In this interview, he talks about limitations people set for themselves, the pigeonhole phenomenon, the difference between incremental innovation and fundamental innovation, how he knows Singapore well but is not here to tell Singapore what to do, and how the book is essentially particularly critical of the US.
Apart from being an author, Eugene is also the Merton C. Flemings SMA Professor of Materials Engineering at the Massachusetts Institute of Technology, Visiting Professor of Management in the Johnsons School, Cornell University, and Fellow in the Singapore-MIT Alliance.
Fabian takes us through his interview with Eugene:
Fabian: The general perception seems to be that different skill sets are required for finding success as an inventor versus an entrepreneur. What do you think about that?
Eugene: I have had the experience of being in many different environments, ranging from large corporations, universities to small start-ups in various fields. In start-ups, at the beginning you have to run everything – I hated accounting but I had to do it.
People would always try to pigeonhole you – some investors would say, “professors can’t run companies.” If you are a researcher bringing your idea to the market yourself, you just have to get used to that.
I believe most people can develop more skill sets but they limit themselves. It is pretty common for people to self-limit, but we should be actively teaching them how to remove these limits and extend their skill sets constantly.
Even when the experiences don’t appear to relate to each other, the skills, reputation and communities you gain from one field would usually help you in some way in the future.
Fabian: Which inventor/entrepreneur do you admire?
Eugene: Edison. I am fascinated by how people extended their skill sets and to know Edison as the guy who invented the light bulb is just a ridiculous reduction. Edison was an inventor, entrepreneur and general business bad boy. He disrupted markets where incumbents were too tied up in the status quo to innovate. He vertically integrated the industry, creating electrical distribution in order to sell the light bulb. He was also a visionary manager and hired the right people (like physicists) before others realized that would be useful.
Fabian: The title “Inside Real Innovation” implies some innovations are fundamental while others are not. What is real innovation to you?
Eugene: The big mistake today is that people can’t recognize the difference between incremental innovation and fundamental innovation. There are two lenses that you can see through to figure out if it is fundamental. One is time: if you can get an accurate recording of how long it took to commercialize, most fundamental innovations take a long time. The other is the degree of disruption – did the innovation change the structure of the industry or create an entirely new market segment? This is clear in hindsight.
Fabian: To move innovative ideas from R&D to market, the book proposes the right approach as having inter-disciplinary team members iterate between Technology, Market and Implementation. Do these team members have to start off with skills crossing disciplines?
Eugene: That’s the ideal case. If I am an investor, that’s what I will look for. But someone can eventually be part of that team without starting off that way. They can get there by accumulating experience in inter-disciplinary work and through learning from failure.
Fabian: For a high rate of innovation, people should “follow the innovation as opposed to follow the organization.” Do you think people are doing that?
Eugene: I think up to the 80s, there was a cultural tendency to work for a large corporation their whole lives. It kind of explains how Bell Labs and Xerox did many initial innovations so well but couldn’t finish them off.
But today, we are transitioning into the future. To keep the innovation going, people need to move into new business models that the initial corporation may not have or support. In the United States, it has become easier to follow the innovation. It makes for a more chaotic world with this high fluidity. But people moving around is better for the innovation in the later stages of its development.
That is beneficial from the perspective of the individual and society but what about the organization?
I believe this paradox is the key strategic element that large corporations have to face for the next ten to fifteen years. People have already seen that it is not true that you just build linear organizations inside you company to deliver innovation. You would have to identify innovators and figure out how to keep them in the company and let them blossom, even if innovation requires them to do very different things.
One way that has been done so far is spin-off companies. It might be the right path if it is not seen as a purely financial move. The focus needs to be on bringing innovations to market. That focus should drive the decision of whether a separate company is needed.
I believe eventually a large company would show the way of how to innovate for the long-term and that would create expectations for other companies to do the same. The current situation is more like the tragedy of the commons. Each corporation has ceased investing in long-term innovation, resulting in a less productive innovation system for all.
Fabian: The current start-up process seems to involve significant capital injection from an early stage. How does this money change things?
Eugene: I think excessive easy capital is destroying innovation. If a start-up really wants to be successful, they should actually resist large initial investment for as long as possible. Then when they take the investment, it would really be at their own discretion and not because they need it.
Inc magazine lists the Inc 500 every year, the 500 fastest growing small companies in the US, and typically only 7% or so of them were VC-funded. It shows that there is a really vibrant part of the economy growing more organically that isn’t usually covered by media reports.
One analogy of injecting investment into start-ups is how people react when they discover a nice garden. They try to reverse engineer it. They concentrate on the environmental factors like the water, soil and sunlight but no one seems to think about the trees themselves. It is only when the tree is ready, then taking in more of the elements like water (VC money) would cause it to grow. Otherwise, the water may even get it killed.
Fabian: Singapore has been pumping resources to build up our innovation system and start-up environment. How do you think we are doing?
Eugene: I have been coming to Singapore since the 90s, so it is one country I know well other than the United States. But still, I am not here to tell Singapore what to do.
In the book we are particularly critical of the United States because we want people to be aware of the problems. That said, the fundamentals are there. The U.S. understands that innovation happens with people, rather than processes, so there is the fluidity of people moving from job to job.
Singapore is great in that investments are made on grand trends that are usually hard to justify on a microscopic scale. For example, Singapore accumulated the necessary human resources for science and technology for years before it was clear they were needed. It has been attracting the necessary financing so that innovations will not be cash-starved when they are ready for funding and it has built up the institutions like the local universities to be research-centric and regional hubs.
The missing element for now is perhaps the transition from a visionary top-down experiment to a ground-up movement embraced by society. It takes time for societies to experience the innovative economy and realize that people are the wellspring of innovation – that’s when the next step would come.
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