Game changing innovation, patent strategy and company size

Can large companies create truly game changing innovation or is it just too hard for large companies? and what does this mean for patent strategy?

Andy Grove recently wrote about how GE and Walmart should be going for ‘moonshot’ innovations – the electric car, and the US health care system, respectively.

This has naturally prompted a lot of discussion, not least of which from Harvard Business Review. Bill Taylor at Harvard has blogged about it and subsequently been interviewed on the HBR IdeaCast about his post. In essence, Bill argues that with rare exceptions, large companies can not create disruptive technology that is truly game changing. Instead at best, they can come up with incremental improvements. The exceptions he cites are Apple and IBM – both of which had to have a near death experience to prompt a dramatic rethink. Bill says that almost all of the world’s disruptive technologies have come out of small, venture capital backed companies, not large ones.

This is all pretty interesting, because there’s been increasing pressure over the past 12 months on the validity of patents which cover incremental improvements – based largely on obviousness.  In India, section 3(d) is a prime example (and it looks as thought it will spread across Asia). In the US, KSR v Teleflex clearly reinforces this view.

So, is Bill right – can large companies come up with game changing / disruptive technologies, or is it all just too hard for them? If that’s right, what does that mean for the value of the patents they file as the law of obviousness continues to squeeze out incremental improvements?

I’m personally with Andy on this one. Large companies can and regularly do innovate well beyond incremental improvements. They’re in a unique position to structure their innovation processes to get the best of both worlds – the resources of a large entity and the pace and creativity of much smaller teams. Provided that they have the foresight and the determination to see it through.

What do you think?

5 Comments on “Game changing innovation, patent strategy and company size

  1. Innovation requires hi-level management attention, because for lower-level players it is just a headache. Disruptive innovations start small, and no management attention is available for anything small. On the other hand, incremental innovation concerns existing large-scale sales, which easily attracts management attention.

    There are only two solutions that may work: a separate group dedicated solely to disruptive innovation and has the resources and authority for experimenting and taking risk, or where the top management is made up of outstanding innovators.

  2. MT – thanks for your great comments, and welcome.I think you’re right and I’m skeptical about your second option working in practice.The first option is, however quite doable, I think.  Even then, how many large company executives will take the risk of creating a small entity within the organisation and letting it freely innovate?

  3. The fact is that disruptive innovation wont just happen in a planned way. It happens when either people are left to think free (as in a University) or if the survival of a company is based on a thinking model (as in a startup). However, both these options are unlikely in a large company.

  4. We are an SME.  For over 20 years we have steadfastedly followed a high technology path towards what we had hoped would be a successful outcome.  Mostly funded in-house, we have necessarily had to ‘low profile’ since we constantly read the ever promoted proposition that without IP cover, we are vulnerable.  Consequently, we find it difficult, if not sometimes [like now] impossible to negotiate a step up the ladder.  How to gain interest and momentum without giving away confidential information.  In any case, we are probably not qualified to know what is confidential and not confidential.Pre recession, we have been unable to interest venture capital or corporate funding.  We are at an early stage, though our technology due diligence has been thorough.  Very few organisations are interested in funding other people’s research, whether these be governmental or commercial.What is an SME and who came up with the numbers separation;  a company of 250 personnel in Cornwall is one of our large companies.  Moreover, I constantly read that the smallest micro high technology startups are the most likely to come up with a truly disruptive concept, theme or invention.After over 20 years and with the now alarming spur of a growing recession, I did believe we would have maximum opportunity to secure the necessary funding; at least to overcome the ‘proof of concept’ need.  We have a disruptive enabling concept with real global potential and we have even with the limitations of low profile been able to find interest from perhaps the most august heights of intellectual science and our latest and most modern digital laboratory in UK.We have carried out a study into what we need for proof of concept in terms or resources, personnel and funding and we believe we are almost there.  However, it does not look as though we are going to be successful, like so many times in the past, purely because a large percentage of government funding, either UK or EU will 1. not be sufficient so that we can network and negotiate, 2.  we have not found one commercial organisation willing to take a risk on this high tech venture and 3.  we believe we need the support and enthusiastic interest of a professional commercial venture right from the beginning, if we are to be properly balanced to pursue the difficult follow-on steps of company establishment and market entry.75% R&D funding from government is 75% of nothing, if the remaining match funding is unavailable.I consider a realistic approach will be to set up a small, mostly paper but legal company formation to handle this initial period, so that everybody concerned knows precisely where they stand for the potential future.We must patent and safeguard our potential intellectual property, although we shall not be able to levy any defence or counter any attacks from unethical competition unless we spend our formative years on mounting and maintaining a professional vanguard at considerable expense. It has been apparent for some time that the largest international groups function on the basis that a startup or small commercial entity will not be able to present a response likely to cause them other than a passing blip.We earnestly wish to proceed with our innovative venture but how do we find the something like £20k to fund a professional global IP defense in the form of a patent.In order to enter the lists, we have to muster adequate funds to network and negotiate with potential technology and government partners. To become a contributing partner, our earlier DTi published a PowerPoint presentation 7 years ago pointing out that at least £25k was the then anticipated requirement to qualify as an active member in respect of the EC FP6 [now FP7.] R&T Innovation Framework.We are familiar with the likely expenses load on such a project.  We came to Cornwall in 1990 having spent a year negotiating a £25k innovation technology grant to begin this project.  When ill health intervened in 1992, we had ourselves spent a matching £80-90k.Throughout the intervening period, the first several years were spent getting back to a reasonable level of health to begin all over again.  Technology like the tide waits for no man; our earlier efforts were based around a secure voice module for analogue cell phones and two-way radios and this with the advent then of the digital cellphone had become obsolescent.Our in-house funding base had drastically reduced and apart from some other small projects we have generally bumped along the bottom in our ‘high tech UK’ fashion till the present day.In talking with our potential academic partners, we find ourselves unable to guarantee whether or not we had disclosed confidential information in the interim, to the extent, we do not know how to proceed with the project and to sign a non disclosure agreement which itself may be the subject of disagreement either now or as we proceed.The only way we can proceed in UK, seems likely to be as suggested above, with the formation or a dynamic legal document, such as the formation of a limited company to meet the needs of all, – 1. a professional patent application funded by this new company, – 2. the necessary funds being available to do this and to meet our in-house and external networking and negotiation with all concerned, prior to our preparing and submitting an EC FP7 bid and – 3. meeting our costs and those of all participating partners throughout the FP7 proof of concept first stage project.I am writing this because my experience seems to be so much at odds with the academic and government projected proposition where innovation and the SME is concerned.  If like the University startup, we had funding throughout our pre spin out followed by seamless venture capital follow on, we know we would have been able to start this project so many years ago.  All we want to do is make high technology products in the open market.  To live in a society where manufacturing was derided, let alone edge level technology and the achievement of success was equated with a management buyout, closely followed by a buyout or closure of what was left of what were once ‘almost noble’ entities, it is no surprise, recession or not, that where we are now was to be expected.Whether we have the ability to fight our way out and begin to learn that making new things is not easy.  I did not believe the description ‘a nation of shopkeepers’ until it is now obviously so true;  how much easier it is to forgo innovation and all that involves and to just import from China and garner the maximum profit in so doing. 

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