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Business Intelligence

Customer demand drives innovation alliances

Email|Print|Single Page| Text size + By Robert Weisman
Globe Staff / August 1, 2004

Demand for innovation is accelerating. And it's taxing the resources of businesses stuck with go-it-alone research-and-development models.

Whether it's tech-savvy rock fans hunting for the latest music players at electronics stores or Atkins dieters scouring their supermarket shelves for low-carb foods, a new generation of consumers expects products and services to be there when they want them. Companies that understand and capitalize on this reality can gain a competitive edge.

''Innovation is something that's becoming more and more consumer-driven," said Navi Radjou, vice president for enterprise applications at Forrester Research in Cambridge.

In a report titled ''Innovation Networks," Radjou explores the growth of a new market ecosystem that is adapted to respond fluidly to emerging customer wants through collaboration between companies and the global sourcing of myriad components and tasks.

The trend is well underway, and it's taking multiple forms. Some companies that once isolated inventors in ivory-tower research silos now dispatch them to spend time with customers and learn how technology can be applied toward solving their problems. Some that once hoarded their inventions now market them to other businesses. Some have joined business and university research consortiums to tackle complex technological challenges. And many are getting adept at weaving together in-house and external innovations and licensing technology wherever they can find it to quickly get a product to market.

''This is simply an offshoot from the time compression of technology," said Bryant R. Linares, president and chief executive of Apollo Diamond Inc. in Boston, a nanotechnology company that has struck partnerships with academic research labs in the United States and application developers in Japan. ''It's an evolutionary process."

Innovation networks can take root within or between companies. Or they can be organized by local, state, or regional governments and economic development agencies seeking to grow industries and create jobs through the cross-fertilization of technologies. Leaders in both the Boston area and the San Francisco Bay Area, for example, are working to forge alliances between their information technology and life sciences clusters to spur business expansion.

But, increasingly, companies are reaching outside their home regions to tap into centers of excellence around the world. Multinational companies are finding more software innovation in India and manufacturing process innovation in China and Taiwan. Both IBM Corp. and Microsoft Corp. have established satellite research labs in China to take advantage of its technical talent as well as lower costs.

''Innovation is not a unidimensional thing," Radjou said. ''It's a multidimensional thing. And even if certain things go overseas, we can innovate in other things here in the United States. We can play the role of the transformer, the role of the financier, and the role of the broker."

Each of these roles -- transforming business models, funding innovation through venture capital, and brokering far-flung technologies -- are American core business competencies that can be franchised worldwide in the next stage of globalization, Radjou contended. ''It takes some time to hone these models," he said. ''The flair of knowing as a venture capitalist which things will fly -- that can't be easily replicated."

And innovations are coming not only in products but also in services, processes, and business models. General Electric Co., by listening to customers, has innovated by dropping features technicians aren't using from newer versions of its medical diagnostic equipment.

Computer maker Dell Inc. does little product invention but has emerged as a master in process innovation, driving new efficiencies into its manufacturing and distribution of personal computers, servers, and other offerings. Through an alliance with EMC Corp. of Hopkinton, it builds data storage machines for the small-business market. And by licensing printer technology from Lexmark International Inc., it has become a rival to Hewlett-Packard Co. in the printer business. Dell invests about 1.4 percent of its revenues in research and development, compared to 4.5 percent for HP and close to 6 percent for IBM.

''In this fluid invention-to-innovation cycle, firms will no longer have to invent to succeed," Radjou wrote in his report. ''Instead, companies will easily mix internal and external sources for services. And like athletic 'all-arounders,' many firms will play multiple roles, simultaneously producing and consuming invention and innovation services."

Robert Weisman can be reached at weisman@globe.com.

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