Traveling unchartered innovation waters with Innovation Charter

(An earlier version of this piece was posted last year to the HeroX blog)

A few years ago, I came across an innovation survey, sponsored by Wazoku. Its results shocked me. 

Full 85% of respondents to the survey–board members, senior and middle managers, and line workers at large UK enterprises–considered innovation important to their companies. So far, so good. Yet 53% of surveyed managers were unaware of their company’s definition of innovation and how it fit into wider corporate goals. And 38% said innovation wasn’t their responsibility because it wasn’t in their job descriptions.

So much for a popular corporate tune: in our company, innovation is everyone’s job!

A lack of understanding of what innovation means for firms remains one of the most serious problems facing corporate innovation. Even C-level executives aren’t immune to this disease, but at the lower organizational levels, almost everyone is infected.

Obviously, no single fix exists to solve the problem. However, for firms that are yet to develop a structured innovation process–and also the ones that struggle to run working innovation programs–I’d recommend a solution that may look deceptively simple (worse, outright bureaucratic) but may prove surprisingly effective. 

The solution is to create a corporate Innovation Charter.

There are three immediate reasons why the Innovation Charter can help firms innovate better.

The Innovation Charter defines corporate innovation strategy

The major objective of the Innovation Charter is to spell out what innovation means for this specific firm. Not humanity, not whole industry. This specific firm.   

It should start with explaining where the firm stands today and where it wants to be in the future. It should then describe how the gap between “now and then” is to be bridged, and what role innovation should play in this process.

The clarity about the place innovation occupies within the general corporate strategy will help select and support matching innovation programs (and not just a generic cocktail of hackathons, idea-generation extravaganza, and fast and often failure festivities).

Equally important, the Innovation Charter will help create a common innovation language, the lack of which often results in a communication wall between corporate innovation team and the rest of the firm.

The Innovation Charter extracts maximum (vis-à-vis innovation, of course) out of the CEO

CEOs are routinely blamed for the lack of attention to innovation, and I myself is guilty as charged.

But let’s face it: they are very busy people in charge of everything. It’s plain unrealistic to expect them to pay unwavering attention to innovation, a continuous, often behind-the-scene process, which lacks frequent “events” and shows no obvious need for day-to-day executive intervention.

So, instead of asking the CEO for constant checking in, the innovation team should create the Innovation Charter and ask the CEO to publicly endorse it. With this endorsement, the innovation team can claim executive support even when the attention of the executive leaders will inevitably shift to other priorities.

It’s tempting to call the Innovation Charter the innovation law of the land. Of course, like any other law, it will need periodic re-enforcement, but will still keep maintaining order even when there are no cops around.

The Innovation Charter makes innovation “everyone’s job”

Corporate innovation can become much more efficient if it’ll expand from traditional R&D or product development units to departments that are not directly involved in the innovation process (manufacturing, finance, HR, etc.). Unfortunately, very often, the corporate structure is too rigid, too “anti-matrix,” to allow innovation to become “everyone’s job.”

Realistically, not everyone in the firm will be willing to assume an extra load that participation in innovation activities demands—and that’s fine. But even those who want to get involved, often can’t do so because of the pressure of their regular jobs.

Besides, attempts at expanding innovation activities throughout the whole firm are often met with resistance at the level of all-powerful middle managers. Unwilling to sabotage corporate innovation initiatives openly (especially if endorsed by the CEO), they often resort to implicit sabotage by not allowing their reports to get engaged on the ground that those are “too busy.”

This is a series problem with no ready-to-go fix to it. But here, too, the Innovation Charter can help because it provides an explicit mandate to anyone in the firm to get their feet wet in the whole-firm innovation waters, something that even their managers can’t easily ignore.

Or, to say it differently, the Innovation Charter adds innovation activities to everyone’s job description at once. Kind of.

Image credit: https://www.britannica.com/story/which-waters-do-you-pass-through-when-you-sail-the-seven-seas

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Internal innovation: overcoming the dangers of remote work

Pessimists are said to be the happiest people on earth, for they celebrate when their own predictions don’t come true.

There was a shock wave of panic last spring when, due to the COVID-19 pandemic, firms around the globe had to switch to remote work, suddenly and en masse.

One can, therefore, easily understand the sense of relief, almost euphoria, filling the air when the captains of industry realized that switching to remote work hadn’t resulted in the immediate collapse of the corporate world.

Remote work works and has a future. That was a conclusion of a report composed by Upwork, a freelance marketplace, based on online surveys of corporate managers conducted at the end of April 2020. (Given that only a few weeks passed after the beginning of the remote work “experiment,” the conclusion of the report looks a bit rushed up, doesn’t it?)

Yet, voices of pessimists on the other side of the barricade were heard already, too. Some academics warned that online communications, a hallmark of remote work, were characterized by lower information sharing—and that meant the increased likelihood of poor decision-making in the short term and the reduced exchange of ideas between the employees in the longer term.

Now, just published data suggests that the pessimistic predictions about potential danger of remote work holds a lot of truth.

Innovation in peril?

A group of researchers from Microsoft analyzed communication practices of 61,182 U.S. Microsoft employees before and after Microsoft’s shift to firm-wide remote work. The major observations were as follows:

  • Remote work caused business groups within Microsoft to become less interconnected.
  • Remote work reduced the number of ties within the company’s informal collaboration network and caused employees to spend less time collaborating with the ties that remained.
  • Remote work caused employees to collaborate more with their stronger ties, which are better suited for information transfer, and less with weak ties, which are more likely to provide access to new information.
  • Remote work caused employees to communicate more via asynchronous media channels (email and IM), which are better suited for conveying information, and less via synchronous ones (video and phone calls), which are better suited for converging on the meaning of complex information.

Summing up their results, the authors concluded that shifting to remote work made Microsoft’s collaboration network more siloed, more static, and less “rich.” And although the authors didn’t directly measure any innovation outcomes, they fully expect that the effects on innovation of changing collaboration and communication patterns will be negative in the long term.

A sober conclusion, given that Microsoft postponed the employee return to the office—yet again.

Internal innovation networks to the rescue

Now matter what you think about the “letter” of the Upwork report, its “spirit” is right on point. Remote work is here to stay. So, the major question right now is how to minimize the potential negative consequences of remote work on innovation.

The answer lies in plain sight: internal innovation networks (IINs).

Although IINs provide organizations with many benefits, two are particularly relevant to overcome the shortfalls of remote work.

First, IINs provide a communication channel between different corporate functions and units that often have no institutional framework to discuss strategic issues. By providing such a channel, IINs create a common intellectual space, which not only allows to exchange complex information but also to facilitate an in-depth discussion of it.

Second, by hosting innovation contents and competitions, open to the whole company, IINs enhance and formalize existing weak ties. This may result in the creation of a new knowledge, which is often superior to the one created within established hierarchical teams.

This is not to say, of course, that firms should abandon or even scale down the existing external/open innovation initiatives. The point here is that the full innovation potential of any organization can only be realized by the concerted effort of connected employees capable of identifying and defining their own problems.

Regardless of whether we’re living in “normal times” or in the case of an emergency.

Image credit: https://www.newcybersource.com/network-solutions/

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Yes, size matters. It’s just not that the bigger is always the better

Among many of Jeff Bezos’s wisdoms, his two-pizza rule is one of the most famous. It states that every internal team should be small enough that it can be fed with two pizzas–to make meetings more effective and the teams more innovative.

When it comes to scientific research, the world seems to disagree with Bezos. As large-scale scientific collaboration become increasingly popular, research groups grow bigger and bigger. A world record seems to belong to a physics paper published in 2015: 5,154 authors. Only the first nine pages of the 33-page article describe the research itself; the rest (24 pages) lists the authors and their affiliation. Just imagine how many pizza parlors would have to work overtime to provide a single lunch for this tight-knit group of collaborators!

The proponents of “the bigger, the better” approach can point to at least one argument in support of their position: a positive correlation between a team’s size and a citation impact of a product that this team had produced. This correlation holds not only for STEM research, but also for social sciences, art and humanities, and patents. The bigger the team of collaborators, the greater the buzz their work is generating.

And yet, Bezos might have had the last laugh—as usual.

A group of authors led by James A. Evans of University of Chicago designed an advanced, more nuanced citation-based index capable of discriminating between “disruptive” and more conventional (“consolidating”) research contributions. Their logic was as follows: when future citations to a given article also reference a substantial proportion of that article’s own references, then the article can be seen as consolidating its scientific domain. However, when future citations do not acknowledge the article’s own references, the article can be seen as disrupting its domain[1].

Evans and his co-authors analyzed more than 65 million articles, patents, and software products generated over 1954–2014. They show that smaller teams tend to come up with more new ideas and opportunities (disruptive contribution), whereas larger teams tend to develop existing ones (consolidating contribution).


The authors also show that work from larger teams often builds on more recent and popular developments, so that attention to their work comes immediately. By contrast, contributions by smaller teams go more deeply into the past and, if successful, project further into the future.

My first impulse is to apply the result of Evans and his collaborators to the incremental vs. disruptive innovation dichotomy. When pursuing incremental (so tempting to say, consolidating) innovation, organization would seem to benefit from creating larger teams that could rapidly expand on recent product development gains. On the other hand, achieving disruptive innovation goals would be more plausible by establishing many small groups pursuing diverse projects—mimicking essentially the approach used by VC investors.

I also wonder if eating a particular type of pizza—say, Neapolitan vs. New York-style—would benefit a specific type of innovation.

Just kidding.

[1] For example, the index shows that articles directly contributing to Nobel prizes tend to exhibit high levels of disruptiveness; at the other extreme, review articles tend to be highly “consolidating.”

Image credit: https://adenuniversity.us/business-magazine/discover-the-two-pizza-rule-that-jeff-bezos-uses-to-have-more-productive-meetings/

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A few words about innovation and leadership

I remember reading, a few years ago, a report with inspiring title “Unleashing the power of innovation.” To get a sense of what’s going on with innovation around the world, the authors of the report approached 246 CEOs and served them with a set of softball questions.

The respondents didn’t disappoint. Yes, we see innovation as a priority to our companies. Yes, we consider ourselves innovation leaders and visionaries as opposed to being simply sponsors of innovation programs. Of course, strong business leadership and right culture are the key ingredients for innovation success. Sure, we take personal responsibility for directing and inspiring innovation.

Nice, isn’t it.

My sense of tranquility was suddenly shaken, though, when I reached the last question of the survey asking about constraints stopping the CEOs from “being more innovative.” Three top answers to this question were: “Financial resources,” “Existing organization culture” and “Lack of talent.”

Wait a minute! Why do these captains of industry view the three constraints as something that is completely out of their control, like a natural disaster? Is it not within the authority of a CEO to allocate enough financial resources to pursue innovation activities? Is it not the responsibility of a CEO to implement corporate policies fostering the culture of innovation? Is it not a CEO’s job to create conditions attracting and retaining innovative employees? Is that how they take personal responsibility for directing and inspiring innovation?

I can’t overstate it: nothing will happen in any organization aspiring to innovate without active personal involvement from the C-suite. Nothing.

Unfortunately, over the years, many CEOs have mastered the art of talking about innovation, delivering well-rounded answers to friendly questions in non-confrontational surveys and interviews.

But a frighteningly large number of them still demonstrate what I call a “cloudy vision” of the very fundamentals of the innovation process. Too many CEOs take a hands-off approach to innovation management, proudly claiming instead that “in our company, innovation is everyone’s job.” And while talking non-stop about the culture of innovation, they neglect to introduce specific corporate policies encouraging and rewarding their employees’ innovation efforts.

Acts of leadership can come in many shapes and shades. On occasion, it can be a sentence said in the right place at the right time. A story that happened some time ago illustrates my last point.

A large multi-national company invited me to a ceremony celebrating the launch of a major open innovation initiative in one of its leading R&D divisions. I was representing a company that was providing an online platform supporting the initiative.

Highlighting the importance of the occasion, the ceremony was attended by a very big R&D boss from the corporate headquarters. In his pep talk, the boss (I’ll call him John) spoke about the virtues of open innovation, the importance of the new initiative, and the need for everyone in this location to get involved. He concluded his talk with a customary “Any questions?”

A young fellow in the crowd of scientists raised his hand. Apparently sensing an opportunity to impress the high-profile visitor, he said: “John, I’m so busy with my current projects. How can I find time to run an open innovation campaign and then go through a pile of external submissions, while simultaneously running multiple experiments?”

John looked back at the young fellow for a few long seconds (too long, I thought) and then said: “Look, we’ve charged you with solving a problem that is important to our company and we want you to succeed. I personally don’t care how you do that. If running experiments is enough, fine. However, if you fail, we’ll ask you: what have you done–in addition to running your own experiments–to have this problem solved? And please, don’t tell us then that you were too busy to go through a pile of external submissions.”

By the expression on the young fellow’s face–and by the silence that suddenly filled the auditorium–I realized that John’s message got across. I smiled to myself. By saying just a few words, John had managed to achieve what in many organizations takes years: he helped create a culture of open innovation in this R&D division.

Leadership matters. A cliché? Sure, but it does.

Image credit: Jehyun Sung on Splash

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Investing in R&D spending

Innovation is rapidly becoming the key factor defining America’s economic growth, prosperity, and competitiveness on the world stage. It also has a profound effect on national security, as highlighted in a 2019 report composed by the Council on Foreign Relations (CFR).

There is enough evidence suggesting that American innovation is in a decent shape. Experts point to the lightning-speed rollout of the RNA-based COVID-19 vaccines and an impressive list of ‘fast and frugal’ innovations developed in response to the COVID-19 pandemic. One can also celebrate the unprecedented level of the pandemic-driven cooperation between U.S. academic institutions and private companies. And did not the Global Innovation Index 2020 name the United States the 3rd most innovative country in the world (after Switzerland and Sweden)?

And yet, I see a host of problems, with deep and systemic roots in the U.S. business and political environment, that have a potential to damage American innovation in the long term. One of them is a growing shortage of novel ideas, a shortage made worse by the declining quality of these ideas and the increased cost of getting them.

Government is not the problem. The lack of it is

What’s going on? Why is the well of innovative ideas in the U.S. drying up?

The answer is simple: insufficient R&D funding.

In the decades following World War II, entirely new sectors of the U.S. economy have been created (jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, digital computers, etc.), thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.

Things have changed. Although the total spending on R&D in the U.S. has remained steady for the past years, at 2.5-2.8% of GDP, only 30% of the money now comes from the federal government; 70% is contributed by the private sector. With its focus on rapid ROI, will private sector spend money on fundamental and, therefore, potentially risky R&D projects? No.

The number and quality of innovative ideas are declining because sources of new scientific discoveries in the U.S. are gradually drying up. Yes, the industry can still generate incrementally innovative combinations of old ideas, but it will fail to create breakthrough innovations.

President Biden’s plan to dramatically increase funding for fundamental research is a promising step in the right direction. Unfortunately, there is no institutional protection for the increased R&D budget, which may be easily slashed again by any future administration.

There is one more troubling thing: the lack of a coherent public innovation policy. Previously, I showed that there was a strong correlation between a country’s innovation potential and the level of democratic developments in this country (as assessed by the Democracy Index 2019). Although all five individual components of the Index positively correlated with innovation, the strongest correlation occurred for Functioning of Government. And yet, the above-mentioned CRF report specifically criticized the weak role the federal government plays in shaping the U.S. innovation policy.

Investment vs. expense

It amuses me how different an attitude toward public and private R&D funding can be.

It’s a common place to call private R&D funding “investment.” (An entry to Investopedia reads: “Why You Should Invest in Research and Development (R&D).” At the same time, public funding of R&D is almost always characterized as an “expense” (or “spending”). Note that in the federal budget, R&D funding falls in the discretionary spending bucket. (Investopedia defines discretionary spending as “a cost that a business or household can survive without, if necessary.”) Apparently meaning that as a country we can survive without spending money on R&D.

I can see where this difference comes from. ROI is the principal metric that the private sector uses to assess the effectiveness of its investments. Given that the industry is spending most of its R&D money (at least 70%, according to a popular model) on short term projects, ROI can more or less be easily calculated. Your investment either works or doesn’t, but at least you know what happened to the money.

Not so with public R&D spending. Given that public money goes mostly to basic science, with the outcomes being uncertain for many years to come, measuring ROI becomes more difficult, creating an impression that there is no “return” on public R&D money. No matter what happens to this money, the R&D funding is habitually considered an “expense.” Worse, some folks call it “waste.”

An underused money machine

Benjamin Jones of Kellogg Scholl of Management strongly disagrees. Not only does he argue that public R&D spending is not a “waste”; he insists that the U.S. is greatly underinvest in science and innovation. Jones goes as far as calling this underinvestment a “market failure”.

Market failure? Is Jones serious?

He is. In a recent report pointedly headlined “Science and Innovation: The Under-Fueled Engine of Prosperity” Jones reviews a body of recent research aimed at calculating the so-called social return on R&D investment (by using numerous economic models and applying them to different industries in varying settings). 

Jones’s conclusion is nothing short of an eye-opener. The social rate of return on R&D expenditure in the total U.S. economy appears to exceed 50% (yes, this isn’t a typo. 50%). That means that $1 of public money invested in innovation produces, conservatively, at least $5 in social benefits. (The rate varies over different industries, being, for example, 40% for agricultural R&D investment and exceeding 55% for industrial.)

This is much higher than a typical private return on R&D investment (or on any other investment, for that matter). Not to mention that this is many multiples of stock market returns or the interest on government bonds.

Take, for example, the still fresh in memory Operation Warp Speed. The public investment cost of accelerated COVID-19 development was approximately $25 billion. It is less than 1% compared to the total $3 trillion the U.S. government has spent in pandemic relief through March 2021. And speaking in terms of human lives, the entire cost of the Operation Warp Speed was lower than the cost of losing American lives in one day in December 2020 (as measured by the “value of a statistical life” approach).

In Jones’s words, “the science and innovation system is akin to having a machine where society can put in $1 and get back $5 or more. If any business or household had such a machine, they would use it all the time.”

And yet, this money-making machine is hugely underutilized (justifying Jones’s words “market failure”). Why? First, because of a decade-long habit to view it and “money-burning” machine instead. Second, a lack of clear understanding of how to use this machine properly.

This needs to change, and I’ll get back to both points in my future posts.

Image credit: https://www.wikigallery.org/wiki/painting_304950/%28after%29-Marinus-Van-Reymerswaele/The-Money-Changers

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A boomerang drug

On June 7, the U.S. Food and Drug Administration (FDA) approved a new treatment for Alzheimer’s Disease (AD), its first in nearly two decades. Manufactured by Biogen (a biotech company based in Cambridge, MA) and called Aduhelm, the drug was supposed to become a cause of celebration by millions of Americans diagnosed with AD. Instead, the Aduhelm approval may well be remembered as the most controversial, if not scandalous, FDA’s decision in the 115 years of its history.

A nasty disease

Let’s first refresh what we know about AD, a truly nasty disease. It is a progressive neurodegenerative disorder that destroys memory, abstract thinking, and cognitive function. It’s the most common cause of dementia in humans (60-80% of all cases), affecting as many as six million Americans and being the sixth leading cause of death.

The risk of getting affected by AD doubles every five years after the age of 65, meaning that with 10,000 baby boomers turning 65 every day, the number of Americans with AD may reach 14 million by 2050.

So far, there has been no real AD cure. Five drugs that were approved in the U.S. for AD treatment, the last one in 2004, can only offer a brief respite from some symptoms in some patients. Worse, the development of AD therapies had been a total disaster: over the period of 2002-2012, 244 drug candidates have been tested in 413 clinical trials, but only one has been approved. This is a 0.4% success rate–or, if you prefer, a 99.6% failure.

A questionable clinical data

Not surprisingly, the results of two Biogen’s clinical trials assessing Aduhelm were eagerly expected—and they were a clear disappointment, yet again. In fact, the trials were halted in 2019 as data showed that Aduhelm provided no benefit to patients’ cognitive function. Moreover, the drug wasn’t even sufficiently safe: approximately 40% of the patients experienced brain swelling and hemorrhaging.

However, Biogen plowed on. The company conducted another analysis of the same data and found that at high doses, Aduhelm showed a 22% reduction in cognitive decline. Encouraged by this newly discovered interpretation, Biogen applied to the FDA for approval.

A controversial approval

An advisory committee convened by the FDA to review the application was almost anonymous in its rejection of Aduhelm: 10 of the 11 experts on the panel opined that that clinical data did not support the approval of the drug (the 11th panelist voted “uncertain.”).

While the FDA is not formally required to follow the advisory committee’s recommendations, it usually does so, especially with the vote count like this one. So it was obviously a great surprise when referring to the extreme need for an AD treatment, the FDA has still decided to approve Aduhelm. In protest, three members of the advisory committee have resigned.

A shocking price tag

And then came another shock, this time in the form of the price tag. Biogen announced that the Aduhelm treatment would be priced at $56,000 annually (not including costs for additional testing and scans patients would need). Given that initially, the FDA set no limits on who will be treated with the drug—and given the number of AD patients in the U.S.–the projected cost of Aduhelm only for Medicare was estimated to be about $57 billion per year, which is more than Medicare Part B spends on all other drugs combined. 

A quick fallout

It was at this point that the pendulum began swinging back. A couple of weeks later, the FDA issued a revised guidance for using the drug, recommending it to be used not by all AD patients, but only by those with mild symptoms. With this restriction, only two million Americans would be eligible for the treatment.

And then, the omnipresent New Your Times published an article describing a cozy huddling of the FDA officials with Biogen’s representatives during the approval process. What initially looked as an example of the FDA’s incompetence suddenly began smelling as something potentially more sinister. At the end of June, two congressional committees launched reviews into the Aduhelm approval process.

It’s vitally important to get to the bottom of what happened behind the FDA’s walls during the approval process. I personally would also be very interested to know what role, if any, was played by so-called patient groups like the Alzheimer’s Association, the largest non-profit funder of AD research.

In the name of the patient

One of the most popular recent trends in healthcare is the drive to what some call “consumer-centric healthcare.” Among many other things this term implies a greater patient involvement in every step of the healthcare delivery process.

The emphasis on patients’ needs has triggered the rapid proliferation of activist groups calling for patients taking a more active role in important healthcare decisions. While any attempts to listen to the proverbial voice of the customer can only be welcomed—be it healthcare or any other customer-oriented industry—one ought to remember that the history of patient group involvement in healthcare decision making process is not without controversy.

Back in the 1980s, the outbreak of AIDS brought to life a voiceful and influential advocacy on behalf of AIDS patients. Having launched an unprecedented in its magnitude public campaign, the AIDS patient advocates succeeded in persuading the U.S. policymakers to shift substantial amounts of NIH funds to HIV/AIDS research. The powerful infusion of taxpayers’ money helped rapidly identify the origin of the HIV/AIDS epidemics and then develop life-saving treatments.

Yet many critics complained that by receiving the amount of NIH funds that wasn’t commensurate with the number of HIV/AIDS patients, the program had siphoned much needed resources away from other, more important, public health needs.

It appears that the case of AIDS is hardly exceptional. In fact, it points to a general trend: various patient groups actively influencing federal funding in favor of “their” diseases.

A 2012 study conducted by Rachel Kahn Best from University of Michigan follows how disease advocacy organizations lobbied Congress for a greater share of NIH funding. Using data on 53 diseases over 19 years, Kahn Best showed that for each $1,000 spent on lobbying for a specific disease, there was an associated $25,000 increase in research funds for this disease the following year.

What is wrong with that, one might ask? Well, the problem is that the amount of NIH funds allocated for any particular disease is being determined not by some objective parameters associated with this disease—for example, by the so-called burden of disease–but rather by the strength of a corresponding patient advocacy group and the amount of money it spends on lobbying members of Congress.

Predictably enough, when you have winners, you have losers, too. Kahn Best points out that diseases affecting primarily women (except for breast cancer) and African Americans tend to receive lower levels of funding because of weaker lobbying.

Besides, adequate funding isn’t provided to so-called stigmatized diseases, such as lung and liver cancer, associated with patients’ “bad behavior” (smoking for lung cancer and alcohol consumption for liver cancer). Year after year, both diseases received smaller funding than would have been predicted based solely on patient mortality.

While welcoming public involvement in healthcare decisions, we ought to find ways restricting the influence of special interests—and money they bring along—on the healthcare decision making process. I know, I know.

A boomerang drug

I’m sure that the Aduhelm approval was considered by many FDA folks as a winning shot at improving the badly damaged reputation of the agency. Instead, Aduhelm became a boomerang drug of sorts adding insult to injury.

Calls to reform the FDA become louder. Can it be reformed?

Image credit: https://asia.nikkei.com/Business/Pharmaceuticals/Eisai-Biogen-Alzheimer-s-drug-set-for-use-at-300-plus-US-hospitals-exec

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The quotes we choose

Long time ago, a boy growing up in Russia, I came across a quote by President John F. Kennedy. It impressed me so much that I wrote it down and learned by heart. Many years later, already in the United States, I found it in English. Here it is:

I’m certain that after the dust of centuries has passed over our cities, we, too, will be remembered not for victories or defeats in battles or in politics, but for our contribution to the human spirit.

I wonder what President Kennedy—having presided over the defeat of the Bay of Pig Invasion and numerous victories over ladies—had specifically in mind when speaking of the “contribution to the human spirit”? His inaugural address? The Moonshot Program?

Now, I prefer a quote by another American President, Calvin Coolidge:

The business of America is business.

There is no question in my mind that as far as “business” is concerned, this country has a lot to be proud of.

In June, my wife and I were vacationing in Vermont, the birthplace of President Coolidge. One day, we bumped into a small store, and I was amused to see a hand-made poster with yet another Coolidge’s quote stuck in the window. This is what it read:

Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “Press On” has solved and always will solve the problems of the human race.

The only point in this Coolidge’s quote I’d seriously challenge is his take on education. Whether in his time “educated derelicts” were such a common thing, I know not, but today, it’s uneducated derelicts who, in my opinion, represent a larger, growing problem.

I do hope that the future of this country won’t be decided in politics or, God forbid, in battles. I do believe that this future is in flourishing business contributing to the human spirit. And I do think that the American future will be properly secured only if this country preserves and expands its leadership position in innovation.

So, at a risk of sounding preposterous, let me offer the following line:

The business of America is innovation.

How about that?

Image credit: my family album

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Did the members of the crowd reach the verdict?

There are some professions that inspire awe just by the sound of their name. Professional fact-checker, a person tech companies such as Facebook and Twitter hire to identify false or misleading claims, is one of them. Isn’t it cool to be someone who always knows the truth? How special do you have to be to tell other folks what to believe in?

It turns out that there is nothing special in professional fact-checkers after all. An international team of authors explored a crowdsourcing approach to fact-checking. Participants, recruited from an online labor market, were asked to rate randomly selected articles just by reading the headline and the lede (the opening sentence or paragraph) of the article. The authors found that a crowd of untrained laypeople as small as 10 people was as good or even better at fact-checking than three professional fact-checkers who, incidentally, had a chance to read the full article.  

This finding can surprise only someone who never heard about crowdsourcing (or still confuses it with crowdfunding). Over the past 10-15 years, numerous organizations–including corporations, governmental agencies, and nonprofits–have adopted crowdsourcing as a tool to help them address their most pressing technical and business challenges.

Crowdsourcing has also been applied to public policymaking: from writing state and city constitutions to creating “smart cities.”

Now, a group of authors led by Kyle Bozentko from the Center for New Democratic Processes want to make crowdsourcing an intrinsic part of our democratic decision-making process. They call their idea Citizens’ Juries.

As the name implies, Citizens’ Juries will be comprised of small groups of people (12-24 members) and be convened for 3-8 days of moderated deliberations on a specific topic. Depending on the topic, the jury could include people from the general population or be “custom-selected” based on characteristics relevant to the policy issue at hand like age, gender, or race. (For example, a youth citizen’s jury could be convened to study student loans.)  The expectation is that serving as a microcosm of the public, Citizens’ Juries will bring the diversity of perspectives, interpretations, and heuristics that is so desperately lacking in our traditional, “expert-based,” decision-making process.

Sure, to make Citizens’ Juries work, a series foundation of organizational and legal bricks needs to be built first, and the vehement resistance from professional nay-sayers is all but assured. But as someone who witnessed crowdsourcing creating value in real life—and as someone who feels that our political ecosystem is rapidly becoming uninhabitable—I’d give the idea a chance.

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3 best innovation team formulas (and when to ignore them)

This article first appeared on Qmarkets blog in 2017 and is reproduced here with some modifications.

You’ve heard this cliché many times before: innovation is all about people. Even if you’re an avid fan of AI, you hardly expect robots replacing humans as innovators any time soon. And if you agree with another popular cliché, the one saying that innovation is a team sport, you will come to a natural conclusion: to pursue a corporate innovation project, you need a dedicated innovation team.

Do you need an innovation team?

Or maybe you don’t. Many folks don’t believe in structured innovation arguing that any ‘structure’ kills creativity and stifles innovation. Even some innovation experts claim that ‘innovation is everyone’s job.’

The notion that “innovation is everyone’s job” is quite popular in many companies. Why? Because it allows their leadership teams to adopt a hands-off approach to innovation process. It obviously takes time and effort to formulate the company’s innovation strategy, align it with the corporate strategic goals, and identify key business problems to solve. In contrast, it’s much easier to announce an open season for ‘ideas,’ launch an innovation hackathon or two and then claim that the collective wisdom of the whole company has been harnessed. (The popularity of this hands-off approach to innovation can be at least partially attributed to the proliferation of easy-to-use innovation management platforms.)

And yet, most corporate innovation leaders do understand the need and value of creating a dedicated innovation team. To be sure, every employee in an organization should ideally take part in innovation projects, but it’s the ultimate responsibility of the innovation team to take ownership of the process: to make it efficient, measurable, and accountable. Anyone with a glimpse of corporate experience knows that when ‘everyone’ is responsible for something, no one is.

Innovative people for innovative teams

And here we come to an important question: how this innovation team should be formed? Several approaches exist.

The first approach emphasizes personal skills of the team members. That’s why you can often hear that the best way to staff your innovation team is to hire…innovative people. Great advice, of course, but unfortunately, with limited practical value. This is not to say, however, that more specific directions are completely lacking. For example, a 2017 publication lists five ‘innovative’ qualities each member of the innovation team is supposed to possess:

  • Leapfrogging mindset: a desire to view the world with the goal of changing it.
  • Complementary knowledge: the expertise that will help your organization create new technology or a new business model.
  • Strategic relationships: the existence of a strong network of business partners.
  • Ambiguity tolerance: the capacity to make decisions based on limited data.
  • Optimistic persistence: the risk-taking mindset needed to persist through the tough times.

Although I wholeheartedly agree with all five suggestions, I nevertheless suspect that most of corporate HR departments, even equipped with advanced evaluation tests, will have troubles with finding enough candidates meeting such a high standard.

Who is your partner?

The second approach pays little attention to the individual skill sets of the team members, but stresses instead the need for an optimal mix of individuals the team is composed of. This approach specifically focuses on the functional roles each member of the team plays in the project. For example, it was suggested that each innovation team should include nine innovation roles of which the most important are the following five:

  • Revolutionary: team member generating and sharing ideas.
  • Connector: team member bringing people together.
  • Customer Champion: team member responsible for interactions with customers.
  • Magic Maker: team member responsible for implementing developed ideas and solutions.
  • Evangelist: team member creating a ‘buzz’ about the project and its results within the organization.

This approach is obviously much more practical than the first. In fact, many organizations have already adopted the ‘spirit’ (if not the exact ‘letter’) of this approach by creating innovation ‘joint task forces’ composed of representatives from different corporate units and functions (or locations, if appropriate): R&D, sales and marketing, customer service, finance, legal, HR, etc.

Implicit in the formation of an innovation team composed of members belonging to different parts of an organization is a belief that this team can only be successful if it includes people with diverse professional expertise and experience. In recent years, this concept of diversity was augmented by a growing body of evidence showing that socially diverse groups (that is, those with a diversity of race, ethnicity, gender, and sexual orientation) are more innovative than socially homogeneous groups.

Research shows that socially diverse groups are better at solving complex problems not only because people with different backgrounds bring new information, but also because the mere presence of individuals with alternative viewpoints forces group members to work harder to get their own points across.

This is good news for HR managers in charge of innovation teams: in our rapidly globalizing workforce environment, finding people with diverse professional, personal, and social attributes is much easier than chasing rare individuals with nebulous qualities such as ‘leapfrogging mindset.’

It’s all about process

There is the third approach to the formation of innovation teams. This approach emphasizes not the team composition or individual skills of its members, but the way the team operates. The logic behind this approach was eloquently articulated in a 2015 article about Google. The article argues that the composition of a team matters much less for its success than how the team members interact, structure their work, and view their contribution. The article listed five key factors that set apart successful Google teams:

  • Psychological safety: team members taking risks without feeling insecure or embarrassed.
  • Dependability: team members counting on each other to do high-quality work.
  • Structure & clarity: the availability of clear goals, roles, and execution plans for each team member.
  • Meaning of work: team members working on something that is personally important for them.
  • Impact of work: team members believing that their work matters.

Characteristically, it is the first factor, psychological safety, which was by far the most important of the five. The safer team members felt with one another, the more likely they were to admit mistakes, work together, and take on new roles. All this obviously positively affected pretty much every aspect of their work.

The power of this specific example in large part derives from the fact that it comes from Google, arguably one of the world’s most innovative companies, because the very notion that innovation requires taking risks without fear of negative career repercussions is hardly new. We all used to hearing calls to ‘fail fast and fail often’ (or even to ‘celebrate failure’) as a surrogate invitation to innovate.

Unfortunately, while voiceful in promoting risk-taking, relentless experimentation, and learning from mistakes (all being parts of the elusive ‘culture of innovation’), companies fail to introduce specific corporate policies that would encourage and reward such a behavior of their employees.

What can be done?

Previously, I proposed two such specific and actionable corporate policies.

  • First, I proposed placing employees involved in strategic innovation projects on fixed-term (tenure-like) employment contracts, as opposed to employment-at-will. This proposal is based on a 2001 study showing that labor laws making it more difficult to fire employees increase their participation in corporate innovation activities.
  • Second, I proposed making stock option grants, as opposed to cash bonuses and other monetary rewards, the principal incentive for engaging employees in innovation projects. This proposal is based on a 2015 finding that companies offering stock options to non-executive employees were more innovative and that the positive effect of stock options on innovation was more pronounced for longer-term grants.

In other words, even before starting to form individual innovation teams, provide all employees with incentives to engage in innovation activities along with immunity for failed innovation projects. Who knows, you may immediately discover that the number of innovative people in your organization is larger than you expected.

Image credit: Leon on Unsplash

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A Case of Innovation Foreboding: 3 Things That Can Damage U.S. Innovation Long-Term

When it comes to complex things, the proverbial glass is never full; it’s only half-empty. On the other hand, the glass is never empty; it’s always half-full.

The glass analogy perfectly applies to U.S. innovation.

In fits and starts, the U.S. economy has begun recovering from the devastating effects of the COVID-19 pandemic. Yet, the pandemic shocks, which will be felt for a long time ahead, have already forced many organizations to change the ways they do business. Almost every operation has been affected: from the manner firms talk to their customers to the logistics of product delivery to maintaining channels of communication between employees.

Will corporate innovation be spared the troubles of adjusting to the ‘new normal’?

Some people don’t even think that anything particularly bad has happened to U.S. innovation at all. Folks who prefer to believe that the glass of U.S. innovation is at least half-full point to the lightning-speed rollout of the RNA-based COVID-19 vaccines and impressive list of ‘fast and frugal’ innovations developed in response to the pandemic. They also celebrate the unprecedented level of the pandemic-driven cooperation between U.S. academic institutions and private companies. And, hey, did the Global Innovation Index 2020, an annual ranking of the world’s innovation capacities, not name the United States the 3rd most innovative country after Switzerland and Sweden?

Houston, do we have a problem?

We do. In fact, we have a host of problems. One of them, obviously pandemic-related, is ‘covidization’ of science, a dangerous ongoing trend of shifting research funding and, consequently, research activities to the field of infectious diseases at the expense of other areas of fundamental medical research. Others have deep and systemic roots in U.S. business and political environment, and in the space below, I highlighted three problems that, in my opinion, can damage U.S. innovation long term.

The well of innovative ideas is drying up due to insufficient R&D funding

Everyone would agree that ideas are the livelihood of innovation. Many also are used to believe that novel innovative ideas are plentiful and cheap, a notion solidified in a popular slogan “ideas are a dime a dozen.”

As I argued before, this wide-spread conviction that we are swimming in an ocean of cheap innovative ideas is no more than a myth. Available evidence shows that the U.S. is facing a growing shortage of novel ideas. Worse, the cost of getting these ideas is growing while their quality seems to be declining. Consider this: by the end of 2019, the venture capital industry had accumulated a whopping $121 billion in so-called “dry powder,” the money for which venture capitalists failed to find ideas to invest in. In other words, ideas might be plentiful and cheap but at the same time not worth of investing money in them.

Where should novel ideas come from in the first place? The answer looks obvious: from R&D, where else?

Exactly, and here is the root of the problem. In the decades that followed World War II, entirely new sectors of the U.S. economy (jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, digital computers, etc.) have been created, thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.

Things have changed since. Although the total U.S. spending on R&D has remained steady for the past years, at 2.5% of GDP, only about 30% of the money now comes from the federal government, whereas 70% of it is contributed by the private sector. With its focus on rapid ROI and competition, will private sector spend money on fundamental and, therefore, potentially risky R&D projects? No.

Sure, the industry can still generate incrementally innovative combinations of old ideas–which indeed may be plentiful and cheap–but it will likely fail to create breakthrough innovations.

President Biden’s proposal to dramatically increase funding for fundamental research along with the elevation of the Director of the White House Office of Science and Technology Policy to the cabinet-level position are promising steps in the right direction. Unfortunately, there is no institutional protection for the increased R&D budget, which may be easily slashed again by a future Republican administration.

The pandemic has disrupted existing innovation networks

A major question, the answers to which are about to start emerging, is to which extent massive shift to remote work has affected the country’s ability to innovate.

Following the initial euphoria over the fact that remote work did not immediately destroy the corporate world, sober voices of concern are heard. Experts warn that online communications, the hallmark of remote work, are characterized by lower information sharing; that means reduced exchange of ideas between members of the innovation teams.

Besides, and perhaps, more consequential, remote work has essentially eliminated serendipitous interactions, unplanned encounters between employees working in close proximity to each other. Serendipity is believed to play a central role in the development of new collaborative partnerships that are crucial for the sustained corporate innovation process—and, as such, serendipity represents one of the driving forces of innovation.

American history already knows one example of a sudden disruption of innovation networks, Prohibition of 1920-1933, when government actions abruptly intervened in the established pattern of people-to-people interactions. This had a profound negative effect on the U.S. corporate innovation. 

Prohibition-induced effects on innovation had one characteristic feature: they didn’t change the scale or the identity of the individuals within innovation networks. They just disrupted established ways people belonging to the networks communicated with each other, and that was enough to damage the whole innovation process.

This is exactly what we see today: innovation budgets are still there (or at least most of them), people involved in the innovation activities, too. But the way these people interact has been dramatically changed by pushing them behind computer screens in their home offices.

The Prohibition case teaches us another lesson: while the innovation input fell dramatically in the years immediately after the Prohibition onset, it rebounded over time, meaning that affected individuals gradually rebuilt their informal social networks. As America gradually opens, and folks return to offices, innovation networks will be re-established. How long it will take, and how innovative the restored innovation network will be, remains to be seen.

The growing politicization of science

In general, Americans trust science. In fact, they trust scientists as highly as military and much higher than religious and business leaders, and, not surprisingly, elected officials.

Unfortunately, a troubling trend has emerged over the past 40 years: the growing distrust in science that has been specifically driven by conservatives. (The trust in science remains steady among moderates and the liberals.)

So far, this distrust in science among the conservatives has been mostly manifested by their skepticism about anthropogenic climate change. However, the COVID-19 pandemic has expanded the front lines of this ‘war on science.’ In December 2020, the Pew Research Center reported that while 84% of Democrats considered COVID-19 as a major threat to public health, only 43% of Republicans agreed. The same ‘blue vs. red’ divide can be seen over seemingly non-partisan issues like wearing masks and COVID-19 vaccination.

Research shows that distrust in science among the conservatives correlates with their unwillingness to support it. Taking to the extreme, this trend may result in increasing ‘defunding science’ both in the Republican-controlled states and, worse, at the federal level.

Image credit: DEVN on Unsplash

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