Innovator's Dilemma - Validation of Vision

Innovators know. Innovators experience gratification when their visionary ideas finally get acceptance and traction. Today's headline is personal:

AT&T to Trial Mobile Payments for Online Shopping

During 2001 at AT&T's AT&T Labs incubator organization, I championed an incubator initiative (1 out of 2 to make it to market out of 20 AT&T Labs incubator initiatives) that encompassed mobile payments for online shopping (as well as wireline payments, pre paid payments, ISP payments and cable payments) that over phases would leverage all the major AT&T businesses' vast and vital assets of direct billed customer bases of tens of millions (as well as pre-paids robust partner distribution network).

AT&T's direct billed customer bases were not just generally overlooked strategic assets ('trusted billing relationships with a infrastructure core competency on a scale that was second to none'), they were basically viewed internally by leadership as a nuisance cost-center. Efforts were made to outsource the billing function ... but this complex, robust, overlooked asset turned out to be too big to outsource. Ironically, history was repeating itself from the 1984 Divestiture when AT&T c-levels and consultant advisors viewed AT&T's network as the crown-jewels to keep, jettisoning the LECs (Local Exchange Carriers) and their huge billing infrastructures as the antiquated portion of the business.

In late 3Q01 the then AT&T Labs President was days away from approving the incubator's launch when he jumped to another company, was replaced by a new Labs President who in short order axed the entire incubator organization - including the multi-phased, multi-business unit, eCommerce incubator initiative that F500 c-levels literally called "the Holy Grail of online billing" (the target customers got-it!). Phase 1 did launch directly by the prepaid group and began to scale with the likes of Disney, Sony, Rhapsody Music, Vindigo, CBS Sportsline and other premium content providers, coupled with distribution partners including Wal-Mart, BestBuy, 7-Eleven, fye and others ... but then came the SBC acquisition of AT&T.

Note that AT&T c-levels back in '01 were chasing the fraudulent industry-ghost Worldcom, a significant environmental factor that clouded their ability to focus on and genuinely appreciate the longer term harvest-potential these assets and core competencies represented on the silver plate before them [but also post SBC acquisition too as I learned while interfacing with new AT&T leadership based in Texas years later].

Innovators, especially in today's unprecedented economic climate, driving innovation takes more than strategic vision, persuasive evangelizing skills along with political adeptness at building alignment across leadership representing diverse stakeholder groups - internally and externally, it also takes relentless determination, soul-testing sacrifice and at least sometimes, relentless patience. (Here's the link to the story: http://www.cio.com/article/630963/AT_T_to_Trial_Mobile_Payments_for_Online_Shopping?source=rss_news)

Innovator's Dilemma - US News lauds Ball State University as having a Top 10 in nation entrepreneurship program & innovative initiatives

Ball State University has been driving innovation for decades (i.e.: first in the nation to implement a fiber optic infrastructure is just one of many of their leadership efforts). Nice to see my alma mater recognized by US News' 2010 survey of 1,400+ universities as having a Top 10 undergraduate entrepreneurship program in the USA per this linked story ("U.S. News lauds innovative programs, initiatives"): http://www.bsu.edu/news/article/0,1370,7273-850-64605,00.html

Innovator's Dilemma - Evolving

Two days ago the President of the European Commission - Jose Manuel Barroso (possibly a distant relative ... he and I have connected via social media and the family tree detective work is underway) spoke to an audience in Hungary about the role of universities in an innovative, globalized market. The commission is planning to introduce a new initiative to modernize European higher education to help keep pace with workplace demands for skills (which suggests to me that they hope to keep up with innovation elsewhere vs. driving innovation ... but maybe both if I am misinterpreting their aims).

In this clip (http://ec.europa.eu/commission_2010-2014/president/index_en.htm), President Barroso said "We want to free up the reservoir of talent, energy and knowledge that universities represent." This comment suggests a recognition that a relevance-gulf has emerged between what is being taught in European schools vs. what is required of young European adults in the real world ... now being influenced from beyond the EU's borders more than ever.

I see a common thread between what this EU Commission initiative is targeting to address and the challenges the US economy and society face. Roughly 3 decades ago a tide of deregulation was unleashed in the USA. A rising tide of magnificent innovation and fundamental life style changes resulted as artificial barriers were dismantled and policy decisions were made to open up new frontiers to development (i.e.: wireless spectrum). Opportunities came into focus for inventors, innovators, pioneers and of course investors. In parallel, the companion investor demand of ROI performance put increasing c-level pressure and focus on cost reduction. While formally regulated enterprises were organizationally bloated from guaranteed rates of return that instituted inefficiencies, over the ensuing deregulation decades, a cost-reduction paradigm emerged as a leading tactic for more 'easily' addressing investors' aggressive ROI demands. I say 'easily' pejoratively as contrasted with making the tougher decisions to pursue and commit to innovative, new revenue generating initiatives that almost always have out-year break even projections. With top officers eventually demanding business unit/line of business heads to cut into bone to meet investor demands, who could afford to make speculative investment decisions?

Just about everything I can think of evolves (including a mountain or even a rock exposed to the elements). European higher education gradually evolved based on environmental factors it faced within, but beyond Europe new competition emerged from evolving environments elsewhere. Certainly Europe's education system was aware of the evolving environments elsewhere, but possibly had institutional constructs that prevented it from adequately adapting. President Barroso's announcement shows that the EU Commission recognizes that Europe's education systems required fundamental structural changes that will facilitate more effective adaptability (that could also have evolved/resulted from too insular, parochial thinking).

Concerning the US business environment, beyond regulatory and taxation matters (a huge and separate issue), the 'easy' cost-reduction decisions by c-levels happen because their financial compensation incentives are focused on annual (and quarterly) performance ... derived from investor expectations and demands.  

Over the last 3-4 decades, has the US investor-culture (and thus this c-level reward system) evolved from a balance of short and long term, to short term excessive? My opinion is that the Baby Boom generation has gravitated the US investor- culture in the direction of being more focused on bigger and faster returns (vs. patient, longer haul investing that I saw as a more common investor-trait of prior generations).

While the USA's post-deregulation era has unleashed technological innovation that has also opened up vastly lower cost manufacturing markets in nations like China and Vietnam, as well as highly skilled and again vastly lower cost services markets in India and elsewhere, the US is facing a perfect storm of 'now-what?' after 3+ decades of post-deregulation, cost-reduction investor demands that logically influenced c-levels to outsource, offshore, move and shutter-up a significant percentage of the USA's onshore business base. Most oversized businesses have exhausted their annual dance of reorganize-downsize-repeat. Coinciding with this trend has been the downward trend in the USA's relative position on scholastic performance from elementary aged through collegiate aged students. These fundamentals cannot be changed overnight.

President Jose Manuel Barroso's announcement suggests more than recognition/acknowledgment, but commitment to making meaningful structural change. Beyond the obvious importance of sensible regulatory and taxation policy that facilitates US business' global competitiveness, and similar to the EU ... a need to close the relevance gap of the US education system, I still sense that some core structural aspects of our investor community's expectations and investment behavior (and the resulting c-level compensation-reward packages) needs attention - but that may be a cultural, evolutionary-thing that may only change out of necessity as the ebb and flow of consequences are fully understood. Survivors evolved because they evolved to survive.

Innovator's Dilemma - More companies solicit ideas online

Slim Odds for Inventors

by Sarah E. Needleman
Wednesday, October 6, 2010

provided by

More companies solicit ideas online; success eludes most.

Stu Berger has created more than 50 consumer products from inventors' ideas -- including some of his own -- in hopes of turning them into commercial hits. He expects his first big break later this month when one of those products, a posture-correcting pillow called the Side Sleeper Pro, goes on sale at some Bed Bath & Beyond Inc. stores as well as the retailer's website. "I thought this day would never come," says Mr. Berger, owner of Integrated Merchandise Group International Ltd., a sole proprietorship in Mamaroneck, N.Y. The path to prosperity can be long and arduous for inventors. Even if they manage to secure a patent, which can take years, they usually need to find a business willing to manufacture, package and market the item.

In an effort to better connect with inventors, some large manufacturers including Clorox Co. (NYSE: CLX - News), Kraft Foods Inc. (NYSE: KFT - News), General Mills Inc. (NYSE: GIS - News), Staples Inc. (Nasdaq: SPLS - News), Procter & Gamble Co. (NYSE: PG - News) and GlaxoSmithKline PLC (NYSE: GSK - News) have launched websites in recent years for soliciting product ideas. Some of the sites occasionally feature specific requests from the companies' research-and-development teams.

Before they launched, "inventors would typically have to find someone to pitch their idea to and it would maybe make it to someone else and then someone else," says Greg Piche, who works in Clorox's innovation group. "It wasn't a very streamlined process." Clorox in May also launched a two-month campaign to solicit proposals for new antibacterial cleaning products; the yet-to-be-determined winner will receive a $2,500 advance and other compensation based on sales.

Similarly, General Electric Co. and several venture-capital partners in July solicited proposals for a next-generation power grid. GE says the program -- the first of its kind for the company -- attracted nearly 3,000 submissions. Five winners will each receive $100,000 to develop their ideas, though there's no guarantee GE will invest further in the products. Even if an inventor's idea gets noticed, the odds of reaping big bucks are slim. Companies typically offer compensation in the form of royalty fees, small percentages of wholesale earnings. Some companies also provide one-time upfront payments, depending on the stage of development an invention is at, what type it is and whether it has legal protection.

Competition is fierce. AllStar Products Group LLC, a private Hawthorne, N.Y., company perhaps best known for its marketing of the sleeved-blanket Snuggie, receives more than 10,000 submissions a year from inventors, says Scott Boilen, founder and chief executive. The company enters into licensing deals for between 75 and 100 inventions a year, with Mr. Berger's Side Sleeper Pro being a recent example, he says.

Once a deal is signed, AllStar usually promotes the invention through infomercials and then attempts to sell the most popular items to Wal-Mart, Target, Walgreens and other retailers. AllStar promises to pay royalty fees ranging from 1% to 4% of wholesale earnings for inventions it helps land on store shelves. Some deals include upfront payments of $5,000 to $50,000, with higher earnings going to inventors of patented goods, Mr. Boilen says. Top-selling items can result in "millions of dollars over the lifetime of a product," he adds.

Bill Felknor, an inventor in Knoxville, Tenn., signed a licensing deal with AllStar in 2007 for Topsy Turvy, a device for growing tomatoes, cucumbers and other vine crops upside-down. Since then, he says more than 11 million units have been sold. Mr. Felknor, who has invented nine other products, says Topsy Turvy has generated him the most income by far (he declined to provide specifics). Still, being an inventor "is a difficult way to make your living," he says.

Danco Inc., a maker of bath and kitchen products in Irving, Texas, says it receives more than 200 product-idea submissions a year from inventors; just 10 to 15 of those ideas make it into retail stores, says Michael C. Miller, director of product partnerships. "To put something on a shelf, another product would have to come off," he says.

Some businesses specialize in helping inventors identify companies to pitch, enter submissions and 

negotiate contracts. InventHelp of Pittsburgh charges inventors between $200 and $15,000,depending on the number of services an inventor selects. InventHelp strikes about 50 licensing deals a year on behalf of inventors; in general, large companies offer the biggest payouts, says Robert Susa, president. Deals include royalty payments averaging between 2% and 5% of wholesale earnings, plus sometimes initial payments of $10,000 or more, he says. "You got to sell a whole lot of units to make a significant amount of money," says Mr. Susa. "You don't want to quit your day job."