Innovation and US Research - American Chemical Society

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16 Innovation W i t h i n the Corporation BRIAN M . RUSHTON Celanese Research Company, 86 Morris Avenue, Summit, N J 07901

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E D W A R D H . K O T T C A M P , JR. Bethlehem Steel Corporation, Bethlehem, P A 18016

The I n d u s t r i a l Research I n s t i t u t e a f f i r m s that there is an urgent need to improve the understanding and stewardship of t e c h n o l o g i c a l innovation w i t h i n the U.S. corporate environment. The innovation of technology that t r a n s l a t e s i n t o new products and processes f o r world markets is of s t r a t e g i c importance to the economic w e l l - b e i n g of the n a t i o n . Although innovation is i n e v i t a b l y a f f e c t e d by f o r c e s outs i d e d i r e c t c o n t r o l by the corporations concerned, it is nevert h e l e s s felt that i n d u s t r y should a l l o t more of its time and e f f o r t to managing the elements of the innovative process that are under its c o n t r o l . In this connection, the I.R.I. b e l i e v e s that the f o l l o w i n g areas are of prime importance w i t h i n the corporation: I. Top Management's A t t i t u d e toward Innovation II. F u n c t i o n a l Coupling w i t h i n the Corporation III. The E f f e c t of O r g a n i z a t i o n a l S t r u c t u r e IV. The Management of Change in Corporations I.

Top Management's A t t i t u d e toward

Innovation

The demands of s o c i e t y are c o n s t a n t l y c h a l l e n g i n g the existence of any system or e n t e r p r i s e . The lessons of h i s t o r y are q u i t e c l e a r that in order to s u r v i v e , every e n t e r p r i s e must respond to societal values and expectations. Key t o the surv i v a l o f a c o r p o r a t i o n i s i t s c a p a c i t y f o r s e l f - r e n e w a l and sustained momentum, and the s t i m u l a t i o n and channeling of t h i s c a p a c i t y i s a p r i n c i p a l r e s p o n s i b i l i t y o f s e n i o r corporate management and p a r t i c u l a r l y the c h i e f executive o f f i c e r . In the case of high-technology c o r p o r a t i o n s , s e l f - r e n e w a l i s almost synonymous with innovation. The f o s t e r i n g of i n n o v a t i o n , then, i s not an option but a v i t a l n e c e s s i t y f o r the top l e a d e r s h i p of a technology-oriented e n t e r p r i s e .

0-8412-0561-2/80/47-129-173$5.00/0 © 1980 American Chemical Society Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

16.

RUSHTON

Innovation Within the Corporation

179

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Business managements are f i n d i n g i n c r e a s i n g l y that they must s a c r i f i c e p r o f i t s to s a t i s f y these needs of t h e i r employees. (e) Increasing Female Representation. The impact of more women i n our labor f o r c e w i l l continue to cause great changes. Management and s c i e n t i f i c ranks i n the male-dominated technol o g i c a l i n d u s t r i e s are prime areas f o r female p a r t i c i p a t i o n . The e f f e c t of women on the innovation a c t i v i t y i n the corporat i o n s i n such i n d u s t r i e s i s l i k e l y to be q u i t e s i g n i f i c a n t . How to take maximum advantage of these new inputs f o r the process of i n n o v a t i o n i s s t i l l another challenge i n the management of change. No one can prophesy the p r e c i s e s c e n a r i o of the f u t u r e , but we have h i g h l i g h t e d some key problems and challenges i n what i s emerging as one of the most dynamic periods i n America's socioeconomic h i s t o r y . The top p r i o r i t i e s of American corporat i o n s must embrace a c t i o n s aimed at maintaining our a b i l i t y to innovate i n an atmosphere of constant change.

* * * * * * * In c l o s i n g , the I n d u s t r i a l Research I n s t i t u t e j o i n s others i n making a strong appeal f o r a r e d e d i c a t i o n to technology innov a t i o n w i t h i n and by American c o r p o r a t i o n s . In a world of i n c r e a s i n g competitiveness and r a p i d , o f t e n d r a s t i c socioeconomic change, c o r p o r a t i o n s must continue to i d e n t i f y emerging needs and i n n o v a t i v e d i r e c t i o n s and d e a l with them p r o a c t i v e l y . Techniques f o r guiding a complex array of t a l e n t s and f u n c t i o n s through the o f t e n long process of t e c h n o l o g i c a l i n n o v a t i o n are based on, among other t h i n g s : (1) a r e c e p t i v e a t t i t u d e toward the champions of new technology and the requirements of v a r i o u s departments i n v o l v e d i n the i n n o v a t i v e process, and (2) an a b i l i t y to keep these v a r i o u s elements i n balance and make c e r t a i n they continue to be f u n c t i o n a l l y coupled with each other and with f a c t o r s from the marketplace, Government, and s o c i e t y as a whole. F i n a l l y , to be s u c c e s s f u l , i n n o v a t i o n , p a r t i c u l a r l y of the breakthrough type, r e q u i r e s longer-term f i n a n c i a l support. Boards of d i r e c t o r s , as the f i n a l a r b i t e r s of corporate s t r a t e g y , must be w i l l i n g to a u t h o r i z e t h i s kind of support i n the face of pressures to put the major p a r t of a company's e f f o r t i n t o p r o j e c t s geared to current or near-term r e t u r n s . RECEIVED November 13,

1979.

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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174

INNOVATION AND U.S. RESEARCH: PROBLEMS AND RECOMMENDATIONS

The I n d u s t r i a l Research I n s t i t u t e b e l i e v e s that corporate leaders recognize innovation to be one of t h e i r most important responsibilities. However, a host of i n t e r n a l and e x t e r n a l f a c t o r s a f f e c t i n g the l i f e of c o r p o r a t i o n s have tended to f o r c e a t t e n t i o n away from an e n e r g e t i c p u r s u i t of t e c h n o l o g i c a l innov a t i o n and can v i t i a t e top management's readiness to m o b i l i z e corporate-wide cooperation. Such f a c t o r s i n c l u d e i n c r e a s i n g Government r e g u l a t i o n , a burdensome tax s t r u c t u r e , the deepening problems of c a p i t a l fund c r e a t i o n , and r i s i n g l a b o r , m a t e r i a l s and energy c o s t s . A l l of these, and more, represent urgent problems that corporate l e a d e r s h i p has been f o r c e d to cope with i n terms of a l o g i c a l o r d e r i n g of p r i o r i t i e s , and innovation may have l o s t ground i n that p r i o r i t i z a t i o n . The formal t r a i n i n g of corporate l e a d e r s h i p has perhaps played a hand i n the o r d e r i n g of the above p r i o r i t i e s . There has been a n a t u r a l need to deal f i r s t with those i s s u e s that lend themselves to more r a p i d s o l u t i o n s and promise to y i e l d s o l i d returns immediately or i n the near term. This a t t i t u d e has both c a l l e d f o r and a l s o been r e i n f o r c e d by courses i n the business and management c u r r i c u l a of u n i v e r s i t i e s as w e l l as s p e c i a l programs and seminars that s t r e s s t r a d i t i o n a l business skills. Only r e c e n t l y have executive t r a i n i n g programs begun to s y s t e m a t i c a l l y address the problems and techniques of managing change and t e c h n o l o g i c a l innovation. There i s a need to a c c e l e r a t e the development and dissemination of such t r a i n i n g programs at the highest l e v e l s i n U.S. industry. In many cases heightened awareness of the c r i t i c a l importance of t e c h n o l o g i c a l innovation may be needed to b r i n g about a change i n the way c o r p o r a t i o n s and t h e i r governing boards assess the long and d i f f i c u l t process that r e s u l t s i n s u c c e s s f u l innovation. T e c h n o l o g i c a l innovation should be accorded the same day-to-day a t t e n t i o n and support as has t r a d i t i o n a l l y been given to corporate funding, share of market, p l a n t operations and the l i k e . In s h o r t , corporate s t r a t e g i c plans must i n c l u d e more of the a l t e r n a t i v e s based on t e c h n o l o g i c a l innovation and s t r e s s a d e d i c a t i o n - or r e d e d i c a t i o n - to the c o r r e c t stewardship of that complex process. Two concrete recommendations geared to improving t h i s stewardship are: * Top l e a d e r s h i p must assume the r e s p o n s i b i l i t y f o r studying, understanding, and implementing the techniques of i n n o v a t i o n , above a l l i n the high-technology c o r p o r a t i o n s . • Management t r a i n i n g c u r r i c u l a should pay more a t t e n t i o n to courses designed to sharpen the s k i l l s of corporate l e a d e r s h i p i n the area of technological innovation.

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II.

RUSHTON

Innovation Within the

Corporation

175

F u n c t i o n a l Coupling w i t h i n the Corporation

The management of i n n o v a t i o n r e q u i r e s a balanced a t t a c k on many centers of u n c e r t a i n t y , whether t e c h n i c a l , economic or social. Innovation must be managed not as an agglomeration of i n d i v i d u a l segments but as a t o t a l system i n which d i v e r s e f u n c t i o n s and a t t i t u d e s are c o r r e c t l y coupled. Some key e l e ments i n a system aimed at technology i n n o v a t i o n are: • The technology i t s e l f , i n c l u d i n g a f e a s i b l e manufacturing approach. • The v i s i o n of d e s i r a b i l i t y i n the marketplace. • Appropriate f i n a n c i a l management, i n c l u d i n g c a p i t a l formation and the a l l o c a t i o n of risk capital. B a r r i e r s to i n n o v a t i o n , e s p e c i a l l y i n the corporate e n v i r o n ment of very l a r g e o r g a n i z a t i o n s , o f t e n a r i s e because of problems inherent i n c o u p l i n g many d i v e r s e requirements, outlooks and f u n c t i o n s . Some examples of these problems as they r e l a t e to the three key f u n c t i o n s are: Function 1. Technology. Innovation encompassing high r i s k but high reward o f t e n r e s u l t s from major t e c h n i c a l advances, e.g., the t r a n s i s t o r , s y n t h e t i c f i b e r s , a n t i b i o t i c s , xerography, the d i g i t a l computer, and i n s t a n t photography. Problems a r i s e i n t h i s type of i n n o v a t i o n because of the seemingly excessive time i t takes to couple the gathering of fundamental knowledge to a v i s i o n of the marketplace or acceptable f i n a n c i a l rewards. Thus, h i g h - r i s k i n n o v a t i o n meets with v a r i o u s degrees of opposit i o n i n the modern corporate environment. A t t e n t i o n to s h o r t term gains o f t e n gets i n the way of developing a balanced p o r t f o l i o of short-term and long-term o v e r a l l corporate s t r a t e gies. I f h i g h - r i s k , high-reward breakthroughs are to be achieved, there w i l l have to be a more t o l e r a n t , p a t i e n t a t t i t u d e toward the process of technology i n n o v a t i o n . Function 2. Market D e s i r a b i l i t y . Many important innovat i o n s address l a t e n t market needs. Since they c r e a t e markets, the market cannot be q u a n t i f i e d i n advance. The v i s i o n r e l a t i n g what can be done - the i n v e n t i o n - to what i s worth doing i . e . , what i s p o t e n t i a l l y marketable - i s perhaps the most important element i n the process of i n n o v a t i o n . F a i l u r e to establ i s h t h i s c o u p l i n g i s a d i s t i n c t b a r r i e r to i n n o v a t i o n . Senior corporate management must provide guidance as to how comfortable they are with s e l e c t e d f i e l d s and business areas and d e c l a r e what they are w i l l i n g to allow the c o r p o r a t i o n to engage i n . Although much has been s a i d about the d e s i r a b i l i t y

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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INNOVATION AND U.S. RESEARCH:

PROBLEMS AND RECOMMENDATIONS

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of champions who w i l l push a development, i t i s e q u a l l y necessary that a c o r p o r a t i o n have tough, p r a c t i c a l l e a d e r s h i p that can p u l l d i f f e r i n g f u n c t i o n s and a t t i t u d e s together and move them forward toward c l e a r l y defined goals. T h i s p u s h - p u l l mechanism i s an extremely powerful c o u p l i n g f o r c e . F a i l u r e to create the e n v i ronment where the t e c h n o l o g i s t works together with the marketing v i s i o n a r y and where both i n t e r f a c e with top management i s c e r t a i n l y a formidable b a r r i e r to i n n o v a t i o n . Function 3. F i n a n c i a l Management. F a i l u r e to p r o p e r l y assess f i n a n c i a l resources i s c i t e d as a major cause of f a i l u r e f o r i n d i v i d u a l entrepreneurs and small businesses. In c o n t r a s t , l a r g e c o r p o r a t i o n s o f t e n overdo f i n a n c i a l e v a l u a t i o n and a n a l y s i s of the prospects of a new i d e a . Indeed, the new-idea champions i n a c o r p o r a t i o n r i g h t l y complain of " p a r a l y s i s by a n a l y s i s " and f e e l that few i n n o v a t i v e ideas can get through these corporate f i l t e r s . R i g i d a p p l i c a t i o n of c l a s s i c a l f i n a n c i a l a n a l y s i s i s not w e l l s u i t e d to the e a r l y stages of i n n o v a t i o n , where i t can sometimes c r e a t e an insurmountable b a r r i e r . As opposed to the c o n t r o l - o r i e n t e d mode more g e n e r a l l y a p p l i c a b l e to mature b u s i ness o p e r a t i o n s , a f i n a n c i a l a t t i t u d e that i s supportive over the longer term i s what i s needed to s t i m u l a t e i n n o v a t i o n . A more s u b t l e f i n a n c i a l b a r r i e r i s the p r a c t i c e of p l a c i n g r e s p o n s i b i l i t y f o r i n n o v a t i o n on the research department but keeping f i n a n c i a l c o n t r o l i n the hands of p r o f i t - c e n t e r management. To hold one f u n c t i o n r e s p o n s i b l e f o r long-term r e s u l t s while f i n a n c i a l l y c o n t r o l l i n g i t v i a a corporate u n i t answerable p r i m a r i l y f o r short-term gains i s counterproductive. In terms of the a t t i t u d e s of top management, such an approach can only be looked upon as a "mixed s i g n a l " from above. The question then becomes: Do those i n top management r e a l l y support innovat i o n or are they a b d i c a t i n g t h i s p a r t i c u l a r r e s p o n s i b i l i t y i n favor of other s e l e c t e d higher p r i o r i t i e s ? Nothing i s more e f f e c t i v e i n p u l l i n g down b a r r i e r s to innov a t i o n than a management committed to a l l - o u t corporate-wide f u n c t i o n a l cooperation f o r i n n o v a t i o n . The converse can be devastating. Here are some recommendations f o r f u n c t i o n a l c o u p l i n g aimed at enhancing i n n o v a t i o n : • Recognize that i n n o v a t i o n i s a complex s e r i e s of events t a k i n g p l a c e w i t h i n the c o r p o r a t i o n as a whole. F a i l u r e to couple any of the f u n c t i o n s i n t h i s s e r i e s can make the whole system f a i l . Consistency of support i s r e q u i r e d by the long-time horizons of technology i n n o v a t i o n . On/off support discourages r i s k - t a k i n g or personal commitment at the t e c h n i c a l innovative level.

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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RUSHTON .

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•

«

III.

Innovation Within the Corporation

R e a l i z e that there i s no such t h i n g as r e l y i n g on an i s o l a t e d f u n c t i o n to be solely responsible f o r c r e a t i v i t y . The whole c o r p o r a t i o n must share t h i s responsibility. Be aware that c l a s s i c a l f i n a n c i a l analys i s r i g i d l y a p p l i e d to the e a r l y stages of the i n n o v a t i o n process can s e r i o u s l y i n h i b i t or even t o t a l l y s t i f l e the process. A sustained l e v e l of funding over long periods of time i s a c r i t i c a l r e quirement . Encourage the co-existence of technology development champions and the kind of top management that i s supportive y e t f o r c e f u l . These two elements c r e a t e the p u s h - p u l l a c t i o n needed to move i n n o v a t i o n forward. The E f f e c t of O r g a n i z a t i o n a l S t r u c t u r e

I t i s probably impossible to a r r i v e a t a consensus on the p r e c i s e character of the p e r f e c t o r g a n i z a t i o n a l s t r u c t u r e f o r maximizing i n n o v a t i o n . Each i n d u s t r y has i t s own s p e c i f i c c h a r a c t e r i s t i c s , and these c h a r a c t e r i s t i c s determine how best to c r e a t e such a s t r u c t u r e . However, c e r t a i n p r i n c i p l e s are noted: • Modern t e c h n o l o g i c a l i n n o v a t i o n w i t h i n l a r g e c o r p o r a t i o n s seems to demand a c r i t i c a l mass that contains a s u f f i c i e n t array of s p e c i f i c b a s i c s k i l l s , both techn i c a l and n o n - t e c h n i c a l . I f the scope i s too narrow i n terms of resources, i n d i v i d u a l s p e r c e i v e very l i m i t e d h o r i z o n s . • Every i n t e r f a c e crossed i n the process of technological innovation necessitates a technology t r a n s f e r , and hence problems of acceptance, ownership and c o n t r o l a r i s e . Each i n t e r f a c e can become a p o t e n t i a l barr i e r to i n n o v a t i o n unless managed and coordinated with great s k i l l . • A p r o f i t a b l e o p e r a t i o n u s u a l l y has the resources a v a i l a b l e to provide f o r the f u t u r e . An u n p r o f i t a b l e one o f t e n does not and i s f o r c e d to focus on only short-range needs.

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.

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INNOVATION AND U.S. RESEARCH: PROBLEMS AND

RECOMMENDATIONS

The Management of Change

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Innovation i s a f r a g i l e process; and when r a p i d or s i g n i f i c a n t changes i n the t o t a l environment take p l a c e , the process can s u f f e r s e v e r e l y i f not managed i n an empathetic manner. The t u r b u l e n t seventies are probably a harbinger of things to come, and we must get accustomed to managing i n n o v a t i o n i n periods of continuous change. Examples of changes i n the t o t a l environment that w i l l p a r t i c u l a r l y i n f l u e n c e i n n o v a t i o n are: (a) Perceptions of the People. For the s o l u t i o n of problems such as i n f l a t i o n , energy shortages, p o l l u t i o n , urban b l i g h t and s t r i f e , and r a c i a l t e n s i o n , the p o p u l a t i o n looks mainly to two i n s t i t u t i o n s - the Government and b i g business. As business shoulders an e v e r - i n c r e a s i n g p o r t i o n of the respons i b i l i t y f o r p r o v i d i n g such s o l u t i o n s and a l l o c a t e s more of i t s resources to them, corporate management may f i n d i t s e l f being forced toward more c o n s e r v a t i v e , r i s k - f r e e p o s i t i o n s - and the i n n o v a t i o n process w i l l s u f f e r . (b) Government-Business I n t e r a c t i o n . Increased Government r e g u l a t i o n of business i s causing d i s t u r b i n g changes i n the general business environment. Business leaders are becoming r e a c t i v e i n s t e a d of p r o a c t i v e . The e x p e c t a t i o n that Government w i l l add to the l i s t of imposed and sometimes a r b i t r a r y r u l e s and r e g u l a t i o n s i s causing short-term t a c t i c s to take precedence over the longer range, more s t r a t e g i c postures. I f our t r a d i t i o n of i n n o v a t i o n i s to s u r v i v e , a b e t t e r balance of l o n g - and short-term c o n s i d e r a t i o n s must be achieved. (c) I n t e r n a t i o n a l Competition. Our n a t i o n a l p r o s p e r i t y w i l l be t i e d more s t r o n g l y i n the f u t u r e to how w e l l American c o r p o r a t i o n s can compete i n t e r n a t i o n a l l y , e i t h e r as m u l t i n a t i o n a l partners or entrepreneurs i n world markets. This trend r e q u i r e s that a p p r o p r i a t e r i s k - b e n e f i t analyses be cont i n u o u s l y performed to decide on the current balance between s a t i s f y i n g d e s i r a b l e s o c i a l goals and a c h i e v i n g the necessary economic competitiveness. I f the funding of high s o c i a l goals d r a i n s too much of our resources away from t e c h n o l o g i c a l innov a t i o n , not only w i l l our world p o s i t i o n be p e n a l i z e d but event u a l l y so w i l l our a b i l i t y to fund these d e s i r a b l e s o c i a l programs a l s o l e s s e n . (d) Changing Work E t h i c . The t r a d i t i o n a l work e t h i c i s undergoing s i g n i f i c a n t change. Personal d e s i r e s such as job s a t i s f a c t i o n , freedom of d i s s e n t , and d i s c r e t i o n a r y time are becoming e s s e n t i a l items i n the minds of the l a b o r f o r c e .

Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.