Wednesday, July 18, 2007

Would you risk all your money in just one security?

Let's say you have a lot of money to invest. Would you risk all your money in just one security? If you would, if that security has some high level of risk, either you really know what you're doing (and then you are lucky) or there's a great probability to lose money. The same can be applied, in some extent, to the product/service portfolio of your company - that is known. Classical examples are that for example Motorola didn't choose a single operating system for their phones - it was one of the first to join the Symbian with Nokia and Ericsson. However, as we know, Motorola also launched Linux and Windows Mobile handsets. So the question is, is Motorola lost and doesn't know what it's really good? The answer is: right the opposite! As in financial portfolios, diversification can be beneficial. Of course there might be exceptions (e.g., you are a very specialized company and that is your strongest asset).

So, why is it important to diversify? First if one of you product fails, you have a chance with the other; then you develop expertise in more than one technology.

Given this, a management of this is strategically needed. That is especially true in what concerns innovation. It's also known that a very small amount of innovation experiences becomes a successful product/service. The questions here are "when shall you get out of some innovation", "what partnerships shall you take part in", "how many new projects shall you support"? These are questions without a straightforward answer, but looking to some successful companies, many practices show us that companies follow more than one standard (e.g. Orange provides OMA IMPS messaging service alongside with Microsoft Messenger in their handsets), some companies create partnerships which will drop latter (e.g., Motorola founded Symbian and is no longer one of the shareholders), and others promote creativity (HP gave one day time to employees for their own projects).

Even if we look the way R&D is done today, you'll see that companies no longer sit their researchers alone in a lab - they create several webs where clients and providers give inputs on their requirements so that research is also a collaborative work. This is good, because sometimes researchers like to work too long and own their innovations, leading sometimes to overlook and spend too much time to unsuccessful projects.
These paradigms need to be understood for R&D and innovation to be handled in a modern and efficient way. As someone one day told "marketing is too important to be in the hands of marketeers", maybe we can say "innovation is too important to be in the hands of innovators".