Innovation and evolution in business strategy

Innovation and evolution in business strategy

 

Darwins theory of evolution underpins much of our current understanding of biology, and its concepts have even come to be applied in other disciplines. Ideas like ’Survival of the fittest’ and ‘mutations’ are part of common language today.

 

Applying those concepts to the dog-eat-dog world of business, Professor Gino Cattani of the Stern School, NYU, works on uncovering what gives successful companies the edge over others; how innovation and creativity can be fostered to come up with new products and solutions, and how existing products can come to fit into market niche.

 

Read more about his research here: https://doi.org/10.1093/icc/dty077

 


This transcript is automatically generated:

Darwins theory of evolution underpins much of our current understanding of biology, and its concepts have even come to be applied in other disciplines. Ideas like ’Survival of the fittest’ and ‘mutations’ are part of common language today. Taking those concepts and applying them to the dog-eat-dog world of business, Professor Gino Cattani of the Stern School, NYU, works on uncovering what gives successful companies the edge over others; how innovation and creativity can be fostered to come up with new products and solutions, and how existing products can come to fit into market niche.

my research over the past few years as evolved into 2 main research streams, the first one looks at the conditions that lead to innovation in particular in these research stream. I’m interested in understanding how firms.

Specially established firms can leverage the knowledge that they have accumulated overtime in a particular domain of application across different domains of applications and and then one particular question that I’m also interested in addressing in this particular research stream.

Is trying to understand what is the role of luck, historical accidents or foresight in explaining why some terms are better, able to engage from this an effort to redeploy their knowledge in two different ad domains. These research streams.

At the end of the day is is trying to understand what drives the performance, it originality across firms and the other research stream which is distinct but also compliments. And the first one is more concerned with explaining what drives the recognition, the acceptance of Innovation in a particular field and in this research stream I studied audience level characteristics and other. In other words, the characteristics of key audiences like users, critics, or peers that play an important role in recognizing and eventually supporting.

One innovation as opposed to a different innovation, and so these are in many ways the two sides of the same coin.

What drives the emergence of innovation? The other one? What drives the acceptance and recognition of innovation in a particular field?

Now you mentioned some of the terms there, but I think it would be useful to set apart the difference. What makes an invention and innovation? How are those two different?

That’s a great question, and I think this is also central to innovation. Research in general. Uh, I think that if you look at the innovation as a process, not just as an outcome, you can think about the process that starts with the idea generation that might.

Eventually, lead to an invention. Whether this invention is eventually patented or not is a different story may or may not be the case, depending on the type of invention that you are considering, but many inventions don’t find a commercial application, so they stop.

At this stage of the innovation process, if you look at the immigration process as a whole from the beginning until the end, and then the invention has to be brought to the market, whether by the innovator itself or by someone else who might license.

Uh, the invention and then brings it to to the market. So the this process might sometimes take the time I can think of cases that I also analyze in my in my research. For instance Corning, that was the company that introduce the first low loss optical glass fibers that for telecommunication applications.

Waited several years before capitalizing on its inventor. Invented efforts and they had.

Pain from the USPTO. Patterns for some of the inventions in the optical glass fibers. But for different reasons, it took years before they could really translate those intentions into actual innovations. Products that were sold on the market so the process can, depending on the circumstances.

I don’t quite some time and and so they are clearly distinct phases of the innovation process, broadly speaking.

And that is something that comes up in one of your papers specifically called Exaptation Andbeyond. Yeah, as talk about how the niche for development and the need for the success of an innovation is mirrored in the evolutionary success of some species in either finding.

A advantage through a biological mechanism or through having a biological mechanism that enables them to survive a new set of circumstances.

As a mechanism to explain the Genesis of innovations, whether incremental but most most of the Times Radical Innovations, he is as being recognized in the past few years. There is an emergent community of scholars who are interested in.

Expectation is a mechanism and in essence is adaptation.

That looks at innovations that are the result of functional shift of an existing technology. For instance, more broadly speaking, functional shift of an existing artifact and typically a technology. As I said, I could also be a product.

Or something else? Uh, the idea is that the Rays.

Uh, a shift that can be triggered by either an exogeneous shock, a change in the environmental circumstances, that sort of highlight uh, knew emerging need a new emerging function for which that particular technology might.

Prove useful, although the technology was not developed for that particular function, but for other factors for the different function and the language tend to emphasize how becausw of these changes the existing technology is sort of Co opted into this new function.

And by the way, these function was not anticipated by the original inventor of that particular technology, and but there could also be new functions that are discovered through proactive search and even though.

The firm or The actor was searching may not anticipate from from the very beginning this new function, but the important important fact in both cases is this functional shipped this new function that opens up opportunities for application.

Of an existing technology, or, more broadly Speaking of an existing artifact and that actually speaks to important unimportant.

Characteristic of resources in general and technologies could be a subset of resources that firms use specially knowledge base resources and.

The idea, in other words, that these resources applications uses that are not always anticipated when they’re first acquired or created, and so these functional shape doesn’t change an existing technology and existing artifact provides, or at least.

Opens up opportunities for new applications and without changing the form without changing the the artifact or the technology. Then of course the in the in the process of adapting to this new application, these new function, the technology the artifact can change, but initially.

Is not change. It’s not a redesign to fit this new function or this new application. And this could also pave the way the way to the emergence of new of new market niches. For instance, there is, uh, there are a few studies that have recently shown the importance of these.

Functional shift of an existing technology as as the Genesis of Newmarket matches with my quarter and collaborator. I mean a friend and collaborator paraprofessional pierpaolo andriani at cash Business School in in Marseille. We hosted a special issue on.

This topic, the role of adaptation in Innovation, Entrepreneurship, and each construction and some of the studies that were eventually published really highlighted the mechanisms through which hesitation leads to the creation of a new market niche. So this has become important area for evolutionary scholars interested in innovation?

Adding’s would also how much of that is generated from within of academia and the market development across many other subjects. Those two state quite far apart, but here they are very deeply intermeshed and if you could maybe explain a little bit more about how those are two spheres work together.

Yeah, that’s a very interesting question.

I can answer again by providing an example and then I can elaborate on some exceptions, but going back to the example of Corning Corning is a very interesting company Becausw in many ways it works like an academic institution, especially if you look.

At the corporate arendi, an center at Sullivan Park in Corning town, upstate New York. And if you go there really, you really have the impression of finding yourself in a University campus. The point I’m trying to make here is that historically.

The way the company has operated looks very much like an academic institution where scientists engineers are primarily interested in developing something knew and market considerations are not always the inspiration of therefore, so the motivation for conducting this kind of.

Basic research, uh, I mean coding is not the only case is not an exception, although there are fewer and fewer firms that still operate that way. You can think about IBM, especially IBM a few years ago you can think about Xerox.

Years ago, and so on and so forth. The point is that, uh, these has some benefits of obviously becausw. You can really push the envelope, and even if you don’t find immediate commercial applications.

The idea of engaging in some of these efforts is to generate body of knowledge that if not now down the road at some point will prove useful for or at least useful in the sense that could be applied to specific applications.

That you may not necessarily envision now and the history of Corning is replete of examples of technologies that were initially developed with.

I know without a specific application in mind or with an application that didn’t turn out to be the right application, the right application or the right applications emerged sometimes years after, but that was available was and still is a well understood reality.

Said that you were working on basic science means that you have to take the risk of not finding right away.

An immediate application so the the payback might be delayed in time.

Uh, obviously these raises some. Some, um, poses some challenges to the firm ’cause you have to invest a significant amount of money without having an immediate return or return might be, as I said, delayed in time and I.

Corning recently, as as tried to balance or reconsider a little bit, but it’s approach.

To reduce the risk of investing too much and waiting for too long recently, they have tried to get a little bit closer to the market by engaging more actively in a conversation with the end market 3 to get a better sense.

Or what the market wants. But these without, uh, obviously losing their, or at least abandoning their original approach of investing in basic search. So the idea is to strike a balance, and that is the challenge for many.

It sounds like the the coning model there of developing. I guess in evolutionary terms, an ecosystem through which innovation and success can arise overtime, and yeah, that leads to the next question, which I guess they’re balancing now of.

Can you teach innovation or can you increase the likelihood in which an innovation and invention a the development of a function to fit a need, does find that either an issue for its success or define its whole new criteria like the coding innovation in Gorilla Glass?

Is that they have screen protectors were around before, but they made definitely the most impact with Gorilla Glass as a high resilience high shock proof piece of hardware that could be put into pretty much every smart phone on the planet now.

Uh, yeah, that’s a great example. And uh, when I was.

Talking about Corning and the way they think about innovation, I was also having that example or the Gorilla Glass example in mind. It’s a very interesting story becausw the glass that eventually led to the Gorilla Glass as we know no.

About it right now was developed in the early 60s and is, as you pointed out, the intended application was used to use these class for eye safety, high wear and eventually in windshields.

Of course, those applications didn’t turn out to be as successful as the company had expected, and these strengthened glass, called chemical was eventually literally shelved and almost forgotten. But there was a sense that this glass, sooner or later, could have found.

It’s on a application and it took several decades. Actually. In 2005 Motorola contacted Corning and ask for a strengthened glass that could be used on the screen of the cell phone that phones that Motorola was producing.

An even more so in 2007, Steve Jobs contacted according asking for a class to be used on the smartphones an A glass with certain characteristics, a class that didn’t break when the smartphone falls and hits the ground so.

Calling did not re invent from scratch, that kind of glass, but basically.

Started with camcorder and with some minor modifications managed to produce what is known. Now the Gorilla Glass.

So the point here is that, uh, you had to have an organization that is willing to frame seemingly unsuccessful products or technologies. Not as failures, but as learning opportunities and also a company that keeps memory of what?

It does overtime, so a chemical was not forgotten was momentarily shelved. I mean, not momentarily in in, in in quotes, because for several decades was not used, but it was not forgotten. Must not actually forgotten as a failure as an embarrassment but a frame.

As a learning opportunity for subsequent developments and and this is not just a a unique case in Corning.

And many other technologies that did not found find an application when they were they were first invented where it eventually use for other applications years after.

So that obviously creates as you said, sort of ecology of technologies that.

Unable to firm to to draw from its accumulated knowledge by identifying opportunities for this technology that, as I said, initially, we’re not. We’re not anticipated.

But when it comes to trying to kind of increase the hit to miss ratio or reduce the period of uncertainty in which that investment may or may not pay off, is there either from the business side or from the academic side and research any.

Effort or understanding to how to kind of narrow that period of uncertainty and increase the chances of success.

But that’s a great question, and of course I.

And calling is a company that I study for for years, but some of the things that.

Explain how cording manage the challenge.

That you are referring to.

Are done by other companies as well. I mean, I can think about 3M, which is another interesting company that shares a lot of similarities with recording and to some extent IBM and the usual suspects. But one thing is that is very.

Interesting here is that Corning, like other companies in that embrace a similar approach if you wish.

They, uh, these companies maintain close contact with the academic institutions they work closely with universities, which gives them the advantage of accessing the latest development in the fields in that.

A relevant for what they’re doing.

One feature, one important practice. For instance at Corning was to have senior scientists who were experienced as scientists, but also well known in the community within the company handles outside the company.

Work as a research ambassadors. Essentially they their task was to travel Italy, travel and talk to academic institutions as I said, but also with the customers that had unique needs, needs that could also anticipate subsequent.

Future developments what professor phone him at MIT would call lead users those who have unique means and by targeting and try to satisfy those needs, you can really push the envelope and anticipate future developments or talking to attending conferences.

In other words, exposing themselves trying to absorb what was out there to sense what the, uh, what the new developments where, but also identifying you, important applications that otherwise would have been very difficult to.

Participate so that was a practice that was institutionalized and helped enormously Corning to really reduce the time from Developping something or having something already in house and identifying the right application.

For an existing technology or for a newly developed technology?

The other thing as I said, especially more recently, is to engage more closely in a conversation with the final, the final users. So in other words, talking to firms, for instance, that calling doesn’t sell directly to the end users to the final market.

He sells to other firms, like for instance Apple that eventually sell to the final to the end markets. So the idea would be to talk more closely to these firms to get a better sense of what the market out there were once. But and that has been done more recently.

So the idea is to, uh, as as you as you asked to reduce the uncertainty surrounding certain technologies in terms of what new and what applications and can you foresee for this new technology for this new technologies or existing technologies, they’re still waiting.

There was something in one of your papers about using awards and prestige as a method for increasing social proximity between companies that you say they would just be interacting. There would be.

Uh, you know bumping elbows as we do in these current lockdown times, and having those conversations, and there would be a reciprocity in that the give and take of either innovation or insight and.

When that comes to making things, either market friendly or market likely I guess that you can’t know the potential of something until it is in the market? How much do you see that that increases the chances of success, it to come from established names and that it might put pressure on.

Smaller or upcoming innovators either as businesses or as sole traders, inventors, researchers trying to find their way in and carve their own niche that it might affect the balance of power there.

That’s, uh, that’s a very interesting question. Also very complex one to address, so I think that in one stream I.

Think about it, that’s completely.

No, it’s actually. It’s nice to to be asked to address some of these questions.

Uh, let me provide a tools, answers related answers. So the first one is to the first part of your question, the role of awards, or let’s say, rewards for which awards are one instance but not the only one in fostering.

Novel ideas, and in many cases even helping, uh perspective entrepreneurs to to have a chance to, in other words, to father to develop their own ideas. Specially when these ideas are truly novel ideas and therefore might challenge the status quo.

Open existing market or industry.

I think that the, uh, there are a business plan competitions. I mean business schools, for instance, had been in the past few years. I’ve been playing an important role in fostering entrepreneurial entrepreneurial initiatives in multiple levels and not just by.

Funding for, uh, some of these initiatives, but also providing access to VCs and Angel investors and other potential.

Source sources of either capital or expertise that entrepreneurs, certain entrepreneurs and may not.

Have this yeah told me not may struggle to find uh otherwise and so that obviously.
Tops certain peoples as I said, developed the ideas and in some cases even to push the envelope. Whether that means.

Capital or expertise that entrepreneurs setting entrepreneurs and may not.

Without accounting for these conversation, that’s been going.

Have this yeah told me not may struggle to find uh otherwise and so that obviously.

Tops certain peoples, uh, as I said, developed the ideas and in some cases even to push the envelope, whether that means.

Eventually competing against larger players or identifying market niche is and that are still untapped. That might be interesting. Areas where to to invest in the Becausw. They’re not as crowded as other markets. That is a different story.

Game, but clearly that is an important. It’s an important channel to which perspective entrepreneurs might overcome some of the traditional barriers to to bring their own ideas to market fruition.

In my research, I I looked at uh for instance, as a particular case of what is called tournament rituals basically competition where you submit a project and if you’re uh if you win, you get a monetary reward.

But also some symbolic recognition that gives you visibility and could also through that visibility open other doors. So these competitions are clearly important. But what we found in that paper is that sometimes the way ideas are.

Projects are selected and reward. It might reflect the logic of established players.

Who may have an interest in fostering an endorsing supporting ideas or projects that are more conventional than unconventional?

’cause sometimes these established players had an interest in preserving for as long as possible the status quote so.

What we what we found is that.

More innovative ideas.

The ideas that are perceived as more challenging of the status quo may sometimes be killed.

Supported and as frequently as they should be.

But, uh, but these speaks more to the anomaly of some of these tournament rituals, or.

Book criteria by which, uh, some of these rewards are are distributed in principle. However, they seem to be. I mean, in my opinion, very powerful way of helping innovators with entrepreneurs, or or otherwise.

Uh, to help innovators depend farther the ideas and possibly bring those ideas to fruition, and I think that one one very one channel that is gaining over the past few years on lot of attention also in academia.

Uh is is crowdsourcing for crowd sourcing and the emergence of this crowd sourcing platform platform? That is being a good way of fostering innovation in even in in large firms, but also giving an opportunity to Innovators to really contribute important ideas, sometimes even radically new ideas.

With the support of an established firm that was looking for a solution to a particular to a particular problem, and the platform has been if you wish the The Gateway with the connector between the two, but that is is an important channel to which obviously innovation in more recent times.

Had been posted.

Capital or expertise that entrepreneurs setting entrepreneurs and may not.

Uh, so I think the these creates opportunities for innovators. But as I said before, there is also evidence that sometimes the criteria by which some of these rewards are allocated may be driven by.

The the interest of some of the key players and established for years and therefore penalize.

Well, to change tack a little bit and to come back to some of the other research streams that you’ve got going. I was wondering if you could tell me and the listeners at home how you came to the position that you communicate in so many of your papers of equating business development and emerging trends in R&D and in.

Market demands to biological concepts like if we could uncover a little bit of the origin there and how those two ideas have come together and.

About why do we need a evolutionary concepts to talk about innovation, for instance? And so I, I cannot. I can answer your question into by first emphasizing how my interest in evolution, biology, and how you, uh, I could use.

Concepts from Arusha Biology to study innovation or at least certain problems. Innovation innovation was largely determined by being exposed to the.

Atmosphere that was characterizing. If you wish, uh, what are the management Department? In particular, when I was there as a PhD student. So I walked in has been in many ways.

One of the leading academic institutions for scholars interested in evolution, or at least scholars interested in studying innovation through the evolutionary lengths.

The simple that the reason for that was.

Uh, the presence as a faculty member at Wharton. Of Professor Sidney Winter, who, with Professor Nature Richard Nelson is considered.

One of the Founding Fathers of of evolutionary economics. So I was there when he was there. I was, uh, I took his class PhD seminar and eventually ask him to become my advisor main advisor from my dissertation and he agreed to be.

Could be my advisor, so I thought that perspective was for me a great theoretical lens to look at the phenomenon I was interested in and I think, however, that I probably was.

Uh, interested more than my advisor and drawing from evolution, biology, and the reason why I did that is that I was struggling to find.

At the time, the right theoretical lens to explain the phenomenon that eventually became the core of my dissertation. So the fact that certain terms for whatever reason and find themselves prepared to take.

Advantage of opportunities that did they did not anticipate, but that materialized years afterwards and and how that situation could be studied and explain and characterize was not obvious to me.

So I think the these creates opportunities for innovators. But as I said before, there is also evidence that sometimes the criteria by which some of these rewards are allocated may be driven by.

Until when I came across this notion of pre adaptation in evolutionary biology and and then this idea of exaptation.

Clear sense that those two terms, particularly the term of a pre adaptation at that at that time, was really.

How can we understand and explain better the phenomenon I was studying so that is was part of my effort to really explain the phenomenon data was interested in. And of course I mean my exposure, my exposure to.

The team the kind of conversation that was going on at toward unhealthy in that respect.

Subsequently, I continued to. I mean, subsequent years I continue to work on some of these topics with other people as well, and and so I engage in a conversation with other scholars that we’re sharing the same interest is a patient became.

Compare detection by the way is an exaptation share lot of mean there are two terms that sometimes I use almost interchangeably, but there are some differences. Of course, but they are very closely linked together so I had to continue to engage in a conversation with other scholars were interesting.

Is a patient and try to understand is this a useful concept at the end of the day or not? So we had multiple discussions and then we found out that these terms is adaptation. In particular was really explaining and explaining a lot of innovations out there where functional shift was.

And so as I tried to elaborate before at the beginning of our conversation, one important source of innovation is not the creation of a new technology, but really finding a new application for an existing technology. And this is through these functional shape, so you.

And so as I tried to elaborate before at the beginning of our conversation, one important source of innovation is not the creation of a new technology, but really finding a application for an existing technology. And this is through these functional shape, so you.

You basically are eventually applied the connected technologies applied for function that was not anticipated when this technology was initially developed, and.

Your example gene transfer, which is uh as being a more recent mechanism to understand innovation, draws from recent developments in cell evolution and it it it has.

The attraction of using these.

Term horizontal transfer. For for understanding Innovation, Isba cause in innovation we talked a lot about every combination of existing modules, existing technologies, existing knowledge but the mechanisms through which these recombination takes.

The horizontal transfer of uh of the ecological modules is a very specific mechanism and that is playing many innovations, including radical innovations that sometimes are described but without looking.

At the underlying mechanisms that have generated them, so the the point is that these the use of the biological analogy forces you to to see whether the same mechanisms that you observe in biology also are also at work.

Uh in a different field in this case innovation could also be other domains not just innovation and and and.

Better correct writes some of the phenomena that otherwise we almost take pro granted without really looking at the underlying micro mechanisms. So it’s not just having an evocative analogy is to try to really understand what the mechanisms are what the process your structures that explain.

Complex social phenomena.

Uh, exhibit similarity or dissimilarity with similar structure and processes in in evolutionary biology and, surprisingly enough, with some of the latest developments, there are much. There are many more similarities than ever thought before and that.

And obviously it makes uh and the effort of establishing this connection of these linkages even more worthwhile, I guess.

There were just a few other things that I wanted to touch on somewhere that we’re coming up on. The 45 minute mark, so I think if we can get through a few more questions, we should be able to wrap up within an hour. Does that sound OK to you? Yeah, perfect.

Um, there was something that came up in your research and something that I personally have been thinking a lot about, and I’ve been kind of going into conversations with our directed an operations manager with the idea of shadow services that business offer as a.

A ripe opportunity for developing innovation or 4 actually already being innovative but not necessarily knowing it or using it to its full potential.

I wonder if you could talk a bit more about those.

Yeah, well, that’s actually something I’m glad that you will raise these questions because.

I’m actually currently working on, uh, with my friend and a cold or Pierpaolo Andreani at cash Business School in Marseille, on a paper that where we try to articulate the meaning and significance of shadow options and provide more.

Empirical foundations to this concept that has become a Azzameen’s remained more evocative than than anything else, in other words.

It’s very evocative concept about the empirical foundations had not been established very strongly as yet, so, but the concept of shared options is really very consistent with some of the things that I mentioned before becausw.

When I was talking about importance of of functional shapes in um.

Painting the wave to a new applications of an existing technology, uh, I was essentially suggesting that.

A technology may have a much broader range of possible uses or of applications, so there are uh, and these unused uses, or unknown applications at a particular point in time represent shadow options.

Options that are not, uh, uh, that the innovator does doesn’t know, doesn’t know. It’s not aware as yet of their existence, but.

Options that could become real options, in other words, could become real applications.

As I go, I mean going back to the previous example of the chemical that paved the way to the Gorilla Glass, you can see how camcorder had the run of the shed options of these glass that initially was not very successful was to become D Glass for smartphones.

And uh, with some minor modifications. So what is the lesson here? The lesson here is that, as I said before, you should frame some of your even seemingly unsuccessful.

R&D efforts not as failures, but as learning opportunities and keep in memory of them is very important because what you do now, although it is not clearly useful, might become useful at a later point in time. So this the reason this notion of organizational memory.

Uh, that is central here. How you preserve your memory of what you’re doing.

And the memory of what you’re doing is stored in organizational routines practices, but also in others in other knowledge beans, like for instance libraries. So one interesting characteristic of calling, for instance.

As part of this effort to preserve knowledge and create conditions for retrieving and this knowledge whenever necessary as being over the past few years to essentially codify most of the of the knock of the accumulated accumulated knowledge.

Overtime and two gave access through its library to this knowledge.

I mean give access to this knowledge to its engineers and scientists. In other words, every time they have to start something new, they don’t have to develop something from scratch, but they can see what has been done in the past and can even sometimes a very distant past. So did you ever been adapting?

The library that is kind of the storage for that knowledge is very important and these companies understood these very well. I mean, I one of the problems that, for instance, many even large firms are phases. These risk of knowledge loss.

Specially the loss of tacit knowledge that firms face when the employees key employees leave the firm is not just losing one in place. Also, losing the knowledge that is storing in that individual. So even a retaining key employees is another important factor in addition to adding libraries.

For preserving knowledge, particularly tacit knowledge knowledge that is not codified so there are uh. There are many things that frame can do to enhance their ability to identify these share options for instance.

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