Tag: Innovation



Academia is turning the next generation of scientists into “research managers,” not bold scientific thinkers. So says Markus Baer, professor of Organizational Behavior at Olin.

Baer

He lays out this argument in The EMBO Journal: Conditions that encourage scientists to engage in relentless, creative exploration of the unknown are becoming harder to find.

“For one, finding new ideas appears increasingly difficult,” Baer and coauthors write in “Creativity as an antidote to research becoming too predictable.”

US data suggest groundbreaking research in many fields, including medicine, is declining. Yet the number of papers published each year has increased, with some unfortunate side effects.

Calcification

“Scientists focus their attention on work that is already well-cited rather than on new ideas or ideas on the fringes of the scientific mainstream,” Baer said. “This leads to a calcification of the intellectual structure of a field, slowing down progress over time.”

Funding sources for research grants often make matters worse. The norm now in many fields: Grant proposals must provide substantial data supporting the proposed theories and hypotheses. Basically, funding agencies reward work on previously established topics.

“A journey into the exploration of the unknown has been replaced with a ticket on the Shinkansen bullet train: Destination known and always on time.”

Baer

Researchers are responding by playing it safe, Baer says. “There’s a tendency to minimize risk.” Many chase ideas that, from the outset, are likely to be publishable to ensure a constant stream of papers.

“I certainly have had my fair share of encounters with, for instance, journals who reject an idea because it is novel and does not fit the current scientific mold,” Baer said.

Baer is known for his research on creativity and innovation. He wrote the article as a follow-up to a symposium organized by the Biotech Research & Innovation Centre at the University of Copenhagen. Baer was an invited speaker with the mission of offering ideas for how to inject more creativity into scientific inquiry.

Covid test

Gone are the days when scientists could explore Yellowstone National Park without knowing what would come of it, Baer says. There, in the late 1960s, microbiologist Thomas Brock discovered heat-resistant bacteria in the Mushroom Spring.

Courtesy of The EMBO Journal

Guess what? Brock’s discovery eventually led to the development of the chemical process behind today’s Covid test.

Sadly, today’s pressure to produce often means budding researchers are recruited onto preexisting projects with already defined milestones and deliverables.

Fortunately, researchers at Olin don’t face the same pressures as medical researchers. Those scientists are profoundly dependent on grant money for labs and other necessary expenses, Baer says.

“I think our approach to training doctoral students allows students to inject creativity into the research process. Erik Dane teaches a course in the PhD curriculum that tries to provide students the tools to do exactly that.”

Bullet train redesign

One strategy is to encourage early-stage scientists to immerse themselves in similar problems and the solutions they may inspire, Baer says.

Years ago, the Shinkansen bullet train created an ear-splitting sonic boom as it raced out of tunnels. A group of engineers was tasked to redesign the train to make it quieter.

One of the engineers was a bird watcher. He made a connection. Birds diving into the water to catch prey faced a similar challenge to the zooming through a tunnel. The new design of the train’s front? It was based on the shape of the Kingfisher’s beak. That bird dives at high speed from one environment, air, into another, water, with barely a splash.

Researchers should be encouraged and allowed the time to pursue topics other than those they’re actively investigating, Baer says. They should join collaborations with scientists from other domains and even disciplines who are investigating analogous problems.

‘Stay in the cloud’

For research to flourish, it’s imperative to rethink the knowledge production process to allow for the occasional detours, setbacks and dead ends, Baer says.

The bottom line: Research leaders may want to embrace the values of autonomy and novelty more courageously—and embolden early-stage researchers to do the same. Also, academic institutions should take a hard look at themselves. Do they need to increase the breathing space and time for scientists to engage in the exploration of new ideas and research avenues?

“Uri Alon, professor and systems biologist at the Weizmann Institute of Science, talks about the notion of the research cloud—the boundary between the known and unknown,” Baer said.

“It seems to me that we are not encouraging young scholars to stay in the research cloud long enough to truly cross over into the unknown. In fact, the notion of having one’s heads up in the cloud has a negative connotation.

“We need to encourage the next generation of scholars to stay in the cloud and tolerate the feeling of not knowing where this journey may lead.”




Data+Design event by the Koch Center for Family Business

Peter Boumgarden, Koch Center’s director and Olin’s Koch Professor of Practice of Family Enterprise, wrote this for the Olin Blog.

When it comes to our mission of supporting family business leaders as they pursue new ways to thrive in the emerging economy, we can learn a great deal by looking at WashU Olin’s model of being data-driven and values-based. But living this theory in practice means flexing a muscle that is often under-developed in many organizations, family businesses notwithstanding.

So what does it mean to have an eye toward relevant data while simultaneously being shaped by a guiding set of values? At the Koch Center, one way that we do this is in our unique approach to combining data and design in our engagement with the broader business community.

Inaugural data+design dession: Balancing continuity and change

On October 29, the Koch Center hosted the first of our new “data+design” series. Each of these sessions is organized around a particular strategic challenge for organizations. Our first event focused on how family and private enterprise balance a commitment to continuity with the past alongside the need to change to match any number of emerging realities.

Approximately 50 leaders from around the region participated in a session designed to leverage some of the university’s best offerings, particularly a rigorous approach to data built upon a strong research foundation. Unique to this model, we asked each participating leader to fill out an assessment that mapped their organization across several distinct dimensions before our time together. This battery of assessments included a modified version of the “World Management Survey,” a measure of business uncertainty, and an evaluation of how much they have changed over the past year and must change over the year ahead.

While it can be helpful to get objective numbers on these items, the data+design format enabled us to provide each attendee with a customized report that contrasted their self-assessment with all other attendees. Indeed, much of the value can come through this comparison. It is one thing to know you self-assessed at a “3.5” out of “5” when it comes to your company’s talent strategy, but a whole different level of insight if you know others in your organization scored this same item lower, and the average across a set of peer institutions was closer to 4.

Sample Participant Result from the Data+Design October 29 Event

With comparative data in hand, the group came together on October 29 and heard me present a set of research-backed framings on what kind of balance is especially high-performing. One study in particular from McKinsey & Company indicated that firms that maintain a relatively robust refresh rate in their product/service portfolio outperform those who do not change enough and those who change too frequently. This refresh rate of approximately 10-30% change over a decade they called “rivers” in contrast to the static “ponds” (less than 10% refresh) or overly dynamic “rapids” (over 30% change). Simultaneously presented with data about where their organization stands alongside a guiding framework to guide our discussion, and we were off to the races.

Extending rigorous measures with design and values

But back to Olin’s guiding framing, even rigorous data without a precise understanding of values runs into limits. After all, it is one thing to know your organization’s metrics compared to your peers, but the leader still has to make clear tradeoffs on what they are optimizing toward and why.

For example, core value commitments will inevitably shape whether one prioritizes progress on this dimension and how one goes about operationalizing this commitment. For example, how do leaders balance accountability with grace? What kind of patience is required as people move to aspirational performance standards? Critical considerations for building this into practice are not always easily captured in the data alone.

And so, the discussion pushed forward with designing potential futures with data in one hand and a set of guiding values in mind. The “design” part of “data+design” came in by our use of forcing mechanisms to have those present consider more than one potential future for these design challenges. “Want to professionalize your approach to growth and innovation? Let’s see if you can identify four different routes in this direction.”

In this approach, we used a modified version of the “Crazy 8’s” design prompt to push people to generate four different alternative futures. In doing so, we encouraged leaders to expand the number of strategic options too many of us consider—which Dan and Chip Heath have found is unfortunately often only one.

Generating progress through the power of data and design

Generating creative routes forward for family businesses will require creativity. In so much as this ownership form is commonplace across the country and globe, approaching questions of strategy and structure with fresh eyes holds the potential for a transformative effect for the families who lead the operations and the broader global economy.

As a university, one of our goals is to support this creativity by bringing elucidating frameworks and the precision of empirical work while at the same point leveraging the teaching function to push our thinking in ways we would not have considered previously. For us, this work requires leveraging the power of data while also operating up to the generative power of design fueled by close attention to both leader and firm values.

We look forward to walking this journey together.




Pharmaceutical and biotechnology companies topped the 2021 RQ Top 50 list of the most innovative U.S. companies. The annual ranking identifies the smartest R&D spenders – those companies that both spend big (at least $100 million in R&D) and provide the greatest returns to shareholders from that investment.

Notably absent from the list were the three most attention-grabbing pharmaceutical and biotechnology companies of the year – Pfizer, Moderna and Johnson & Johnson.

Anne Marie Knott

That’s because the RQ50 is not like other innovation rankings. Developed by Anne Marie Knott, the Robert and Barbara Frick Professor in Business at Washington University’s Olin Business School, RQ (research quotient) measures R&D productivity in theoretical models linking R&D investment to revenue growth and market value – precisely the outcomes executives and investors care about, Knott said.

“RQ essentially measures how smart companies are. Just as high IQ individuals solve more problems per minute, high RQ companies solve more technical problems per dollar,” Knott said.

“While most of the market still thinks R&D spending is the best gauge of companies’ innovativeness, it’s not. It’s quality not quantity of R&D spending that matters.”

The proof is in the numbers: The RQ50 portfolio historically outperforms the S&P 500, despite the fact that the two portfolios bear the same level of risk (beta), Knott said.

What does it take to make the RQ50?

The 2021 RQ50 represents a broad swath of the economy. The biggest representation comes from pharmaceutical and biotechnological companies, which comprise nine of the top 50, or 18%. Makers of semiconductors make up 14% of the list followed by computer programming at 10%. By contrast, 28% of the RQ50 are the only firms in their industry to make the cut.  

“So it’s not the case these firms are all riding the same wave of opportunity,” Knott said. “The RQ50 firms are standouts in their respective industries.”

Now in its eighth year, the RQ50 ranking is fairly stable: 66% of firms from the 2020 ranking appear again in 2021. According to Knott, that’s because firm capability changes slowly.

Of the 50 companies who made this year’s ranking, six have made the RQ Top 50 all eight years since CNBC published the initial RQ50 in 2014. These standouts include Hasbro, Lam Research, Netflix, NewMarket, Synaptics and Xilinx. 

New to the list

Seventeen companies are new to the RQ50 list. How did they make it?

  • Alarm.com, FMC, Guidewire Software, Match Group, NortonLifeLock and Qualcomm were close last year, but ascended this year.
  • Abiomed, Church & Dwight Co. and MaxLinear crossed the $100 million R&D threshold in FY2020.
  • Cara Therapeutics – No. 2 on the list – was excluded last year because its R&D exceeded revenues.
  • Prior to FY2020, Acacia Communications, Blueprint Medicines, Corcept Therapeutics, Hewlett Packard Enterprise, Lumentum Holdings, Square and Xperi Holdings hadn’t been publicly traded and conducting R&D for enough years to form their RQ.

Who dropped out?

In order for 17 firms to ascend, another 17 had to drop out. What happened to them?

  • AMAG Pharmaceuticals and The Meet Group were acquired.
  • Retrophin rebranded itself and now trades under a different name.
  • Halozyme Therapeutics and Ironwood Pharmaceuticals dropped out because their R&D spending fell below the $100M threshold for inclusion.
  • Arena Pharmaceuticals, Enanta Pharmaceuticals, Lexicon Pharmaceuticals and PTC Therapeutics no longer have revenues that exceed their R&D, a criterion for inclusion. 
  • Allison Transmission, Dow, Intuitive Surgical, FireEye, Sirius XM, Take-Two Interactive, United Therapeutics and Veeva Systems failed to maintain RQs sufficient to keep them in the top 50.

COVID-19’s effect on innovation

While the COVID-19 pandemic shut down manufacturing lines and disrupted global supply chains, research and development – at least so far – appears to have continued its upward trend. During FY2020, which for some ended in June 2020 and for others not until May 2021, R&D spending in absolute dollars increased by 6%. During this same time period, revenues fell on average 10%, making the R&D investment even more significant.

“In most cases, firms committed to their FY2020 R&D spending before the pandemic. So it’s still too early to measure the pandemic’s full impact on firm R&D investment,” Knott said.

“However, I’m cautiously optimistic that firms will continue to prioritize R&D because if there’s anything the pandemic has taught us, it’s the importance of innovation.”


A central puzzle of corporate strategy is whether headquarters can add value to their business units beyond the burden of their own overhead. The record is bleak: On average, corporations trade at a 20% discount relative to their breakup value.

“This is the problem that we want to try fix,” said Anne Marie Knott, Olin’s Robert and Barbara Frick Professor of Business.

Anne Marie Knott

She proposed and tested a theory of how corporations could overcome that record. On November 10, she presented the findings as part of the Olin Business Research Series. More than 60 people tuned in for the virtual event.

The 20% discount could mean that multibusiness firms fundamentally destroy value or that they are poorly managed. Regardless, a whopping $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms, Knott says.

Bank One and its return on assets

Bank One, a bank holding company, motivated the theory. Knott and co-author Scott Turner, of the University of South Carolina, explain how in “An Innovation Theory of Headquarters Value in Multibusiness Firms” in Organization Science.

Bank One increased the return on assets of its target banks by 40-70%.

“This would be really easy if they were purchasing underperforming banks,” Knott said. But they weren’t. They were buying well-managed banks.

The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders. In turn, this “competition from below” stimulates leaders to innovate more.

Knott polls audience members during her Business Research Series presentation.

Beyond demonstrating that headquarters can add value through innovation and growth, the theory offers prescriptions on how to do that. For instance, they can establish systems that create norms for sharing, which eases innovation. They also can offer high-powered incentives to fuel innovation.

In general, Knott’s research examines the optimal environment and policies for innovation, which she summarizes in her book, “How Innovation Really Works” (March 2017). This interest stems from issues arising during an earlier career in defense electronics at Hughes Aircraft Company.

KEY TAKEAWAYS:

  • A $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms.
  • Bank One increased the return on assets of its target banks by 40-70%.
  • The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders.
  • In turn, this “competition from below” stimulates leaders to innovate more.


Jorge Calvo, Professor of Operations Strategy at GLOBIS University Management School and former President & CEO of the Global Supply Chain Management Division of Roland DG Systems, recently sat down with the Director of The Boeing Center for Supply Chain Innovation, Panos Kouvelis, to talk about Industry 4.0 and its implications on the future of global manufacturing.

Industry 4.0 was a term coined to describe a program to support the local industry in Germany and France. It is considered to be the fourth major phase of the industrial revolution, characterized by its use of emerging technologies to enhance manufacturing techniques and supply chain processes.

In his experience, Calvo has found that there are two different approaches within the scope of Industry 4.0: the German approach, focusing on machine-to-machine production practices and supply chain management (i.e., the “smart factory” and the Internet of Things), and the Japanese approach, which focuses on cloud-based technology designed for process optimization through the use of artificial intelligence and machine learning.

For more supply chain digital content and cutting-edge research, check us out on the socials [@theboeingcenter] and download our app on iOS or Android for access to exclusive content and events!


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