There’s been quite the brouhaha lately about disruptive innovation. On one side is Harvard Prof. Clay Christensen (author of The Innovator’s Dilemma) and his long-prevailing theory about how disruptive innovation drives incumbents out of the market. On the other side is Jill Lepore and her attack of Christensen’s theory in The New Yorker. It’s an interesting issue: Do disruptive innovations almost always lead to the downfall of incumbent companies? Is their only hope to “disrupt” themselves?
Along with Joshua Gans of the University of Toronto and David Hsu of Wharton, I conducted a study on the speech recognition industry over the last 58 years. We found a surprising pattern among entrants that adopted disruptive technologies: Instead of always going head-to-head with incumbents, they often adopted a dynamic commercialization strategy in which they started out competing against them, but later switched to cooperating with them (e.g. by licensing their technology). To understand how this can happen, we need to review what it means for a technology to be “disruptive.”
In 2011, two business school professors put numbers to an idea that many assumed true: that a vibrant research university can drive an economy. They studied companies started by alumni of the Massachusetts Institute of Technology and found that those businesses had provided 1.7 million jobs and generated $1 trillion in revenue annually.
As more countries try to compete in the global economy, the pressure is on policy makers and university leaders to imitate the way MIT spurs innovation and economic growth. Unfortunately, many universities struggle to match the speed and success of MIT’s model.
The former Procter & Gamble CEO recently confirmed to head the U.S. Department of Veterans Affairs must go beyond government reforms that Congress recently struck and address how the troubled agency measures performance.
On Thursday, President Obama signed into law a $16.3 billion measure to help overhaul the Department of Veterans Affairs, an agency that in recent months has been plagued with criticisms for long wait times for health care and manipulation of records. While the extra funds are substantial and may be necessary for a system that serves some 8.5 million veterans each year, it won’t be enough to fix the problems at one of the nation’s largest health providers.
Newly-confirmed Veterans Secretary Bob McDonald, a former CEO of Procter & Gamble, must create a new dynamic if the reforms are to succeed; he has to go beyond Congresses’ prescriptions and change the agency’s internal dynamics by focusing on what is measured, why it is measured, and what is done in response to the results.
One of the reasons for the VA’s current crop of problems has to do with the way the VA measures performance. The metrics that former administrators focused on pushed people in the direction of highlighting (sometimes exaggerating) what was going right and playing down what was going wrong.
Consequently, systemic problems — which might have been addressed early on before they caused harm — built up until they caused a crisis. It didn’t help that many of the metrics, such as wait times, were beyond the control and influence of the managers being evaluated, so there was even more incentive to game the system.
Knowledge and innovation generated at universities can lead to the creation of high-impact spin-off businesses. Whether it is through the licensing of intellectual property, partnerships or other informal arrangements, the tech transfer process can play a critical role in shaping new industries and regional economic development.
Research by Eesley and Miller and Eesley and Roberts has demonstrated the role Stanford University has played in shaping the development of Silicon Valley and MIT’s contribution to building a world-class innovation hub in the Kendall Square district of Cambridge, Massachusetts.
Rather than dipping too deeply into the tax break tool box to attract new business, state and local governments might do just as well to make their local skies more friendly. Some research I’ve recently completed suggests that the easier it is for venture capitalists to travel by air, the better the companies in which they invest do.
When my colleagues (Shai Bernstein at Stanford University and Richard Townsend at Dartmouth College) and I analyzed what happened when new airline routes were introduced that reduced the travel time between venture capitalists and companies in which they had invested, we found a robust result: the travel time reduction leads to an increase in innovation as well as a greater likelihood of an IPO. Moreover, the greater the reduction in travel time, the stronger the positive effect on portfolio companies.
Our results indicate that VC involvement is an important determinant of innovation and success. Far from just sitting back to see if their investments pay off, venture capitalists tend to be active investors. They want to be up close and personal with their companies. Better flight connections that enable them to do so lead to greater company success, we found.