive relationship with new product success. Market orientation also had a positive indirect influence on new product success through generative-learning-inspired radical innovation and a negative indirect influence on new product success through gleaning-inspired imitation. Market orientation had no influence on firms’ adaptive learning priority or incremental innovation priority.

Overall, the results suggest that market orientation shifts the weight of a firms innovation programs away from imitation toward a balance between incremental and radical innovation.

Relative priorities of firms by market orientation, showing that serving customers best requires radical innovation

Serving customers best requires new learning and experimenting

Maximal long-term success requires a two-pronged innovation strategy.

In the short run, firms must remain competitive and alluring by engaging in incremental improvements that appeal to their customer base. These types of innovations can be discovered and prioritized by talking to customers and by monitoring competitors through traditional marketing research and intelligence activities.

In the long run, however, the most successful firms accompany adaptive modifications to the marketing mix with framebreaking initiatives. …long-term market leaders must innovate relentlessly and must be willing to cannibalize their own products to maintain their leadership position. These initiatives must be proactive and planned and must encourage employees to be selectively destructive (e.g., to identify and undo the obsolete). Although short-run incremental innovation programs can be linked explicitly to deadlines, budgets and outcome measures (e.g., ROI), longer-run destructive programs are not likely to produce results in a linear manner. As a result, they may best be pursued offline.

…a strong market orientation appears to be a key to the ability of firms to balance incremental and radical innovation programs. Prior research has also identified learning orientation as a key element of this process.

Managers should strive to improve their market and learning orientations by diagnosing their performance on each and benchmarking progress relative to exemplar firms.

In addition, long-run radical innovation requires firms to foster the motivation, opportunity, and ability to implement change…; in other word culture is key…

  • Motivation can be instilled by a reward system that makes experimentation and failure psychologically safe and the maintenance of the status quo psychologically unsafe.
  • Opportunity requires that employees be given the money, time, and voice to engage in change related behaviors.
  • Ability requires firms to hire the right type of people: ‘‘Individuals with low needs for uncertainty avoidance, high tolerance for ambiguity and the lust to experiment should be recruited for decision-makers’’…

  1. Baker, William E., and James M. Sinkula. “Does market orientation facilitate balanced innovation programs? An organizational learning perspective.” Journal of product innovation management 24.4 (2007): 316-334.

Proven components are ideal for innovation

Diagram showing that fracking used proven components.[1]

knowledge broker… firms innovate by combining existing technologies in new ways that result in dramatic synergy.

Explore new territories

Gain access to a wide range of industries or knowledge domains by working on a wide range of different problems and their existing solutions. The more diverse the experiences of everyone in your organization, the more diverse the set of past solutions to draw upon when facing a new problem.

“Working with companies in such dissimilar industries as medical instruments, furniture, toys, and computers has given us a broad view of the latest technologies available and has taught us how to do quality product development and how to do it quickly and efficiently.”

Learn something about everything

Learn as much as you can as fast as you can about the current state of the art surrounding any new project. The deeper and more flexible the knowledge you learn, the more easily you can use these past experiences to interpret new problems and recognize the value of past solutions.

“The best way to come up with ideas was first of all to go out and look at what’s out there.”

…knowledge brokers… may not know as much about any one thing as would a more specialized firm, but they often know when and where to look to learn more.

Find hidden connections

Build pathways that link project teams to the relevant knowledge of others in the firm. Invest in communication tools that provide for intensive interaction and analogic thinking. The more you communicate and interact around current problems, the more you will see these problems from a variety of perspectives and consider the range of possible solutions that this variety evokes.

Andersen’s Center for Strategic Technology demonstrates the firm’s latest thinking in business process solutions to its partners and clients. … not with brochures or technical specifications but, instead, with scenarios that combine a number of business and technical systems to paint a complex picture of what could be.

Make the idea work

Don’t stop with a good idea. Integrate innovative ideas with existing, well-developed, and well-accepted ideas from within the industry. Build prototypes, create simulations, and work with users to fit your innovative solutions into the established practices of these markets.

…implementation.. activities… generate a “wealth of knowledge that’s a result of the struggles, the agonizing they went through to try to figure out what’s the right way to proceed rather than the wrong way.”[2]

  1. “The Craic about “Fracking” – Technical Facts on Hydraulic Fracturing.”, 12 Aug. 2014, Accessed 20 Nov. 2016.
  2. Hargadon, Andrew B. “Firms as knowledge brokers: Lessons in pursuing continuous innovation.” California management review 40.3 (1998): 209-227.