Michael Serbinis has been to the brink of the bubble and back.
A few years ago he was at Zip2, creating a search engine that was later sold to AltaVista. Then, like many bright people in the late 1990s, Serbinis headed to California, where he created a company, DocSpace, that he then sold to
Critical Path. He joined Critical Path, which provides messaging software to telecommunications carriers, in March 2000, just as tech stocks started sinking. As he reviewed his own fortunes, Serbinis found himself in the chief technology role at a company that had acquired more than 10 companies, with dozens of lines of business each. There were some good ideas there, but not enough that could make any money.
“”We had a bag of apples, oranges and hammers,”” he says. “”Apples are hard enough to sell in this kind of market.””
Companies often say they thrive on innovative ideas that transform or improve their products and services. The economic downturn, however, has forced many of them to refocus their efforts on what’s proven and profitable. The result is an increased tension between the need to fund research and pay attention in the bottom line. Even seasoned inventors are feeling the pressure.
“”If you miss a beat, if you don’t meet financial expectations, they punish you,”” says Rafik Loutfy, corporate vice-president of Xerox Corp. The owner of more than 30 patents, many of which he developed at the firm’s famed Palo Alto Research Center, Loutfy says companies are no longer content to simply hire the best minds, supply them with the best equipment and hope that great product ideas come out of it. Instead of encouraging revolutionary innovation, in tough times most companies stick to what Loutfy calls “”sustaining”” innovations that simply keep existing products going.
“”The tougher the economy, the better managed the company, the more R&D is pushed to sustaining innovations,”” he says.
Michael Raynor, a director with Deloitte Research in Toronto and author of The Innovator’s Solution, says approximately 80 per cent of all R&D projects fail, which naturally makes companies shy about investing in high-risk or “”disruptive”” innovation projects. Sustaining innovation projects, in contrast, merely improve service but increase market share. “”That can be a self-limiting strategy, because eventually you run out of up-market areas you can sell into,”” he says, adding it may be wiser to experiment with disruptive technologies that could pay off big dividends later. “”Sometimes it’s actually easier to go after those opportunities, because the expectations are very low.””
The tricky part of managing innovation is figuring out when customer shifts will occur. One technique is to involve customers in the innovation pro