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Trilogy Tidings
February 2008
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in this issue
     Do you care about innovation?  How about invention?  Do you think they're the same?  I think not, at least not after reading an interesting series of articles on MidwestBusiness.com authored by Dr. Ogan Gurel, a physician turned life-science investment advisor.  He lays out a strong case for differences between these two concepts and talks about how to innovate and why it's a challenge for young, under-capitalized companies.  You might get absorbed by the entire series as I was, or you might prefer to settle for my interpretations and opinions below.
 
     I cannot think of a single one of our new-product commercialization clients for whom these issues are not pivotal.  If this is true for you as well, read on.
 
Regards,
Joe
Lightbulb
Innovation is Different from Invention 
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     The distinction was nicely drawn by Jan Fagerberg in 2004: "Invention is the first occurrence of an idea for a new product or process while innovation is the first attempt to carry it out into practice".  In other words, innovation is "the actualization or realization of an invention whether it be a societal benefit or monetization".  From a commercial standpoint, you may have invented but you haven't innovated if you haven't achieved market adoption.  From a societal standpoint, invention is intellectually pleasing but innovation is required to serve the public good.

     Clinical medicine has seen many clever inventions that ultimately failed to serve patients for a lot of very good reasons: e.g. physician preference, insufficient benefit to some of those touched by the invention, inadequate performance relative to then-current standards of care, complexity, costs, incompatibility with related clinical processes, poor risk:benefit ratio, etc.  Addressing and resolving these and other issues, which may include radical changes in the design or positioning of a new medical product, is what medical product commercialization is all about  (and what we expend a lot of energy on at Trilogy).
 
     Here are a few more differences worthy of mention:
  • Innovation does not require invention.  (The classic example is the IBM PC, which was created from a range of existing, proven technologies -- essentially an outstanding repackaging and market positioning job.)  However, invention can contribute mightily to innovation and often does.
  • Invention often concerns a single product or process and involves only a few people.  Innovation usually involves a combination of products and processes and more people to realize commercial and/or societal benefit.

     Most economists agree that innovation is the fundamental driver of productivity growth, and most of the rest of us believe it makes our lives better.  It's a good thing.  So how do we make it happen?  Read on.   

Thoughts to share?  Contact me.
Innovation Needs Stimulation and Management 
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     While solitary isolation from the "real world" can be of benefit to invention, it's an innovation-killer.  While invention requires great freedom of thought and action, innovation requires stimulation and skillful management to address the inevitable interdisciplinary combinations and outward (market) views that are necessary to realize user benefit on a large scale.  Innovation requires a connection to reality.  Gurel asserts that that the lack of such a connection dooms many corporate innovation initiatives.  (Of course this begs the question whether corporate innovation programs can be put right; I think they can.)
 
     Successful innovation requires capable management to (1) break down internal biases and barriers (think J&J managing its device and drug cultures to create its first drug-eluting stent) and (2) reach out to the "prospective market" in order to understand clinical needs, revenue and profit potential, competing technologies and clinical methods, and likely competitor responses.  All this needs to be investigated, then managed, post-invention.  Fostering innovation requires full engagement with the "market" to fundamentally adapt or reshape the underlying inventive "product" into a package that truly meets the needs of that market.  (Commercial message: This is how I make a living at Trilogy.)
 
     So much for management.  How about stimulation?  It seems to me you can provide a stimulus to innovation in only two ways: with money (compensated work) or sweat equity (uncompensated work).  Make no mistake -- it's real, hard, smart work that we're talking about here.  The economic stimulus is my next topic.  If you're still awake, read on.   
 
         
Thoughts to share?  Contact me .
The Innovation Gap 
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     If you work in a large company with significant capital available for new products, this gap does not exist for you.  Your innovation work gets funded on the merits (or by political influence ... but that's another newsletter topic!).  But if you work in or run a small company with constrained financial resources and which is not on a proven success track, you're facing an innovation gap.  Your firm can be characterized as "emerging" or "nearly dead", depending upon the day of the week.
 
     There are really two problems today, one affecting seed-stage enterprises and having directly to do with money and the other affecting all VC-funded enterprises and having indirectly to do with money.  The first problem is the shortage of capital to fund innovation experienced by companies that are trying to take fundamental inventions at the level of academic research or an entrepreneur's initial idea into at least the initial stage of commercial development, i.e. proof of business concept.  These young companies don't necessarily need $5 million and a full-blown management team of grayheads to make the leap from early technology development to preliminary market proof of concept.  But VCs have little interest in such startups because their business models don't work much below $5 million; some don't work below $10 million.
 
     On the other hand, if a new enterprise decides to conform to the VC model and somehow builds a full team, demonstrates a qualifying future and puts $5-15 million in the bank, it will likely face the second problem: what Gurel calls the rigid startup syndrome.  Now, startups are not supposed to be rigid and bureaucratic; they claim the advantage of nimbleness.  But the investing VC will dictate rigidity by forcing a laser-like focus on the nascent organization because that's the proven key to a relatively quick success and exit.  If the laser's target turns out to be wrong, well so be it; the organization just disappears and contributes to the VC's statistical 80-percent portfolio failure rate.  A far better outcome -- at least in some cases -- would be to encourage the venture to adapt, shift direction or reassess in order to optimize its own survival.  The result: the invention eventually gets commercialized, makes some money (albeit not enough to satisfy VC appetites), and contributes to society.
 
     If you're expecting an iron-clad solution to either of these dilemmas, you will be disappointed.  I don't have one.  Angel investors and debt are two obvious possibilities, but angel groups seem to be morphing into VCs, and debt is pretty onerous for a startup.  And, by the way, by no means do all startups deserve to survive!  But I do know that there are numerous smart, capable people around who could address this issue and thereby contribute greatly to a nation's productivity and better the lives of its citizens.
 
Thoughts to share?  Contact me .     
What does Trilogy do? 
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     Trilogy Associates facilitates business growth and renewal through commercialization of new products, providing the following services:
  • Opportunity assessment
  • Business planning and enterprise growth strategies
  • New-product conceptualization, commercialization and marketing
  • Market research and competitive assessment
  • Business development and partnering
  • Market and technological due diligence
  • Assessment of the therapeutic and diagnostic potential of novel technologies
  • Design of efficient and effective development strategies for early-stage biomedical products
  • Business and technical writing/publishing

     Inquiries to establish whether and how we might support your business initiatives are always welcome.  Contact us.

Resources from our Archives 
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Contact Information
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Joseph J. Kalinowski, Principal
508.359.7806
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