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IN: Inside Innovation June 11, 2009, 5:00PM EST

Dusting Off a Big Idea in Hard Times

Automated innovation—relying on computers to roll out new products—was a dud. Now it's a sharp tool for cutting costs

By Reena Jana

Suermondt (foreground) asked HP researcher Kirshenbaum to cut costs Eric Millette

As recession-racked companies search for ways to cut costs, some are rediscovering automated innovation. In the early 2000s, auto-innovation was trumpeted as the Next Big Thing. Instead of relying on engineers and designers, HAL-like computers would create goods on their own by exhaustively combining bits and pieces of previously successful products.

Hewlett-Packard (HPQ) and Pfizer (PFE) were among the early practitioners. Dubbing its software "genetic programming," HP set up GP Lab to experiment with computer code that could analyze the "genes" of earlier inventions and point to evolutionary advances. Pfizer equipped some 1,500 scientists with software that could identify chemicals that might turn into drugs.

Individual researchers also tinkered with such self- propelled programs. In 2005 auto-innovation software created by John Koza, a programmer from Los Altos, Calif., earned the first U.S. patent ever awarded to a nonhuman.

But these initial efforts in auto-innovation didn't pay off. The patent won by Koza's program, a microchip that controls a machine's operations, never turned into a commercial product. At Pfizer, auto-innovation was blamed for leading researchers down dead ends and bloating the budget. And HP found that while GP Lab suggested some dazzling new designs for data-storage products, it failed to turn up any that customers were likely to buy.

As quickly as auto-innovation swept through research and development departments, it was gone. HP killed GP Lab in 2004, four years after it was first unveiled. "We found that it worked to make theoretically good designs," says Jaap Suermondt, director of HP's Business Optimization Lab, who oversaw the project. "But it became a hammer in search of a nail."

Now that companies are under intense pressure to get more out of every dollar, automated innovation is making a comeback. Rather than being used to create products, however, it's turning into an efficiency tool to improve business processes.

Dozens of software companies are using algorithms once intended for product development to help corporations pinpoint ways to reduce spending. San Diego's Natural Selection, a 16-year-old company that created the program used by Pfizer to try to auto-invent drugs, is helping clients streamline delivery routes and retrofit facilities. Among its recent customers: General Electric (GE) and the U.S. Air Force. Some of the original corporate participants in auto-innovation are back at it, too, including Pfizer and HP.

HP's adventures (or misadventures) in particular show how ideas that bombed at first can become valuable when given a second chance. "Successful innovations are often built on the backs of failed ones," notes Scott D. Anthony, president of business consultancy Innosight and author of a just-published book, The Silver Lining: An Innovation Playbook for Uncertain Times. "It makes sense to make it a regular practice to go back and see what pieces of rejected ideas might offer important tools if they can be applied in new ways."

Like researchers at 3M (MMM) and Google (GOOG), staff scientists at HP Labs are urged to spend a chunk of their workweek on self-initiated projects. Evan Kirshenbaum, a computer programmer who has worked at HP since 1989 and holds more than 20 programming patents, began in early 1998 using his spare time on auto innovation writing code to combine and recombine snippets of ideas to discover new ones.

Here's how it works: An engineer takes information, such as design elements of laptops that sold well, then plugs this into the program.

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