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Nurturing the innovation reef

By Mario Morino

4 September 2009

A reef made of silicon

In the early 1990s, a seasoned executive shared a metaphor that has stayed with me ever since: he said that innovation is like a coral reef. Marine biologists don’t fully understand what causes reefs to form, he said, but we do know that human actions can nurture or harm the process. The same is true for innovation—a natural, chaotic, unpredictable process that is hard, perhaps even impossible, for well-meaning outsiders to foster. If we try to control or micromanage innovation, we risk squeezing out the very life forces that give rise to successful new ideas. Instead, we must focus on finding ways to nurture and accelerate the natural processes of innovation once they’ve begun organically.

For almost half a century, Silicon Valley has been the most compelling example of a healthy innovation ecosystem in the United States. Yes, the dot-com implosion and now the global credit crisis have dampened the valley’s exuberant spirits, and the exotic Italian sports cars in the parking lots of Sand Hill Road seem jarringly out of keeping with the somber reality of our times. But even after the deluge, Silicon Valley is the kind of reef ecosystem we should support and nurture across our nation.

It’s important to note that Silicon Valley’s remarkable ecosystem was not the result of a grand plan hatched by a civic or political leader. It developed organically, beginning as far back as the Great Depression, when Stanford University students Dave Packard and Bill Hewlett started tinkering in Packard’s Palo Alto garage. It’s also important to note that there has never been a defined, structured way to connect the dots in the valley. Instead, this organic ecosystem, with its interrelated professional and personal networks, has allowed the dots to connect themselves. A good example of this phenomenon is the remarkable TED conference which brings together the brightest minds in a wide range of fields to advance its mission of spreading ideas.

Spreading the success

Of course, Silicon Valley is not the only ecosystem of commercial and social innovation in America; the other highly innovative centers include Boston/Cambridge, the Potomac River region, Raleigh/Durham, Seattle/Redmond, San Diego, and others. Most of these regions and the nation as a whole, however, default to linear thinking with formal structures to define and control innovation. What we need instead is to turn the forces of innovation loose—to create the right conditions for that reef ecosystem to grow on its own and take hold. These regions need to emulate Silicon Valley’s seamless flow of knowledge, ideas, and people.

If you look, you will find astonishing examples of innovation, even in the unlikeliest places. Take Greenville, Mississippi, one of the most economically depressed communities in the United States and now the test site for an innovative environmental venture of global significance. The community is planting thousands of acres of bamboo, the fastest sequesterer of carbon dioxide, using a new cloning technique that will dramatically decrease the time it takes to produce mature bamboo forests.

But innovators like these are often disconnected, operating in silos, without the financial resources and strategic support they need to bring their ideas to fruition. They do not swim in a teeming, healthy reef ecosystem.

Toward a national innovation strategy

I have come to believe that nurturing innovation at the national level will require two kinds of approaches—top down and bottom up.

First, our nation needs an overarching framework—perhaps it could be called a national innovation strategy—that would define a shared vision, create a clear direction, and identify priorities for innovation. This strategy could be drafted, outside the political process, by a presidential commission made up of the most outstanding innovators and thinkers from a host of relevant disciplines and quarterbacked by a high-profile “innovation czar” appointed by the president.

The priorities might naturally start with the president’s top three, spelled out in his address to the joint session of Congress in January: developing clean, renewable energy; controlling the cost of health care; and making education more accessible. The commission would also have to embrace other needs, such as the enormous challenge of rebuilding our infrastructure and developing more robust emergency response and homeland security systems.

Take something as basic as the rebuilding of our highways, bridges, and rail systems. Right now, our stimulus dollars are buying the status quo rather than the smarter, longer-lasting, more cost-effective systems that would provide a quantum leap forward. For example, we now have the technology to embed our roads and bridges with microsensors that, interconnected into a “nervous system,” could reduce traffic congestion, improve maintenance, and enable far better decision making by governments. Similarly, whenever a jurisdiction considers new road projects, it should determine whether it could also enhance its telecommunications infrastructure by laying fiber-optic cable at the same time.

We ought to apply this same “let’s break the mold” thinking across the board—from how we educate our children to how we could have higher-quality health care at lower cost.

To put us on an innovation path, this national strategy would have to identify, to the fullest extent possible, the specific inflection or tipping points (or both) within each of the priority areas. These points would be opportunities where targeted investments in innovation, from the public, private, and philanthropic sectors, could have a disproportionate impact over the long term. On a smaller scale, this approach can be seen in the Bill & Melinda Gates Foundation’s $100 million Grand Challenges initiative. With the help of scientists all over the world, the foundation identified 14 health challenges that, if solved, would dramatically improve life prospects for the world’s poor. Then it offered very large grants to researchers who come forward with innovative approaches to these challenges.

In addition, the presidential commission described above could identify all the ways the federal government can support innovators and remove outdated legislative and regulatory barriers to innovation. The Washington Monthly’s recent special section on entrepreneurship contains several compelling examples of how government policies can stifle progress. One such example involves energy: entrepreneurs are eager to seize the potential of converting our outdated electric power systems to a smart grid but face daunting regulatory hurdles, thanks to a century-old regulatory scheme that rewards inefficiency.

An even bigger and more foolish barrier to innovation is the US immigration system. We invest huge amounts of money in educating the world’s best and brightest foreign engineers and scientists in our top universities—and then kick them out of the country. As a New York Times article documents beautifully, the foreign-born innovators and entrepreneurs who managed to navigate our immigration system have had an enormous impact on the success of Silicon Valley’s innovation ecosystem. We need to reform immigration to attract and retain the kind of top talent and potential innovators that are well represented in Silicon Valley. We should be just as welcoming to those who may not fit the high-profile innovator role, but who have the cleverness, desire and work ethic to create small businesses that, over time, will grow to add to the backbone of our middle class
We’ll need bottom-up approaches. For example, building on the mass-collaboration methodology used by innovative companies and outlined in a New York Times article, the administration could create a federal innovation stock exchange and open it to any of the federal government’s 4.2 million employees who wanted to float out-of-the-box solutions for tough societal challenges or new types of innovations with the potential to fuel our economic engine.

In my business life, I saw firsthand how innovative those who serve in government can be. Every year, the Partnership for Public Service presents the Service to America awards, honoring the contributions and innovations of federal employees—such as the one whose discovery led to the development of a vaccine for the virus that causes a majority of cervical cancers around the world. However, the sad fact is that federal employees are rarely asked to be innovative. The innovation stock exchange could motivate federal employees and provide this significant and relevant pool of talent with the means to express its ideas in a new, more public way. Ideas listed on the stock exchange could also spark additional ideas from inside and outside the federal government. Federal employees whose innovations were adopted could receive some form of bonus, as well as recognition from the president. If this worked for the federal government, one could imagine a network of innovation stock exchanges in which states, metropolitan regions, large universities, hospitals, and civic-minded corporations would put in place similar mechanisms to advance innovations addressing key social and economic needs.

With a national strategy, as well as efforts to seed creative chaos from the bottom up, the Obama administration could put America on the right path for the long term. Unleashing, channeling, and connecting millions of innovative minds across all regions, all disciplines, and all walks of life is the most important form of long-term stimulus the president can provide. It is the key to nurturing our national coral reef.

Comment [42]

Agree? Disagree? Let us know what you think. Please include your full name with your comment. Comments may be edited.

I’m in the automotive business and for quite a few years, was managing a young, start up franchise. The business was in the red and market share wasn’t picking up as strongly as planned. To survive, a small team of managers and myself had to innovate in many of our business processes, marketing and pricing strategies.

The team was young, enthusiastic and had a lot to prove. After a while, innovation became a culture and we were constantly asking ourselves what’s next and new we can do. This is especially true for marketing where our relatively unknown brand had to make itself heard among the extremely competitive and cluttered market place.

From my observations, a few factors came together that helped our little “ecosystem” flourish.
(1)The need to innovate or do things differently in order to survive. In other words, we were forced into a corner, had to differentiate and catch attention.
(2)The small team set up and the close power distance between the leader (myself) and the rest. The team was not afraid to table ideas and experiment.
(3)Importantly, we had the financial backing from the parent company to execute a lot of our ideas. This was encouraging to the team and the satisfaction of seeing an idea working and ringing the cash registers was tremendous.

I’ve since moved on to a much more established organization, managing a brand that has a stronger history and foothold in the market. The contrast in the level of innovation is obvious.

Processes are deeply enthrenched. Proven strategies are used repeatedly with no motivation to change. The brand has a loyal following and it will do well with everything status quo.

From these experiences, I believe innovation will happen in a “crisis”, within an informal, close knit environment. To grow this “ecosystem” on a national level, the same factors might have to be present as well.

Posted 12 September 2009, 12:58 by Victor Kwan
When I consider that in Europe the vast majority of innovations that lead to marketable and profitable products have been hatched in small and medium-sized companies in recent years, I wonder whether we need national strategies and regional innovation hubs. What we need, above all, are competent, curious, motivated and hard-working professinals that observe and think and that are encouraged to considert solutions outside the box. Yes, they also need some free time and some resources to pursue ideas, but the company also needs a strict Portfolio process that will determine at the appropriate time – that is as early as possible – which ideas become fully resourced and funded project.

Posted 10 September 2009, 15:57 by Fred Kohli
Great to see that my piece is sparking such good, substantive, and provocative comments. I’ve enjoyed reading all of the posts. Personal matters kept me from responding sooner, for which I apologize. I strongly agree with many, if not most, of them. I respectfully disagree with a few.

Bill raised a great question: “Doesn’t the idea of creating a reef contradict the notion that the best networks evolve organically?” I’m sorry I did not do a better job with the coral reef analogy. The point I was trying to make is that creating a reef de novo is not possible. Our aspiration should be to nurture the reefs that start organically. When we do find pockets of innovation, we need to be careful to ensure that our actions nurture and do not kill these innovation pockets, just as we’ve learned vis a vis coral reefs.

I heartily concur with those who pointed out the critical role of capital and also the limitations of the dominant VC model. Although I didn’t agree with all of what SV Founder wrote, I do agree in principle with his point, “ VCs don’t fund innovation—they fund Exit Events, with specified returns to LPs—and GPs. Maybe a national strategy to fund innovation should focus on that aspect.”

I want to raise the specter that entrepreneurs may face a very different venture capital/private equity world in the coming years. We have to ask if the convergence of VCs struggling to produce returns, the loss of leverage that private equity has depended upon, a more gun-shy investing world, and entrepreneurs who have not yet recalibrated their valuation expectations—to say nothing of the change in credit card financing, which may have been the biggest seed funding source out there—will make capital more scarce. I hope this new VC/PE environment forces some investors to be more introspective about how they can do more to nurture genuine, game-changing innovation. There are select investors who care deeply about sustained innovation rather than producing “one-shot wonders,” and who may learn to be less intrusive while providing more value through their knowledge and connections to the entrepreneurs and innovators they fund. But this requires a different mindset for many VC/PE firms. I agree that today there are too many private investors who are interested in quick scores, too prone to “run the business,” believe they can “reengineer” the businesses to be better, and make decisions for the short term rather than build great corporations and market leaders.

C Mahapatra commented, “Let’s replace the word ‘invention’ with ‘innovation’ in the old metaphor – Necessity is the mother of invention – and we have most of the answers. But we need to create necessity plus attend to the existing necessities with all seriousness.” I agree wholeheartedly. My family and I visited Israel in 2006 as part of an awards program. In a trip report immediately following our visit, I shared this observation: “Israel is finding solutions to the scarcity of resources in ways we can’t yet comprehend. Their compelling advantage is that as a people and culture they know they have to in order to survive.” America has a deep, proud tradition of innovation. But we don’t have this existential urgency and, in spite of all we’ve done, we do not enjoy a full cultural embrace of innovation. We desperately need that urgency and embrace.

I loved the comment that if we don’t expand access to quality education, we’ll be limited to getting “the best idea out of 1,000” rather than “the best 1,000,000 or more.” Yes! Yes! Yes! But that means we may have to change our view of education and the increasing focus on test scores. Khaja Ansari pointed out the importance of curiosity, essential to innovation and provided this comment: “We should discuss how we can improve curiosity. We improve curiosity by observation; asking questions, having confidence, and no negative judgment.” In addition to great test scores, shouldn’t we do more to ensure students learn how to learn, gain critical thinking skills, apply at least in principle the steps of the scientific method, and develop a digital literacy that addresses hard competency and social nuance?

I agree with all of the other key ingredients for innovation that Robert Friesen mentioned, including academic and other thought centers (and yes, Stanford is an outstanding example), communities of innovators, B2B and B2C markets, and a culture that supports risk taking and bouncing back from failure. Even more to the point, his closing paragraph is worth reading again:

“Finally, sustained innovation requires a resilient culture—one with people who are willing to risk it all, lose it all and try again. This requires that innovators bounce back from a ’failure,’ dust themselves off, glean what worked from it and take those lessons to the next situation. Doing this on a national scale is an admirable goal but, like anything, innovation is most successfully done by those who have either practiced it or have the patience, resources and resilience to learn it. The replicable model has a number of moving pieces that need to be nurtured together, yet in different ways, and tracked as on a spider chart.”

Friesen is absolutely on mark with the above. Although there are some efforts on a national scale of value, I believe that we are a nation—and a world—with pockets (regions) of innovation. What is important is the building of critical mass of talent—those who can and will innovate—within a region. And at the core of this network theory I’m suggesting is the fact that the innovation benefits from the industry clusters that Michael Porter has described so well. As Dr. Raghavan Guruswami commented, “The cluster approach is the ideal approach to innovation efforts.”

I vigorously agree with the thoughtful insights Kevin Walsh Crean shared: “We can foster innovation, but we’d have to adopt evidence-based management structures to do it, and we’d have to accept the profoundly destabilizing consequences of a) stripping many a manager of the illusion that they are more in control of the process than they actually are (and if that’s the case, how would they justify their decisions, and their salaries?); and b) allowing strategic decision-making to be more closely tied to learning, i.e., the rewarding of the recognition of failure, when it is in fact failure (and particularly when it helps to destroy a mental model that may have taken hold of management, e.g., as when one is in a bubble).” I loved all of this but found the idea of evidence-based management structures and entrepreneurial innovation to be in conflict, at least in some areas or domains.

What was surprising is only one or two commentators touched on the issues of intellectual property and that we are in the midst of paradigm shifts in this regard, with enormous implications for the innovation process.

Finally, I agree that the innovation from the bottom up will always be more important than any attempt to innovate from the top down and that government regulations can be a huge impediment to innovation. But several of the responses showed a willingness to throw the baby out with the bathwater. Silicon Valley would not be Silicon Valley if not for the critical infusions of innovation capital provided through the Department of Defense, the Department of Energy, and NASA. Perhaps it’s my personal history, but I don’t buy the notion that government has no constructive role to play in the innovation ecosystem. In terms of an Innovation Czar, I envision this role not as one of intervention, but rather one of using the Administration to encourage and support bottom-up, grassroots entrepreneurs and innovators. I don’t know whether a “czar” structure would be effective or not, or whether the term is even the right term. But I do know that we need big, bold national goals in a few areas of existential importance (e.g., carbon-free energy, breakthrough health technologies)…backed with big, bold funding…advanced via the kind of public-interest values and transparency typified by the Human Genome Project…and celebrated from the biggest pulpit in the world. After all, imagine what this discussion would be focused on had our government not made the investment to create the Internet. We wouldn’t even be having this blog commentary!

Posted 10 September 2009, 15:12 by Mario Morino
Someone had commented that innovation can only be the product of carrot and stick motivation. Not true. In fact, monetary carrots can actually stifle innovation by limiting the creativity of the mind. Career analyst Dan Pink in this TED presentation, using empirical evidence, shows that there are better ways to spur innovation than simple carrot and stick motivators. A must see:

http://www.youtube.com/watch?v=rrkrvAUbU9Y&feature=player_embedded

Posted 10 September 2009, 12:58 by Kevin Burns
The best way to foster innovation is from secondary levels of schooling because children think freely,and are at the peak of creative thinking, and are motivated by small incentives.only unfettered opportunites would
guarantee out of the box sulutions.

Posted 10 September 2009, 08:02 by J..A.simon
Great ideas comes from inventive minds – realising these ideas comes from bold visionary leadership. A national budget for innovation is a vague idea to put the cart before the horse.

A visionary leader will inspire those around them to find the resources to turn the idea into reality. There are indeed pressing global challenges that with vision and leadership science and technology can help address.

Visionary leadership can’t be handed out to someone with a title and a budget – they just emerge with the will and the drive to make change happen. We can’t know where they will come from. It could be anyone of us. It could be you.

Posted 10 September 2009, 03:57 by mp
In my opinion innovation needs the capability to build or do something useful, a market for this “something” and a system of recognition and rewards for this “something”.

The problem is with the first of the requirements. We as a society are not encouraging the people capable of doing this i.e engineers and scientists, to pursue their careers. Far too many of them are straying into Management studies since these careers pay better. We need to ensure that more of these bright and young minds continue with their primary specialization.

Posted 10 September 2009, 01:30 by Kalyan Dutt
Interesting article. Nonetheless, the economic theory has long taught us that every agent reacts to incentives. If one wants to foster innovation one needs to rethink our incentive system. It´s naive to believe that innovation can be driven by pure ideology and good will. Carrots and sticks, that´s the fundamental driver of any action.

Posted 9 September 2009, 15:31 by Paulo de Tarso
I couldn’t agree more with SV Founder: there’s not a well thought through thesis here.

To the extent that we understand innovation, it’s the result of empirical studies, like that conducted by Andrew Van de Ven in the Minnesota Innovation Research Project, the results of which were published in a huge slog of a book several years ago. One of the key insights from that study is that participants in an innovation project do not themselves have a good awareness of the dynamics of the innovation process. Moreover, because of the way that managers attribute responsibility for an innovation team’s success or failure, there’s a real disfunction, currently, to any attempt to oversee the innovation function. People on innovation teams swim in a sea of type I and type II errors, giving rise to real anxiety and uncertainty. I know; I’ve been there. Not an environment that’s naturally conducive to clear thinking by humans.

Unless, that is, a manager is wise enough to admit the very substantial limits that exist on one’s ability to predict returns, both immediate and long-term, to on-going innovative activity, and to take intelligent decisions within those limits in as un-biased a fashion as is possible. All of this, according to Van de Ven’s research, puts a premium on brutally, completely honest discussion of the on-going merits of a project. When crisis rears its ugly head, as it always does, these tough discussions may even require the reconsideration of the very assumptions of a project—even though a manager might have staked his or her personal reputation on the validity of those assumptions in order to get the resources to attempt the project in the first place! Now does the conundrum become clearer?

Mr. Morino, the author of the above article, would like to see a “seamless flow of knowledge” and a “national strategy.” Sure he would. It all sounds great and we’d all love to have it. The question, unanswered in the article, is realistically how. That requires a diagnosis of the underlying problem, such as Van de Ven has already sketched out, and a realistic appraisal of the likelihood of improving our chances of addressing that underlying problem.

With the managers you’ve known in your own workplaces, and the current management structures in place, does it even seem remotely possible, from the nostrums proposed above, that they will increase the candor of strategic conversations at your place of work? And how could a “national czar” or a “national strategy” possibly help?

I once knew a somewhat corrupt contractor who had to hang a door in a hurry. He was supposed to screw the hinges in. Having only his hammer around, he slammed the screws into the door jamb with his hammer. No one knew the difference when they came to buy the house and he got to use his hammer and go home on time. McKinsey, and most other consultancies, have many hammers lying about.

The problem with much business writing today (and always) is that it more or less stitches together memes that seem to be floating around in the larger culture, and which are already accepted. If a McKinsey consultant write an article extolling the virtues of an “ecosystem;” call for bold new action; and earnestly call for “out-of-the-box” thinking tied to a “national innovation strategy”—especially if this prescription seems to be based on anything coming out of the Silicon Valley— who’s going to disagree?

Sound management advice, however, is often far less sexy, far more empirically and rationally grounded, far more complicated and distressing. We can foster innovation, but we’d have to adopt evidence-based management structures to do it, and we’d have to accept the profoundly destabilizing consequences of a) stripping many a manager of the illusion that they are more in control of the process than they actually are (and if that’s the case, how would they justify their decisions, and their salaries?); and b) allowing strategic decision-making to be more closely tied to learning, i.e., the rewarding of the recognition of failure, when it is in fact failure (and particularly when it helps to destroy a mental model that may have taken hold of management, e.g., as when one is in a bubble). Do you know many managers that reward the recognition of failure? That reward candor? Or that manage anxiety and uncertainty well? In what may be the understatement of this or any other blog, those things are not easy to do. kevinwcrean@hotmail.com

Posted 9 September 2009, 13:22 by Kevin Walsh Crean
Bill Gates Foundation? Poverty? Government Czar? Get real. Innovation comes from environments with strong economic engines and less government involvement. Extreme global poverty grows at 3% per year. Bill Gates my you know what. Economic engines have to come first(!). Union organizer “Manufacturing Czar?” Maybe we can innovate if there is anything left in 4 years. Yes, we need more Czars…

Posted 9 September 2009, 11:24 by B. Francis

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