Strategic Management of Technology and Innovation

Anita Brick: Hi, this is Anita Brick. And welcome to CareerCast at the Chicago GSB to help you advance in your career.

Today we're delighted to have Robert Price, who's president and CEO of PSV Inc., which offers services in technology commercialization, corporate strategy, human resource management, and general management. They provide services to small businesses, including board memberships and investment and financial counseling.

Participation has included companies engaged in computer software, environmental and recycled products, computer data storage, integration services, human resource services, specialty healthcare, food products, and specialized services in the banking industry. Price is retired chairman of the board and CEO of Control Data Corporation, now Ceridian Corporation. He succeeded the company's founder, William Norris. He joined Control Data in 1961 as a mathematician staff specialist, became director of international operations in 1963, group vice president of services in 1972, and president and chief operating officer in 1980.

Bob, I hear you were instrumental in leading Control Data's early strategic expansion into international in both operations and marketing. You also led the strategic move from hardware into information and systems integration services through the startup and growth of small subsidiary companies. You retired in May of 1990 after 29 years with Control Data, and he's taught in business schools, including Fuqua School of Business at Duke for 15 years, currently an adjunct professor at the Pratt School of Engineering at Duke.

Bob has also published in the California Management Review and various business publications. He's been a guest lecturer at numerous colleges and universities, including the Johnson School of Business at Cornell University, Carlson School of Business at the University of Minnesota, and our friendly rival up on the North Shore, Kellogg at Northwestern. Today, we're going to really talk quite a bit about your book, The Eye for Innovation, which came out about a year ago, and it presents seven basic principles for the strategic management of technology and innovation.

So let's start by having some shared definition. How would you define innovation?

Bob Price: Innovation is … that's a good place to start. I mean, it really is, because innovation I believe is one of the more misunderstood words in the business vernacular. The general feeling about innovation is it deals with things—things at the fringe of science, the esoteric, the unusual, the operating on the borders of science and technology. But innovation has a very straightforward meaning.

Innovation means problem-solving. Innovation means being able to see a need, a problem, something that needs to be done, something that is being done but isn't being done well or efficiently or effectively, and then saying, there's got to be a better way. And you take knowhow, which is technology. You can take old knowhow and recombine it in new ways, or old knowhow combined with new knowhow.

Something you've just discovered, new technology, some new science, and you put those things together in a different way, in a novel way. And that's where the innovation comes from. You put them together in a novel way to meet that need in a much superior fashion. So innovation is about solving the problem of meeting needs, using technology, using knowhow.

Anita Brick: OK, so organizations say that they want to be innovative, but they struggle to hold on to the past.

Bob Price: Yes.

Anita Brick: And given that Wall Street is such a factor where it's quarterly, like, what are we doing now? And do we meet the quarterly projections? How do you build innovation into organizations today, while not losing sight of both the short- and long-term profitability?

Bob Price: Well, obviously, for an existing corporation, especially a public corporation, that response has to be responsive to the financial community and to investors in general. There's a continuing balance. There's a judgment between how much are we doing that's new and how much are we doing to protect the old. Now, innovation actually, it applies to both those problems because innovation may be just as important to protecting the legacy products and services as it is to developing new products and services.

And that's another major misunderstanding. And that is that frequently, the process of innovation is just as important as new product innovation. And when I say new product, I mean product or service, obviously more generically. But process innovation is extremely important in continuing to be competitive in the things that we're already doing. And process innovation is not a manufacturing process. It means marketing process.

Is there an innovative way to a new channel, an innovative way to sell our products? Is there an innovative way to finance our products? Is there an innovative way to change the administration so that the administrative overhead is less so? I'm a great believer in process innovation, and it applies to both ends of the task.

Anita Brick: OK. So can you give us an example of where process innovation really helped an organization, either one that you were part of or one that you are aware of?

Bob Price: Sure. Dell.

Anita Brick: OK.

Bob Price: So that was a process there. Dell didn't invent any transistors. They didn't invent any chips. They did some nice design work. I mean, you know, they put stuff together. But the real innovation was in marketing—direct marketing, telemarketing. Then, of course, internet marketing at a later stage. So it was marketing process innovation as a foundation that was the original driving force of Dell's success.

Anita Brick: All right. So not to put you on the spot here, of course, but they've hit a little blip lately. Can you think of some innovative tweak that might help them get to the next stage?

Bob Price: If I could that easily, Michael Dell would be all over me.

Anita Brick: There you go.

Bob Price: But I think the real point is, if you have an organization, if within the organization, you have people who embrace change, who aren’t afraid of change, if they're willing to think about change, those people are going to come up with innovative ways to improve the system.

Anita Brick: All right. So one of your principles is, innovators are made, not born.

Bob Price: Yes.

Anita Brick: I hear a lot from people saying I'm not creative. They think of innovation and creativity, almost artistic creativity. How do you make an innovator?

Bob Price: Well, the … let's kind of start at the back end of the thing. Instead of saying what's step one, step two, step three, step four, which is the normal way to prescribe for business managers what they should do to do this, that, or the other thing, think about the end result that you want to achieve. When you look at an innovative company, what do you see?

What are the characteristics of a company you think of as innovative? Well, one very simple thing is that generally you're going to say, man, they really got some smart people, some very skilled people. So talent is there. And that's important. You also find that they have policies and practices that tend to foster innovation. And the perfect example of that is 3M.

They have a practice, a policy, that—I can't remember now whether it's 15 or 30 percent, but something like 30 percent of their revenue in any given year are going to come from products or services that are less than two years old. So they have a goal that fosters a policy, a product, an infrastructure thing.

There are other kinds of infrastructures. One of the most famous infrastructures, which is not nearly the magic people think it is, is a so-called skunkworks, but those are infrastructure kinds of things. So skills and infrastructure. But the two most important are what I call awareness and secondly, intense motivation. So let's take awareness first. What does awareness mean?

Awareness is much more than being technologically up to speed. That is to say, it's not just a matter of being aware of all the new things that are going on out there. It's a matter we think of people who have a high degree of awareness as being intuitive. That is to say, they're looking at this problem and thinking of that in metaphorical terms, almost a way to solve that problem that other people don't think of.

So they are aware of things that need to be done, and they are able to apply new technology and old technology because that need can be done in a better way. And that's the second thing that I mentioned. And that's intense motivation. Innovation does not occur if people aren't intensely motivated to do something. How does that come about?

They really believe in a new company, for example. People—almost from anybody who's associated with the company to clerical people, the drivers who drive the people to work—I mean, the taxi drivers, the people in the community—everybody really cares. They want this thing to succeed. They know about it. They know people personally. So the motivation is there for this thing to be a success.

And after it gets to be big, we tend to lose that. But I don't think we have to. And it's a chance of giving people to work on things that they truly care about. And, an example from my own experience is that there was a woman, who was a clerical person who worked for Control Data.

Her name was Hilda Pridgeon. And Hilda … and this was many years ago. And her husband was diagnosed with Alzheimer's. And that was before very many people even knew the term Alzheimer's. In fact, she was told it was a very, very rare disease. But Hilda had to find a way—she really cared about her husband—she tried to find a way to try to take care of him and yet earn a living.

Well, that's where infrastructure comes into play, or policies. Control Data had a—way before its popularity today and before there was internet and all the rest of it, we had a work-at-home policy, so we allowed people to work through computer terminals with our own proprietary network—we didn't have internet—could work at home and do the things that they needed to do at home, so Hilda could work at home and take care of her husband.

But it was more than that, because she soon found there were 2 or 3 other women who were in exactly the same spot, and they thought, well, wait a minute, there's got to be more than just us. We're just 3 or 4 women here in the Twin Cities area of Minnesota. So they began networking and they found, I think, the first response to the thing, they got something like 20,000 responses. And so … long story short, the net result of that is a thing which exists today called the National Alzheimer’s Association, which helps families and other caregivers who have people … a loved one who has Alzheimer’s.

This all came about because Hilda cared, and she was really motivated to do something about that. Now, that's, you know, maybe that's an extreme example, but I don't—I think it's the same with people who have a new product that they truly feel that that product can mean something different. And then—and I was exposed to that early, of course, in Control Data, because we had a person, whose name was Seymour Cray, who felt that he could design the world's fastest computers. And he felt it was really necessary because he knew about the things in the government and elsewhere that needed ever so much better computation than they could get.

So he set out immediately, and his very first product for the company was seven times as cost-effective and as fast as anything on the market at that time. And he never lost that enthusiasm for doing the biggest and fastest, the most powerful computing devices. So on the one hand, you have a woman who was interested in caregiving and a man who's interested in fast computing, but underneath it all are the same two things.

What kind of knowhow can I bring to solve this problem that I really want to do something about? So the question is not exactly what steps do you follow, but you have to find ways. And it's different for probably each business circumstance, each organization. How do you bring about—having skilled people, having supportive infrastructures—but how do you give them a sense of having something to care about and become immensely motivated, intensely caring about trying to solve that problem?

Anita Brick: OK, so what if I am—and I find this with students and alums—I'm highly motivated. I care about things. My organization just isn't very innovative. Do I need to leave the organization? Are there things I can do to kind of spur things on?

Bob Price: The—obviously one solution is always to quit, right? But, no, I think beyond that, there are—and this is the old story that we use in many other ways. It's called leading by example. And you may have your little project and if you can bring this feeling to you and your 3 or 4 colleagues, maybe, who are on the project, and you achieve success with that, that's not going to go unnoticed.

And so, little acorns have a way of growing into big trees. And I do think that the way—the place to start is not by filing an employee grievance. Sometimes you have to do that, too. But no, the way to start is to say, what can I do within my little area of responsibility to foster innovation in myself and in my work group?

And actually, innovation truly starts with each of us as individuals. We go through dozens of little processes each day. Do we ever stop and think there's got to be a better way to do process one or process 10, or as a way to do better three of them, or one of them, or none of them? What could I think of if I had no constraints? What would I do to do my job in a better way?

Anita Brick: That's a good point, because then that gives each of us some amount of control. Right? Which would kind of facilitate this process.

Bob Price: And, you know, and people say, well, yeah, but that's not going to produce a new supercomputer or, you know, a new marketing system. But if you begin to think about innovation in small ways and the people around you become interested in seeing the success that that gives in small ways, then it's catching.

Anita Brick: Earlier—actually, before you and I started this conversation—you and I chatted briefly and talked about the kind of interconnectedness of strategy and innovation. Could you tell us a little bit about that?

Bob Price: Sure. The … and it's really a very straightforward … strategy … if innovation is a misunderstood term, “strategy” is worse, because strategy is something we apply to almost anything that we want to make seem important. So if we want the most mundane thing in the world to be important, we call it strategic. And so … But strategy: what is strategy?

The strategy process, now, just to be more precise, a strategy process is fashioning a journey, a step-by-step journey. One step at a time towards an objective. And the journey takes place in what I call strategic space. And it's a journey. It's a journey in space, but a strategic space and the dimensions, if you will, of strategic space are three—and we're used to three-dimensional—three plus time, and this involves time as well—and the three dimensions are products.

Well, think about innovative products. By that I mean products and service and innovative processes, which we've already talked about a little bit. And markets, new markets. And so at each step of our strategic journey, we are making decisions with respect to markets, products, or processes, new products, new processes, new markets.

And each of those steps can involve, if we're going to do it well, innovation. In other words, we're going to take our step in the process direction with a new process. Going back to my example of Dell. A new product, obviously a new kind of computer—a light, photonic computer instead of a silicon-based computer.

Or a market. And one of the more innovative things in the market dimension …. And suppose you are in the watch business. There certainly are new escapement mechanisms in there. There's new technology. We've had quartz and all those kinds of things. But one of the most innovative things was … it had nothing. It didn't use any kind of esoteric technology in that sense of a product or process technology. It was market technology. And what became a big hit 20 years ago—and is still a hit in terms of watches, particularly women's watches?

Anita Brick: Swatch?

Bob Price: Swatch. Swatch was a marketing innovation.

Anita Brick: How so? How do you view it as a marketing innovation?

Bob Price: Because it addressed the need to combine the need for telling time with fashion. So it took a very mundane thing—what time is it—and turned it into an object of fashion. That's an innovative step. And in the market dimension.

So anyway, strategy is a journey in strategic space; the dimensions of strategic space are market, product, process. And at each step we take innovation. And at each innovative step we must use knowhow. Either old knowhow or new knowhow or some combination of old knowhow and new knowhow. So the base of strategy, the whole base of strategy is technology, knowhow. Once—if we have knowhow, we have technology, it's possible to be innovative. We can meet needs in new ways by recombining old technology or applying new technology.

And once you have an innovative organization, then you can begin to develop strategy, which leads us to yet another concept. Because innovation in and of itself demonstrates a way to solve a problem, to meet a need. But it hasn't … there's no business there. In fact, one of the students that I was talking to yesterday talked about the difference between a device and a product, and a device is a thing, but a product is something with which there's almost automatically a market associated.

Anita Brick: Interesting distinction.

Bob Price: I thought it was too; I hadn't thought of that before. But in any event, the thing that's inherent in that is what we call entrepreneurship. So innovation is problem-solving. And entrepreneurship adds the dimension. An entrepreneur is one who assumes the quote unquote—I think I'm quoting the dictionary—assumes the risk. OK? Or what kind of risk are you assuming? Or you're assuming technological risk, of course; you're assuming the business risk and marketing risk. But what do we mean by market?

Marketing is another one of those things that gets applied in such broad ways. We don't know what it means anymore, but what is the marketing risk that we are assuming? What are we trying? What does the entrepreneur take upon? What do entrepreneurs take upon themselves in terms of risk?

Obviously the financial risk, OK. But the financial risk is associated with the market risk. And the market risk is very simply, how do I create demand for my innovation? It's OK to have an innovation, but how do I get you, Anita, to want to buy it?

Anita Brick: Good point. Yeah. Because often the innovation—it's not the first person who comes up with the innovation who makes billions of dollars; it’s the person who then takes it from device to product.

Bob Price: And is taking one of them … One of the most significant innovations of our lifetime—in fact, probably of the last half-century, maybe even century, maybe much longer than that—is the integrated circuit chip. And until the guys—when they left Fairchild and started up Intel Integrated Electronics, they had the idea for a very simple memory chip, an integrated circuit, which was a memory device.

Now, one would think that, in retrospect, that the demand would be instantaneous for something that was going to be so revolutionary. Let's jump on the bandwagon now; you know, get there early. Didn't happen that way. Didn't happen that way at all. In fact, Intel would go to computer designers and they … well, yeah, that's an interesting memory device. And sure, I can probably use that. And it has a lot of intriguing properties. But look, this is the way I've been doing my memories for several years now. And my boss has me, with this new computer design, it has to be done in two months’ time. I don't have time to mess around with something new. I'll just use my old stuff. So come back to me after I finish this project.

Anita Brick: How did they correct that? I mean, how did they finally …

Bob Price: Exactly. What does it take to get people to change their habits? It's an educational process in a way—in a very real way. It's an educational process. You have to teach them how this can make their lives easier. And there are various ways to do that. You can … One very simple way is, OK, you don't have to buy my device. You take it and use it, you'll like it. That's one way.

Another way is to say, oh, you're building a computing device. Well, here, let me build one like what you're trying to do. Not exactly, but the same kind of thing. And show you how to go about doing that. So you educate them in the process of using the new chip, if you will.

And the other is to get a good reference cell, or some external motivating device, and reference cells are a good motivating device, but in the case of the chip, it was pretty straightforward. In 1961—and Intel had been in business at work at this thing for three years. At that point, there was still no real commercial market for integrated circuits—but in 1961, John F. Kennedy announced a man on the moon goal by the end of the decade, and all of a sudden, all the concerns about cost or difference …. because what counted was weight, space, and performance. And so there was a huge demand from the space program for integrated circuits. And then there got to be, if you will, a community of users who knew about it.

So, sometimes tapping into an external event is a way to do that.

Anita Brick: Can you force that? Can you create the event rather than they happen to be at a certain place in time?

Bob Price: Yeah.

Anita Brick: Where it just came upon them. Is there a way to push the market?

Bob Price: Yes. There are no … let me say, I don't think there are any formulas that I can give you that would allow you to push the market. But the thing that's behind that is to be incredibly persistent, just to be persistent. Never give up and keep searching for the chinks. Once you find the chink, then you can begin to exploit it, and almost all new innovations require looking at this vast wall out there and finding chinks in it that you can begin to get into.

And we have a lot of literature on marketing innovations that has to do with that kind of thing.

Anita Brick: What do you think about all the disruptive technology that's going on? I mean, you know, the convergence of technology?

Bob Price: Well, maybe those are two slightly separate things, but as far as disruptive technologies, I think my response to that is, thank heavens we have disruptive technologies. And we certainly could use more disruptive technologies today—for example, in healthcare, or in wellness, things to overcome catastrophic diseases and so forth.

But we need disruptive technologies in a lot more—I won't say mundane, but a lot more other ways that perhaps we in the United States don't think about so much—but think about the number of people in the world who do not have drinkable water. And I'm sure there are people working, but there's just a huge array of possibilities in the poverty-stricken world for better ways of producing potable water and nutritious food.

I mean, those are pretty, pretty fundamental needs. Any human needs water and food. So the world out there is just full of possibilities for disruptive technologies.

Anita Brick: Now, why has this all been such … ? I mean, our listeners can't see this, but every time you talk about innovation, you light up. You get a big smile on your face, and you light up. What was it that attracted you to technology and continues to attract you to innovation? And through technology.

Bob Price: Once you know the thrill of seeing people using something that you've helped to bring about, not even that was necessarily your sole idea, but something you've helped to bring about, nothing ever will replace that thrill again except doing it one more time.

Anita Brick: So what would you suggest if someone wanted to have more of their career involved in innovation, or even have the core of their career be involved in innovation? How should they prepare? What should they do?

Bob Price: Take math.

Anita Brick: Take math? You’re talking to the right school.

Bob Price: Yes. That's only because that was my academic background … there are innovators or some wonderful innovators who aren’t mathematicians at all. In fact, one of the most famous inventors and innovators is Thomas Edison, of course. And he didn't even like math. But the way to prepare yourself is to find ways to solve problems and find activities that involve problem-solving.

And I don't mean mathematical problem-solving. This is … The hardest problems we have, of course, are management problems, but that's not a good place to start. They can be pretty discouraging. And politics is probably the only one that's worse. But if in … there's one way to really learn the thrill of finding a better way—of saying there's an answer to there's got to be a better way. And it's been around for 20 years now or more, but we call it total quality management. And it has gotten, and still is, a little bit sidetracked—or it's taken on an aura which is misleading, because people think of total quality management as continuous improvement. So they think of it as incremental improvement.

They don't think of it … You never hear the word innovation when it comes to TQM. But if you think about what's going on in a total quality management process, you are trying to find a better way to do something. And it can—sometimes you can take big steps, huge steps, sometimes you can take just little tiny steps.

And we talked about that a moment ago. Sometimes if we just apply TQM principles to our daily work, that is to say, is there a better way to do what I'm doing. That's a good place to start. And that's why I said in the book that innovators are made, not born, because it's a way of thinking; it's a way of—obviously there are people who are a lot more creative than other people.

Not all of us are going to be designers of supercomputers, and not all of us are going to be astronauts or designers of spaceships, and so forth. But all of us have some creative ability, and we have been given a chance to—that's management's task, is to have an organization in which people are given a chance to exercise their innovative capacity, even in little ways.

And I mentioned Hilda Pridgeon a moment ago, for example. I mean, that wasn't necessarily a little way, but it started out being a little way. It was to find a way to look after her husband in a better way. And so all around us, there are needs. And I have to add, after having said all that, clearly there has to be, coupled with that—and this is the hard part, as far as management is concerned—there has to be accountability. You don't just turn people loose and say, well, go do whatever you want to do, whatever you care about and have fun and come back and tell me whenever you've invented a new, new rocket or something. There has to be accountability for … And for the organization to produce, to do the things that it's committed to do, is called integrity.

And so integrity and accountability have to accompany this intense desire to find new ways to solve problems. And the only way, the only way you really learn that is by practicing, by doing it. And the greatest need is for managers who have the judgment and the coaching ability, really, to help people along that path.

Anita Brick: One final question.

Bob Price: Sure.

Anita Brick: Because we've talked about … a lot of it's very, very interesting because innovation, I guess you could even innovate your personal life. If you don't have an opportunity to do it at work, you could look at your daily life outside of work and at least come up with ways to develop the underlying skills to innovate and then apply it elsewhere.

Is there anything else you'd like to tell us today that you think it's important for people to know, kind of about innovation and competitiveness, especially, you know, in the marketplace today?

Bob Price: The … and I referred to this, but maybe I haven't said it explicitly, but we are so wrapped up in trying to execute the things that we have to do just to get through the day. Fix breakfast, get to work, catch a cab, catch a train. You know, brush my teeth, shave, do whatever I have to do. We're so caught up in the daily activities of what's necessary just to maintain life, if you will, that we don't have time to …

Well, yeah, I'm aware of that problem, but I don't have time to … I hardly have time to get my checks written this month; how do I have time to work on a new accounting system? So I believe it is somehow or other to develop the discipline, and I can't give you a percentage, but to set aside some time, some amount of time, some little bit of time each day to think of how to do something better that I'm already doing.

Anita Brick: Great. I said one final question, but could I have one more question?

Bob Price: Sure.

Anita Brick: When you look back over the lifetime of your career up to this point, what do you think has been your greatest accomplishment?

Bob Price: Oh, I've gotten so many, so many wonderful sources of satisfaction, Anita. But I think there are two things that stand out. One was my opportunity, and maybe this is what woke me up as much as anything. But one was my opportunity to help my company and its expansion into the international marketplace. Because when I joined the company, we were strictly dealing with our products in the United States, and we had some natural entrees into other countries.

But once we began that process, obviously, it turned out that each country was a little bit different, and some of them were much more amenable to our products than were others, and so forth and so on. But to find ways to sell computers in Greece or Israel or Mexico was a different problem from trying to find a way to sell computers in France or in Germany or to the US Department of Energy.

So finding those markets that allowed us to expand the base of the company's operation into the global market was one true eye-opener for me. And I really enjoyed that. But even more than that, I was given the responsibility, at a time when the term wasn't even defined, of building the brand-new business for the company and information services, consulting, education, confrontation services, all those kinds of things.

And we were doing a little bit of that stuff, but 35 years ago, the CEO and founder of Control Data had the foresight to see an important role that was an important part of the information technology markets that that would be, and he wanted to get started. And so he gave me the chance to kind of pull together what little bit we were doing and find new things to do.

So that was building a business in the face of incredible odds, because when you said you were in the services business, people looked at you like you weren't in the computer business.

Anita Brick: Well, it sounds like it's been a great road.

Bob Price: It's been a great deal of fun. It really has.

Anita Brick: Thank you so much. And if people want to read an excerpt of the book, it will be on our site. But you can also go to Bob's site, which is BobPrice.net. And there are lots of other things there as well. And thank you for listening. This is Anita Brick with CareerCast at the Chicago GSB. Keep advancing.