Money and the infinite pursuit of innovation

Having a couple of million dollars in your bank account takes the urgency out of your drive to innovate… Just last Tuesday I ran into this piece of Stanford research. It shows that an initial public offering (IPO) on the stock market has a negative impact on the level of innovation in a company. I get that. Being rich might even make a lot of bloggers lazy 😉

But.
I wonder where true inventors go after they leave such a company. Do they spend the rest of their lives hanging out by the pool side? Somehow I don’t think so. So why do they leave? An IPO – or the presence of money – seems to cause a shift in a company’s priorities away from creativity. In this post I will explore the issue (without suggesting I did any kind of thorough research myself).

Money Creativity Matrix

IPOs seem to cause a shift to urgency (left) at the expense of R&D activities

Why do innovators leave after an IPO?

At one point in my career I was working at a, well not a start-up because it was a couple of years old, but still a company in the early pioneering stage. Characteristics:

  • Most people around are actively trying to improve the product, or they’re helping out on the stuff that needs to get done.
  • No one gets excited over quarterly reports, but they do get wowed by anything that will make the product easier or more fun to use because everyone wants people to know it and love it and, yes, buy it too.
  • The bottom line is that there is no budget but you’re allowed to tinker. If you have an idea, you check with your boss (the owner/entrepreneur) and he may well give you permission to invest your time, energy, and intelligence. So long as the dull must-do tasks are taken care of too.

Creativity scare #1: investors’ risk adversity

The moment IPO and suchlike is around the corner this all changes. Inventors become the engineering department. That may sound like an important part of the company, but more and more people within the company get interested in things like marketing and quality control and business process management. Which basically means more rules. It means that if you are really excited about something you thought up, you need to make sure you’re talking to the right person by the coffee machine or risk:

  • watching their eyes glaze over as they say “Oh – yeah. That’s great, really great”.
  • having them say stuff like “I’m not sure that’s allowed/safe actually”.

That’s exactly the kind of situation that might, apart from no longer having to worry about money, cause this:

“I find that the quality of innovation produced by inventors who remained at the firm declines following the IPO and key inventors are more likely to leave.” (Shai Bernstein)

Key inventors – that doesn’t sound like people who were in it just for the money. These are the born tinkerers.

Innovations that do pass the risk-and-legal test may have been compromised at an early stage – any part deemed risky is replaced by add-ons to bits that were invented at an earlier stage. It seems that investors want you to do what you’ve proved yourself to be good at, only more of it, and without risky adventures now that their money is involved. Think sequels 🙂

Creativity scare #2: a sense of urgency

Marketing talk on its own is unlikely to scare innovators away – start-ups all try to come up with a viable product. What else is there? An innovator is motivated by curiosity – wanting to find out how things work, how problems can be solved, products might be improved…

A shift in your company’s mindset from opportunities to threats (to the investors’ money, for example) will lead to decisions based on a sense of urgency. Especially if you have the money to act immediately – you find yourself buying a company that has the necessary tech rather than wasting time trying to figure it out yourself. Added effect is that such an action knocks out a potential competitor, or allows you to effectively monopolize a couple of relevant patents.
Invest wisely – don’t gamble.

How to pull off the combination of money AND the pursuit of creativity

There are at least two things you can do to safeguard creative processes in your company:

  1. I found this sentence: “Firms with more entrenched managers, whose greater job security makes them less likely to be sensitive to market pressures, experience a smaller decline in innovation novelty, and interestingly, their inventors are less likely to leave the firm.” I could translate this as “Firms that don’t get completely taken over by shareholders don’t scare their inventors away as much.” Make sure your company has solid management before even considering going to the stock exchange.
  2. Don’t interfere with creative processes by throwing risk and legal stuff in at an early stage. Let innovators tinker and give them credit for being good at it. This is what companies like Google understand. Inventors, while liking the idea of having enough money to live a comfortable life, need to know they are allowed to tinker (part of their time). There’s nothing quite like someone asking themselves “I wonder if it’s possible to… How about if I try…” and taking off. This is ‘flow’ for inventors. Mess with that and you should not be surprised if your inventors pack up and leave.

If you don’t like the sound of ‘letting them tinker’, you need to accept that your top innovators will turn elsewhere to do what they do best.

Source: Research paper No. 2126 “Does Going Public Affect Innovation?” Shai Bernstein, Graduate School of Business, Stanford University, December 2012.

P.S.: I just found myself wondering how this relates to blogging vs. corporate blogging. What do you think?

I hope you found this post of interest! Please add your thoughts about innovation, creativity, and tinkering in general in a comment – what else could you do to keep inventors on board?

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2 thoughts on “Money and the infinite pursuit of innovation

  1. I’ve totally enjoyed this. Love your casual style (‘without suggesting I did any extensive research’… 🙂 ) & so easy to comprehend. You tell it well. As for ‘inventors become the engineering department’ – so true. Yes, things change. What happens to a drive, once driven.

    We bloggers could get lazy, had we reached our initial goal – oh, but no, no, life goes on & there’s more to be said.

    The word ‘tinker’ is just great. Tinker, tinker, tinkering away. Like it. Google do seem to let theirs tinker, yes, & they do continue to come up with good ideas (though hitting the donkey – if you know that bit of news – was not a good idea).

    Great stuff, ContentRambler.

    • Thanks for the compliment 🙂 You’re right, letting people tinker is important – and no, it doesn’t mean you’re safe from making mistakes. Far from it! But trying to drive out every possibility of making mistakes won’t help you if you want to be creative/innovative.

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