Reinventing Edison

Great inventor though he was, Thomas Edison could have benefited from advice on innovation in a post-recession market

By Christine Crandell

Managing innovation in a post-recession economy requires new approaches, different tools, and a reconfigured mindset.

We're not quite ready to exhale, but the whiff of a major recession in retreat is getting pretty strong. Particularly for technology companies where constant innovation makes the difference between life and death, the receding gloom is reigniting creative fires. The emerging product-creation strategies, however, don't look the way they used to. That's because the business innovation model has changed.

Today, nearly 80 years after his death, Thomas Edison remains the icon of American invention. He deserves it. With more than a thousand patents to his name and credit for some of the best product ideas ever created, the Wizard of Menlo Park stands out as a giant.

He invented not only the phonograph, movie camera, and light bulb but also an orderly innovation-management process—the forerunner of today's corporate research and development department. Idea generation, concept development, feasibility studies, and product development, testing, and launch were distinct phases in that process.

Surviving Failures

Although Edison believed, as a matter of principle, that all of his inventions should have practical uses, he did have his share of spectacular and costly misses. Pricey pre-cast cement homes, DC dynamos, and bizarre electrical devices designed to communicate with the dead were among his more noteworthy failures. Even his successes were often misdirected. Yet marketplace flops were just another part of the creative process, and the companies he created to exploit those inventions were simply folded whenever they failed to gain traction.

For some companies, until fairly recently, product failure remained an option—not the preferred one, of course, but a survivable one. Yet the crash of 2008 and the advance of product globalization, novel business models, competition from nontraditional sources, and time compression—which affect every aspect of a product's life cycle—conspired to reduce companies' appetite for risk.

To minimize those risks while optimizing their daily operations, many companies adopted management techniques such as Six Sigma, designed to reduce the unknowns, limit the uncertainties, and as much as possible, eliminate the risks of business operations. Yet risk is an inherent element of new product development, and squeezing it out can kill innovation. So instead of trying to innovate on their own, many companies now wait for startups to innovate—and then acquire them. That's a workable strategy. But it's not necessarily the only one.

A Venture Capital Principle

Another is to think about investment on a portfolio basis rather than an individual product basis. The uncertainties inherent in breakthrough innovation projects mean that most simply won't pan out. The technology doesn't work. The market has changed, etc. The statistics are depressing. According to PRTM, a management consulting firm in Waltham, Mass., half the R&D investments never bear fruit. And half the projects that do get launched fail, according to Gartner (IT), a research and analysis firm in Stamford, Conn. To counter the risks, product companies have taken a page from the venture capitalist book by managing a number of incremental and breakthrough innovation projects within a single portfolio. If they're good at it, they'll be able to spot failures early and kill them, before they've invested too much money. Many of Edison's projects never saw black ink, either, but by bankrolling an entire portfolio, some of them made money, and a few of them made a lot.

The fundamental problem with the Edison R&D model, however, is that its inventive work was essentially isolated from prospective customers, on one end, and from the company's own business units on the other.

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