It Takes Two to Tango: Entrepreneurial Interaction and Innovation by Joe Tidd

Innovation

It Takes Two to Tango: Entrepreneurial interaction and innovation By Joe Tidd

Innovation management focuses too much on processes and What is Conjoint Innovation? tools, whereas entrepreneurship is pre-occupied with individ- Traditional treatments of the lone, heroic, visionary entre- ual personal traits. However, many of the most successful in- preneur fail to account for the frequency of couples or small novations were co-created by multiple entrepreneurs, and it is groups of entrepreneurs in the creation of successful innova- this interaction of talent that is at the core of radical innovation, tive ventures. The latter qualification is important, because what we call Conjoint Innovation. We examine 15 cases, histor- the focus here is on the creation of innovative new ventures, ical and contemporary, to identify what Conjoint Innovation is and how it works. Table. Examples of Conjoint Innovation ince the pioneering work of scholars such as Joseph Schumpeter and Peter Drucker, the fields of Innovation Apple* Steve Jobs & Steve Wozniak Sand Entrepreneurship have become two separate and dis- Google* Larry Page & Sergey Brin tinct disciplines. However, this division and specialisation has Facebook* Mark Zuckerberg & Eduardo Saverin resulted in a blind-spot: entrepreneurship has become preoc- Microsoft* Bill Gates & Paul Allen cupied with the personalities of individual entrepreneurs and Netﬂix* Marc Randolph & Reed Hastings small business creation, and innovation is dominated by cor- Intel* Robert Noyce & Gordon Moore 1 porate R&D and new product development processes. As a Marks and Spencer* Michael Marks & Thomas Spencer result, we have failed to identify and understand an important ARM Mike Muller & Tudor Brown part of innovation and entrepreneurship, innovative new ven- Skype Niklas Zennström & Janus Friis tures created by multiple entrepreneurs, what we call Conjoint Sony Masaru Ibuka & Akio Morita Innovation. If we study recent and historical cases of radical new Rolls Royce Henry Royce & Charles Rolls ventures we find that a significant number of the most successful DNA James Watson & Francis Crick were co-created, by multiple entrepreneurs, and it is this interaction of talent that is at the core of Conjoint Innovation (Table). Electriﬁcation George Westinghouse & Nikola Tesla We define Conjoint Innovation as “the combination and inter- Steel process Henry Bessemer & Robert Mushet action of two or more entrepreneurs with different capabilities Steam power James Watt & Matthew Boulton to create a novel technology, product, service or venture.” *Ranked “world’s most innovative” rms, http://www.fastcompany.com/most-innovative-companies/2011/

58 The European Business Review September – October 2012 If we study recent and historical cases of radical new ventures we find that a significant number of the most successful were co-created, by multiple entrepreneurs, and it is this interaction of talent that is at the core of Conjoint Innovation. often predicated on the development sharing. The first allowed the transfer and Ford for his process and corpo- or application of technology, rather of voice over the Internet, rather than rate innovations, including the creation than more general start-ups or small conventional telecommunications net- of Fairchild Semiconductor and Intel. business formation. The table identi- works, and the other exploited the dis- Sherman Fairchild agreed to fund the fies 15 recent and historical examples tributed computing power of users’ “Traitorous Eights” new venture on the of Conjoint Innovation. This list is not computers to avoid the need for a ded- basis of Noyce’s reputation and vision. representative or comprehensive in any icated centralized server or infrastruc- At Fairchild, Noyce created a climate sense, but is intended to demonstrate ture. Skype was created in 2003 by the in which talent thrived: it was much less that Conjoint Innovation is evident and Swedish serial entrepreneur Niklas structured; more relaxed, team-based significant. Many of these cases are Zennström. Zennström was previously and less hierarchical than at Shockley. well known and have been discussed (in)famous for his pioneering web Arguably this was the archetype for in the popular business press and busi- company Kazaa, which provided a P2P the future culture of Silicon Valley. ness school case studies, but the focus is service, mainly used for the (illegal) In 1968 Noyce left Fairchild to form too often on only one of the more pub- exchange of MP3 music files. He sold a new venture with Gordon Moore licity-seeking founders. However, it is Kazaa to the US company Sharman (also one of the original “Traitorous worth exploring some of these exam- Networks to concentrate on the devel- Eights” from Shockley, and originator ples to illustrate the concept. opment of Skype. He teamed up with of “Moore’s Law”). Five of the original the Dane Janus Friis and together founders of Fairchild Semiconductor Randolph and Hastings, Netflix they built Skype. Zennström had dual funded the creation of Intel (INTgrated Netflix was founded by Marc Randolph degrees in Business Administration ELectronics). Intel’s third employee and Reed Hastings in 1997. Hastings had (BSc) and Engineering Physics (MSc) was Andy Grove, a chemical engineer graduated in maths and computer science, from Uppsala University in Sweden, and credited as its key business and and prior to creating Netflix had experi- and senior professional experience at strategic leader. ence at the software company Adaptive Tele2, a European ISP. In contrast, Technology and had created his own Janus Friis had no formal higher edu- Royce and Rolls, Rolls Royce business Pure Software in 1991, which cation, but had gained customer service Charles Stewart Rolls and Frederick he sold in 1995, for US $750 million. and support experience at CyberCity, Henry Royce originated from con- Prior to founding Netflix, from 1986 one of Denmark’s first Internet service trasting backgrounds and educations. to 1992, Randolph was Vice President providers. He met Zennström in 1996, Charles Rolls was born into the aris- of Direct Marketing, Vice President when he hired Friis to run its customer tocracy, and was educated at Eton and of Corporate Marketing and General support. Friis and Zennström worked Cambridge University, where he dem- Manager of Borland International's together at Tele2 for four years, but onstrated a natural flair for engineering Consumer Products Group, and from in January 2000 they left Tele2 and work and gained a degree in Mechanical 1994 to 1996, he was the Vice President created Kazaa in 2001 to develop and Engineering and Applied Sciences. of Marketing for Visioneer. In 1996, he promote peer-to-peer file sharing soft- In 1902 Rolls established a business became Vice President of Marketing ware and services. selling cars, C S Rolls, which became for IntegrityQA, and at Pure Atria a leading distributor. Royce had a more served as Vice President of Corporate Noyce and Moore, Intel conventional background, the son of a Marketing, where he worked with Robert (Bob) Noyce was one of the miller. He won an apprentice with the Reed Hastings. pioneers of microelectronics, whose Great Northern Railway where he was contribution can be traced all the way trained in engineering, but also taught Zennström and Friis, Skype forward to current entrepreneurs such himself foreign languages, mathemat- Skype successfully combined two as Steve Jobs of Apple fame. He has ics and the fundamentals of electric- emerging technologies to create a new been referred to as the Thomas Edison ity. In 1906 they formed Rolls Royce service and business model for tele- and the Henry Ford of Silicon Valley: Ltd, and in 1907 developed the Silver communications. The two technolo- Edison for his invention and techno- Ghost, which became known as the gies were Voice over Internet Protocol logical innovations, including the co- greatest car in the world. Its production (VoIP) and peer-to-peer (P2P) file invention of the integrated circuit; continued for 20 years.

www.europeanbusinessreview.com 59 Innovation

Marks and Spencer of commercial electricity. Tesla studied progress for the next decade, until he Michael Marks, a Russian Jewish electrical engineering in Austria, but entered into a partnership with Matthew refugee, first set up a stall in a Leeds left university after one term. In 1884 Boulton. Watt had the technical ingenuity, market place selling homewares under he moved to New York, and began to but Boulton had the capital and commer- the slogan ‘Don't ask the price, it's a work for Thomas Edison in the famous cial knowledge. Together they formed a penny.’ The company was founded Edison Machine Works. Tesla quickly new venture, Boulton and Watt, to exclu- in 1884 by Marks, aged 21. In 1894 progressed and was given the impor- sively manufacture steam engines, and by Thomas Spencer, a cashier at one of his tant task of completely redesigning the 1800 had installed almost 1,500 engines. suppliers, joined him. Spencer decided Edison company's direct current (DC) The new venture represented an early that the £300 required for a half-share generators. However, Edison did not example of a “systems integrator” with in the business would be a good invest- have the mathematical background nec- an innovative business model. The firm ment. The running of the business was essary to fully appreciate the benefits of of Boulton and Watt did not manufac- split between Spencer, who managed alternating current (AC) over DC, and ture steam engines, but instead required the office and warehouse, and Marks, had dismissed Tesla’s ideas for AC gen- their customers to purchase parts from who continued to run the market stalls. eration and transmission. As a result, a number of suppliers, which were then By 1900 he and his partner were operat- Tesla left Edison to work with George assembled on-site. However, Boulton ing 24 stalls and 12 shops, mainly in the Westinghouse at Westinghouse. George and Watt did not make their profits from Midlands and north of England. Spencer Westinghouse founded Westinghouse selling the engines. The company made had developed some important contacts Electric Company in 1886. Westinghouse its profit by comparing the amount of while working for Isaac Dewhirst, a was the son of a machine shop owner, coal used by the machine with that used textile wholesaler for M&S, and these and in 1869 at age 22 he had invented a by the previous, less efficient engine, and allowed him to get the best prices for patented railroad braking system. In 1887 required payments of one-third of the goods by dealing directly with the the infamous "War of Currents" began savings annually for the next 25 years. manufacturers. This close relationship between Westinghouse and Edison, but This innovative business model made the between retailer, suppliers and manufac- by 1890 Westinghouse had won. The company and its two founders phenom- turers continued to be a defining char- following year General Electric was enally wealthy and influential. Boulton acteristic of the company and its many formed by the Edison company to invest used to brag that the company didn’t sell subsequent innovations in clothing and in AC technology, although Thomas steam engines but provided power. food. M&S continued its relationship Edison's personal views on strategy had with Dewhirst and Corah, a textile sup- to be over-ruled by the President and How does Conjoint Innovation work? plier, which became their first to be dealt Board of Directors. These examples demonstrate that many radical new ventures are not simply the result of a technical genius or visionary We can identify three mechanisms that commonly con- entrepreneur. Instead, all these cases tribute to the interaction between entrepreneurs and feature a combination of talents and capabilities which interacted to create a the creation of radical new ventures: complementary radical new venture. Therefore it is nec- capabilities, creative conflict, and adjacent networks. essary, but not sufficient, for Conjoint Innovation that two or more entrepreneurs create a venture. We can identify with directly. The business was con- Boulton and Watt, steam power three mechanisms that commonly con- verted into a private company, Marks & The concept of novel “business models” tribute to the interaction between entre- Spencer Ltd, in 1903. The ‘St Michael’ is not new. Contrary to popular belief, preneurs and the creation of radical trademark was registered in 1928. In the architect of the Industrial Revolution, new ventures: 1934 M&S set up a Scientific Research James Watt, did not invent the Steam • Complementary capabilities Laboratory, and were the first to have Engine, which had been patented in • Creative conflict a lab to pre-test garments and research 1698, almost forty years before his birth. • Adjacent networks fabrics, and in 1948 M&S established its However, Watt did make significant tech- food technology department. nical improvements to existing steam Complementary capabilities engines by introducing a separate con- Entrepreneurial capabilities are often Westinghouse and Tesla, electrification denser to reduce waste energy and hence too narrowly conceived as individual Nikola Tesla was a Serbian-American increase significantly their efficiency and education and experience, but it may polymath, mechanical and electrical engi- effectiveness, and developed a proto- be more productive to consider these neer, and a pioneer in the development type in 1765. However, Watt made little in the collective and aggregate sense

60 The European Business Review September – October 2012 more commonly adopted in innovation management.2 For example, a central theme of innovation studies has been the role of cross-functional interaction, which is associated with more complex and radical products and technologies. Examination of the cases in the Table indicates that founders of these innovative, high-growth ventures all have different capabilities, indicated by their educational and prior work experi- methods or relationships. In general, some integrated and proprietary hardware, ences and roles. Most typically we find conflict over goals and methods is con- software and content. Developing an that a combination of technical and structive, helping to avoid groupthink, and effective innovation network can deliver sales or marketing is a common cou- to consider more diverse opinions and a wide range of benefits beyond the col- pling, although other variations exist, alternative strategies. So the goal is not lective knowledge efficiency. Innovation depending upon the maturity of tech- necessarily to minimize conflict and max- networks promote access to different nology and markets. For example, the imize consensus, but to maintain a level and complementary knowledge sets, initial recognition of the opportunity of constructive conflict consistent with the reducing risks by sharing them, access- requires the ability to connect a specific need for diversity, and a range of different ing new markets and technologies, technology or know-how to a new com- preferences and styles of creative problem and pooling complementary skills and mercial application, which requires a solving. This involves the productive use assets. Without such networks it would rather rare combination of skill, expe- and respect for diversity of perspectives be nearly impossible for the lone inven- rience, aptitude, insight, and circum- and points of view, and contrast with tor or entrepreneur to bring his or her stances. A key issue here is the ability many sole-founder ventures, which adopt idea successfully to market. to synthesize scientific knowledge and more authoritarian patterns. market insights, which increases with About the Author the entrepreneur's social capital - link- Adjacent networks Joe Tidd is Professor of Technology ages, partnerships and other network The idea of the lone inventor or entre- and Innovation Management at interactions. This requires a delicate preneur pioneering his or her way SPRU, Science and Technology Policy balance between differentiation and through to market success is something Research, University of Sussex, U.K. integration of capabilities, and strong of a myth, not least because of the huge He has worked as innovation policy ties within disciplines to develop depth efforts and different resources needed to adviser to the CBI (Confederation but weaker ties across functions to make innovation happen. Whilst indi- of British Industry), a researcher for promote innovation. vidual ideas, energy and passion are the lean production project at the key requirements, most successful entre- Massachusetts Institute of Technology preneurs recognise the need to network (MIT) and worked at Imperial College Some conflict over goals extensively and to collect the resources Business School, University College and methods is construc- they need via complex webs of rela- London, Copenhagen Business School tive, helping to avoid tionships. Innovation is not a solo act and Rotterdam School of Management. but a multi-actor game. One of the out- He has written nine books and more groupthink and to consid- comes of exploiting adjacent networks than sixty papers on the management er more diverse opinions is the identification and development of technology and innovation, and is and alternative strategies. of innovative business models. Most the Managing Editor of the International of the cases of Conjoint Innovation Journal of Innovation Management. in the Table combined technological Creative conflict innovation with novel ways of creating References The presence of complementary capabil- and capturing value: both Mushet and 1. J. Bessant & J. Tidd (2011) Innovation and Entrepreneurship. Wiley, second edition. www. ities is necessary for Conjoint Innovation, Tesla created wealth through royalties; iande.info but for constructive interaction to happen Boulton and Watt pioneered the service 2. J. Tidd (2012) From Knowledge Management we also need a degree of creative conflict.3 model of “power by the pound”; Marks to Strategic Competence. Imperial College Press, Creative conflict arises due to differences and Spencer’s were the first to promote third edition. 3. J. Tidd & J. Bessant (2013) in personalities, creative and cognitive fixed-pricing with “don't ask the price, Managing Innovation: Integrating technological, market and style, and domain-specific knowledge and it's a penny”; ARM’s fab-free pure organizational change. Wiley, fifth edition. www. experience. Conflicts can occur over goals, design and licensing model; and Apple’s managing-innovation.com