Six years ago the hot winds of the Web swept through companies, igniting wildfires of excitement. Marketers and technologists competed to be assigned to speculative but glamorous E-commerce projects. Managers, meanwhile, struggled to maintain morale among those on the not-so-cutting edge.
Innovative companies experience that tension every day. Something revolutionary appears, and employees -- who were hired, after all, for their talent and creativity -- strain yearningly toward it. "I actually have some big hairy Halloween knuckles that I wear into meetings where I have to tell people to stop working on something new because we promised something to customers," says John Moussouris, founder and CEO of MicroUnity Inc., a designer of microprocessors for communications. "If you hire people who are very innovative, sometimes you have to be the Neanderthal."
But no one has to play the caveman at Advanced Tissue Sciences Inc. The company, whose products replace or repair damaged tissue and organs, requires employees to devote 80% of their time to existing product lines. For the remaining 20%, however, "we allow them to work on anything that they find exciting that's much, much longer term," says founder and vice-chairman Gail Naughton. "That keeps their energy and their enthusiasm alive." The program, which is administered at the discretion of individual managers, extends beyond R&D to other departments, such as corporate communications.
Naughton, who has informally benchmarked her company against 3M, also believes that companies with cultures that promote innovation should define the concept broadly so as to include seemingly small ideas that make a big difference to the bottom line. Toward that end, Advanced Tissue Sciences bestows recognition on all good ideas, whether they're technical breakthroughs or process improvements. "To be successful we have to come up not only with new products but also with ways to continually improve our product and reduce the cost of manufacturing," says Naughton. "We reward everything equally. We have to."
Another effective tactic for keeping staff focused on current business: frequent exposure to customers, which in Advanced Tissue's case means patients. "On a routine basis we bring in burn victims and families of burn victims, or diabetic patients who have been spared an amputation because of our product, and we make sure that all of our associates understand how their work has touched these people's lives," says the founder. Although she recognizes that most companies' patrons won't have such dramatic stories to share, she believes that customer contact is imperative for motivating folks in the trenches.
"It's important to put a personal face on your product or service," says Naughton. "It makes your customer real to everyone working in the organization."
Compensation: Pay Per New
To foster innovation, you must reward innovation. Most of the companies on our list do so with cash or stock options for specific inventions. Consider the incentive program at InterDigital Communications Corp., which develops advanced wireless technologies. Employees who come up with a patentable invention get more than 2,000 options: one-third vest when the patent is filed, two-thirds when it's granted. There's also an Inventors' Dinner for those who've filed for or have been awarded patents that year. The dinner recognizes -- with cash awards -- the individual or team named as inventor on the year's most valuable patent, the person named as inventor on the most patents, and employees who've reached certain "plateaus" (by being named inventor on 5, 10, or 15 patents, say). Cash awards start at less than $1,000 and grow with the number of patents. The program was created to encourage "an atmosphere of collegial competition," says patent lawyer Kimberly Chotkowski. It's worked. In 2001, InterDigital applied for 256 patents, five times the number it applied for in 1999.
An effective tactic for keeping staff focused on current business: exposure to customers.
Financing Innovation: The Game of Risk
Radically new ideas need time to mature. Radically new products need time to develop. And radically new anything needs time to find its market. But time costs money, so companies must devise strategies for keeping projects afloat and reducing risk. Among the best sources of funding and support:
Universities and government. When universities apply to government agencies for research dollars, they may not have all the skills to complete the proposed project. If the missing pieces have anything to do with computing and the sense of touch, Louis Rosenberg, founder of Immersion Corp., expects his phone to ring. Immersion's engineers collaborate with universities' faculty and students on government grants. At Harvard, for example, an Immersion team helped develop underwater robots for repairing oil wells, at the behest of the Office of Naval Research. (Immersion's contribution: a tactile-feedback system for sending data to the robot's operator.) Rosenberg cultivates academic relationships so that the company's name pops up at every opportunity. "We wouldn't be able to develop [a technology like the feedback system] on our own dime because it's too speculative," Rosenberg says. "But we learn a lot by doing it."
Customers and suppliers. John Moussouris of MicroUnity calls his approach to commercial partnerships the "big tent" theory. "If you have a new technology that can make money for a lot of related companies, then you can get other companies to help fund the deployment," the CEO explains. For example, MicroUnity is working on a technology that improves computers' high-speed communications. Under the company's big tent are chip vendors, network operators, content providers, and others -- all enterprises that stand to profit from MicroUnity's innovations. When the company devised a new way to print on silicon, for example, Moussouris and his team persuaded two manufacturers to charge them less than the cost of production. "Once they had mastered the technique, they could sell it to other people," he says. "The ideal situation for a small company is to have the booth near the entrance of the big tent but to allow lots of other folks to come in."
