Last year Google completed the first entire restructuring of their corporate organization since it started. This reorganization included creating a parent company, Alphabet, Inc. and then moving various units that were formerly part of Google to separate entities. Part of this effort included repositioning their research and development arm, into a company called Google X.
This restructuring is showing promising results.
A recent development of Google X is Wing, a delivery-drone unit, which consist of 11-pound drones it built with fixed wings for gliding to destinations and 12 rotors for hovering over homes while winching down deliveries. It successfully tested the Wing aircraft in Australia last year by delivering burritos and medicine to customers who ordered the items on a mobile app.
However, Google X is very different from a typical company’s R & D function, because most R & D functions are very narrowly focused and separated from the real world. By contrast Google X has and is working on an incredibly diverse array of projects that come from many sources, both within and outside of the company.
Its goal is to dream up out of the box thinking type solutions to crucial problems that will ultimately create world-changing companies that could eventually become the next Google. Along with Calico, Sidewalk Labs and other of its newly separated operations, Google X is Alphabet, Inc.’s “moonshot factory” that is working on various “radical” innovations.
Where do these innovative ideas come from? Their employees.
So how do you foster the flow of ideas from your employees?
The Decline of Research & Development Spending
Alphabet, Inc. knows that, as a share of the federal budget, Research and Development spending has declined by two-thirds since the 1960s.
Incredibly productive corporate research labs of the mid-20th century, such as Bell Labs and Xerox Palo Alto Research Center (PARC), have reduced their footprint and objectives. The reduction of America’s space program has eliminated the source of numerous inventions and innovations created the 1960’s and 1970’s.
What Alphabet, Inc. is trying to do is to develop an overall structure for creating an inexhaustible supply of innovations. The reason this is important is that you don’t want to be an innovation one-hit-wonder within your company, but instead the goal is to establish a continuing stream of innovations.
To create this ongoing stream, you need to determine how and where to collect ideas and innovations and what it will take to get your entire organization identifying opportunities for innovation.
The objective is to get you and your employees thinking in a “what if” mode in everything that is done within your organization. But how do you to do that?
There are two actions that must be taken to get your personnel thinking of innovative ideas.
First, you must tell them you want them to share their ideas.
Second, you need to train them on how to think of creative solutions to situations they encounter.
20th vs. 21st Century Innovation Has Changed Everything
The last 40 years has brought about a complete change in how innovation occurs. Previously there was only one innovation paradigm: the “Closed Innovation Model”. In closed innovation, a company generates, develops, and commercializes its own ideas. This approach was based on the philosophy of control and the related strength of the internal R&D operations of many leading corporations for most of the 20th century.
However, toward in the end of the 20th century, a new model appeared: the “Open Innovation Model”. In this new model, a company commercializes both its own ideas as well as utilizing innovations from other firms to develop and bring products/services to the market. It is based on the foundation that reducing the time to market is of the utmost importance. Therefore, whatever means can be used to bring its ideas to market quickly is justified.
Because this is a titanic shift in innovation philosophy and operation, let us look at an example of how this occurred with Lucent Technologies (formerly the Bell Laboratories section of AT&T before it was broken up) and Cisco in the late 20th century.
While they were both in the IT and related communication hardware and software industry, the two companies took a totally different approach to innovation.
Lucent’s method was to rely on its strong R&D function to develop new materials and state-of-the-art components and systems, with the hope this would fuel future generations of products and services. Contrarily, Cisco’s approach was to acquire whatever technology the company needed from the outside, many times partnering or investing in promising startups. In this way, Cisco kept up with the R&D output of perhaps the world’s finest industrial R&D organizations, all without conducting much research of its own.
During recent years what happened with Lucent and Cisco has been played out many times. For instance, IBM’s research prowess in computing provided little protection against Intel and Microsoft in the personal computer hardware and software businesses. The ride-sharing company Uber quickly did the same thing to the cab and shuttle van industries.
Globalization Changed Everything
Is the internal R&D function no longer the strategic asset it once was? No, it is not. The change is rooted in the 
globalization of our economy, which in turn created a worldwide, ubiquitous base of knowledge and expertise. This has changed how companies generate new ideas and bring them to market. Previously, successful companies followed the mantra, “We have greater knowledge, more skills and can do things better than the rest of the world.” In the past this resulted in earning above-market profits because they had a monopoly on the best solutions for their customers.
The Model for Innovation Has Changed
For most of the 20th century, the closed innovation model worked. General Electric’s famed Global Research Center, IBM, and Bell Labs researchers made amazing discoveries and harnessed them to create a host of revolutionary products. During this period, knowledge and expertise were accumulated in specific research facilities, like a celestial body attracting objects as a result of its gravitational pull.
However, because of the globalization of the economy, information and know-how has now become distributed in universities, start-ups, and through employees leaving companies and starting their own ventures. With personnel possessing advanced skill sets across the world, a global network of knowledge, expertise and innovation funding was created.
Open innovation is built on the foundation of a distributed approach to accessing the factors of creativity and production instead of a more monolithic mindset. Under this thinking, a company should not lock up its intellectual property but instead find ways to profit from others’ use of it through licensing agreements, joint ventures, and other arrangements. Google/Alphabet has set a good example of doing this.
Historically, the Ethernet and graphical user interface are two such examples. While these inventions were not viewed as promising for Xerox, which was focused on high-speed copiers and printers, they ended up being commercialized by other companies and provided tremendous benefits to society.
Creating an Ongoing Supply of Innovative Ideas for Your Organization
Alphabet, Inc. has realized that creative ideas in general, and outside the box thinking concerning crucial problems facing all aspects of mankind is what is necessary throughout their entire organization.
Therefore, since its inception Google has encouraged its employees to share their ideas for innovations with the company. Additionally, they have trained their staff on how to think of and develop innovative solutions to situations they encounter.
Related to your company, as Alphabet long ago realized, your employees are paramount in the innovation process, therefore you need to determine how you will provide the initial and ongoing ideation and innovation training your personnel will require. This should include communicating to them which areas and markets you envision as crucial to your company, so they can focus their innovative efforts on these objectives. Without this communication and training, you will not achieve the innovation results you desire.
Just like Google has taken the steps to develop the flow of ideas from its employees for the “next Google”, so you should implement a plan to find the ideas that will fuel the future of your company, then use an “Open Innovation Model” to develop those innovative ideas with resources within and outside your company.
If you need assistance with developing an overall flow of ideas and how to use innovation most effectively within your company, please contact us using the below information so we can be a resource to you in this crucial area.
Fountainhead Consulting Group, Inc. is an Innovation and Business Planning firm. During the past 17 years we have shown over 1,200 companies how to achieve their goals by using our unique, comprehensive and systematic FastTrak Innovation Program™, Innovation Academy™, and Structure of Success™ methodologies. Using the components in these methodologies, each month we examine an aspect of how to transform your business or organization into a true 21st Century enterprise.
Office: (770) 642-4220
www.FountainheadConsultingGroup.com
George.Horrigan@FountainheadConsultingGroup.com
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