Charles Phillip's meeting with the Enterprise Irregulars stirred a lot of commentary on Acquired Innovation. In one of Jeff Nolan’s tweets:
What is acquired innovation: term Charles made up to describe what they are doing beyond a financial transaction
Dennis Howlett commented:
While thousands of customers continue to pay full maintenance on what is in truth old and brittle technology then I cannot see how Phillips’ statements make sense. Unless of course you are cynical enough to believe that companies have found a fresh appetite for new expressions (eg social graph for social network). Then it is easy to see ‘acquired innovation’ as marketing fluff.
While smaller companies have the edge in terms of agility when it comes to innovation, larger organizations have more assets at their disposal to drive innovation. But and its a big but... can these companies put the correct management, governance and incentives in place to gradually shift a corporate culture from being innovation averse to innovation embracing... AND which Innovation strategy should they pursue based on the life cycle of the company and its market? It was with this frame of reference that the "Acquired Innovation thing" was bothering me. Can a company acquire innovation? If so, what does that mean for the company? And when should they pursue it?
Although the decline of categories can be perceived as inevitable, particular in hindsight, they often catch management by surprise, either by arriving earlier or by declining faster than anticipated. In both such instances, the chances for organic renewal are diminished as that innovation type needs runway to get up to speed. Companies in this predicament, therefore, are better served by acquisition renewal.
Acquistition Renewal is a type of Innovation which should be leveraged in a declining market. Its a type of innovation that we don't typically think about when we see the term though. It can be pursued in parallel with other innovation initiatives without disturbing them- unitl the M&A switch is actually thrown -- then all bets are off. He goes on to site GE as a company that perpetually reinvents itself thru acquisition and divestiture and is a best practice for this type of model.
So it seems that yes, one can acquire renewal and this renewal can be classified as innovation but will it transform the company? Will it make the company more innovative at its core? My guess is only after multiple such renewal cycles where acquisition renewal becomes intrinsic to the corporate culture. And its a different type of innovation, its not product or service innovation - the competency becomes that of aligning a set of new corporate initiatives with emerging market realities, whether or not the company is in a position to take advantage of those new realities or not. Its a form of institutional innovation.
But the juxtaposition of Charles Phillips' comments on acquired innovation and GE surprised me. When I was skimming Chapter 7 in Darwin on Managing Innovation in Declining Markets, I remembered Dan Farber's post on the EI discussion with Charles:
"Its a term I created,” [acquired innovation] Phillips said. The amount of money required to start company is very low and many small companies can develop innovations quickly, he said. Oracle gives entrepreneurs the freedom to focus on sales, marketing and development, while it takes care of all the administrative functions and firewalls off the acquired company.
Phillips said he modeled managing different businesses within the Oracle business on GE’s structure. “We give them autonomy and enough authority so they feel like they are running the company,” he said.
Dealing with Darwin went to press in 2005. Is Charles patterning Oracle Strategy on Geoffrey Moore's thinking?
And if so, is Oracle really attempting a renewal strategy or is this just catch up? Are they in a declining market trying to break into a new one? Are they redirecting focus, building an entirely new business? Are they deflecting significant time and effort away from the core business which keeps the lights on? It looks as if they've skimmed the cream off of Moore's Milk but that's about it. According to Moore, renewal strategies are "high risk endeavor[s]." Renewal after all means a category shift... new markets, new sets of customers, new solutions, new sales channels... new ad infinitum.
So does mean there's also a "harvest and exit" strategy in play at Oracle?