Tag Archives: Innovation

The challenge(s) of innovation

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Entreprise Romande asked me to write a short article about Innovation. It was published on March 2, here is my quick (and dirty) translation

Two famous quotes are worth recalling: in 1899, Charles Duel proposed to close the patent office he headed the U.S. stating that “everything that has to be invented has already been.” Less than a century later, Bill Gates stated with conviction that “a computer did not need the equivalent of more than a memory disk.”If these two predictions show that the difficulties of innovation are linked to the difficulty in predicting the future too far, they are unfortunately only legends! It remains no less true that innovators face many obstacles, the first of them being the permanent uncertainty in which swims the one who wants to offer something new.

The difficulties do not stop at the door of the future. In a famous book, Professor Clayton Christensen explains the dilemma of large companies toward innovation. Christensen uses the term Great and not Large because he speaks of the best managed corporations: by being attentive to their customers, they constantly seek to serve them better by improving the constant changes in the quality of their products and services. In doing so, it is extremely difficult to see coming revolutions, all the more difficult to identify that they often start very humbly, with products of inferior quality and very incomplete. Christensen cites numerous examples, but simply note that Microsoft almost missed the turn to a web that did not generate income, Nokia has missed the market for smart phones and I remind you this famous quote by Henry Ford: “If I had asked consumers what they wanted, they would have said a faster horse.”

Any smart player quickly learns from those mistakes. Christensen, who has become an icon in innovation, explains that the major players must simply create spin-offs away from customers and development centers. Despite some initial mistakes, Nespresso has become a flagship product of Nestle. Perhaps less known is the fact that Cisco has become a major player in the world of servers thanks to a start-up it had funded in its infancy and then acquired. The lessons were digested; Christensen and other experts today have become popes of innovation with more refined models

The spin-off concept is nowadays obvious, and good news, there is no need for significant resources, at least initially. Experts advocate rapid iterations in constant contact with potential customers, from the start of a project. It was also understood that one must first find customers willing to test visionary products, even promising but incomplete. Adjustments can be made continuously and avoid unnecessary investments in directions that the market would refuse later. Finally, the transition for visionary customers to more conservative customers will require a specific strategy and often a new team for product development. Systematic procedures that would ensure the success of future innovations? Unfortunately not. In a recent interview to the Finnish press, Steve Blank who believed he had developed a scientific theory of innovation said, ” Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, Business Model Design) to build early stage ventures, entrepreneurship would become a “science,” and anyone could do it. I’m beginning to suspect this assumption may be wrong. It’s not that the tools are wrong. Where I think we have gone wrong is the belief that anyone can use these tools equally well.” In the same way that word processing has never replaced a writer, a thoughtful innovation process will not guarantee success. Blank added that ” until we truly understand how to teach creativity, their numbers are limited. Not everyone is an artist, after all.”

You have to go global, and right from the start

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I do not make the front page so often so it was fun to be on the EPFL one this morning. Forgetting about ego, I talked about my usual obsession, lack of growth of European start-ups. You may read the interview by clicking on the picture or reading it below.

More seriously maybe, you can read a similar analysis by Oseo, the French innovation agency which published “A look at 10 years of creation of innovative companies in France”. the study is in French and looked at 5’500 start-ups created between 1998 and 2007.

What the study says is that 85% of the company are alive after 5 years [against 50% in the USA; I already addressed the topic in Survival or failure – which success?], they have less than 10 employees, and the one important reason of this situation is the difficulty in building relational networks. Nothing new probably and nothing new in the interview below… except maybe that half of the French start-ups have an international strategy right from teh start and 30% have a foreign-only market!

“You have to go global, and right from the start.”

10.02.12 – How do you go about setting up a business? Hervé Lebret, start-up specialist and head of the Innogrant program at EPFL, answers a few questions. “When launching a start-up, you must think globally right from the start”, says Hervé Lebret, head of the Innogrant program, a support tool for entrepreneurs coming from academia. He believes that both the Swiss and Europeans hesitate too much when creating start-ups. As the person responsible for writing a monthly column dedicated to start-ups on the new EPFL website, starting next Monday, he was more than happy to be interviewed.

Does the current economic situation make it harder to find funding?
This may come as a surprise, but I don’t think that things have really changed. It’s hard to find capital, as it has always been, but not impossible. It depends on the business area concerned, but I would even go so far as to say that there is more capital now than there was 15 years ago. Businesses such as Scala or Aleva, with origins in EPFL labs, have raised significant sums from venture capitalists in the last few years, just as Aïmago, Lemoptix or Attolight which secured 1 to 2 million francs from Business Angels.

Are some areas more favorable than others?
It makes it easier if the know-how is present locally, as is the case here with biomeds or nanotechnologies. Cleantech businesses are starting to lose the favor which they enjoyed until recently. But I’m convinced that ideas can come out of anywhere and get a good reception, as long as their communication is efficient. Incidentally, we shouldn’t pay so much attention to the needs of the market. These don’t suffice to predict which start-up will be the next success-story. Promising areas have needs, but no immediate solutions, and when the start-ups enter the market the first needs have often already evolved and are moving in another direction.

How can one ensure a good launch for their start-up?
Only one start-up out of ten succeeds in raising venture capital like Aleva or Biocartis, and grows to a size of 50 to 100 employees. Then out of these, 10 percent will enjoy success over ten years, like Endoart or Swissquote, which employs over 400 people. The main goal should not be survival. On the contrary, these start-ups sometimes last too long. Some 90 percent of them are still there five years on, but they haven’t grown. In the United States there is a higher rate of renewal: only 50 percent of start-ups are still in existence after this same five-year-period. The problem lies in the conservative stance of Europeans, who are wary of quick growth. I think we should bring students’ attention to this aspect very early, starting in high school. You cannot just turn yourself into a businessperson. We need to encourage children and young people to explore and stop stigmatizing failure, which we still do now in Switzerland. We plan to show a fascinating documentary soon on the topic of students who are eager and interested in creating businesses – it’s called Something Ventured.

How do you carve out a place for yourself?
It’s fairly easy, if you have a good idea, to obtain up to 500,000 francs from public funds or philanthropic organizations, which allows the business to survive one or two years. These contacts also provide free marketing, which can in turn help to find initial business angels and make an initial million francs. The limits come from the young businessperson’s excessive humility, from their self-limitations. In order to succeed, you must be a salesman and somewhat extrovert, or team up with someone who is. Network is essential in effective positioning of the company.

How important are start-ups for the economic fabric of Switzerland?
Some forty start-ups are created each year in the Canton of Vaud, fifteen of which come from the academic world. They play an important role in the future of the Canton, of Switzerland and even Europe. Logitech or Swissquote, for instance, have created many jobs. However, Swiss start-ups in general struggle to grow beyond five or six employees. The biggest problem is well known: entrepreneurs lack risk-taking instincts and therefore struggle to grow their businesses. They prefer to do it in stages. In the United States an “all or nothing” policy prevails, and results in a higher success rate. Facebook, which has just declared its entry on the stock exchange, already employs 3000 people. Individuals who have good ideas go straight ahead and are not afraid of failure. They aim directly for global markets. The biggest mistake is to aim first and foremost for the Swiss market. One should aim for the world market straight away by adopting a global perspective and not being afraid of passing off as arrogant is essential.

Author: Cécilia Carron – Source: EPFL Mediacom

Something Ventured: a great movie

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I just watched Something Ventured and I loved it. Loved it so much I plan to have it shown to as many EPFL students as possible in the spring! It is a movie about passion, enthusiasm, energy, changing the world and yes… about money. When asked about their hope about the movie, producers Molly Davis Paul Holland said: Our high hope for this film is that every student that wants to be an entrepreneur—at every level, high school, business school, on corporate campuses—sees it. We want to see more young people fall in love with entrepreneurship… And if we have a quieter, more serious goal, it’s that I want policymakers to look at this and say ‘What can we do to make it easier, not harder, for people in this country to start those kinds of businesses?’

I would have said I hope that every student — at every level — sees it. And the producers added we were trying to explain our vision for the movie and said, ‘What we are envisioning is a movie like Reds [Warren Beatty’s 1981 film about the original Bolsheviks], where you go back in time to talk about an exciting period — in that case 1917 Russia — and ask people in the present day what it was like back then. Dan said ‘Ok, so you want to make Reds but without the Communists.’ That is ultimately what came about: A really beautiful dialogue with really interesting men and the people they financed.

“A Film About Capitalism, and (Surprise) It’s a Love Story.”

This is the title of another article about the movie, where the journalist says “moviegoers can see what might be the rarest bird in the documentary world: a genuine love story about capitalism.” Somewhere else, the moviemaker, Dayna Goldfine explains: “I think what compelled us to take this one on, even though it is a positive view of business, was, one, it’s a chance to do this kind of alternative view. But also, what these guys were doing – both the entrepreneurs and the venture capitalists – was creating real products. So much of what has come down in terms of the financial tragedy of the last few years has been caused by the investment bankers –people who were really just creating financial instruments, as opposed to changing the world with technology by creating or funding an Apple Computer, or a Cisco Systems, or a Genentech”. Co-moviemaker Dan Geller adds: “I wouldn’t say that money was incidental – money was important – but the overwhelming enthusiasm was for taking these brilliant ideas and these inchoate technologies and making something earth-shattering with them. That’s the energy, I think, that comes through in these stories.”

Yes it is a movie about capitalism, about business. But it is also a movie about enthusiasm, happiness, failure also. It begins in 1957 with Fairchild and Arthur Rock. It could have begun with French expatriate Georges Doriot. A professor at Harvard who supposedly taught manufacturing (in fact it was about how many glasses to drink at a cocktail party and how to read newspapers – go to obituaries), Doriot did not create venture capital with ARD (even if he funded Digital Equipment – DEC) – Rock created the term later, but Doriot inspired most of the heroes of the movie: Tom Perkins, Bill Draper, Pitch Johnson, Dick Kramlich. And these guys funded Intel, Atari, Apple, Tandem, Genentech, Cisco. (The movie tells stories from the 60s to the 80s, but Google, Yahoo, Amazon, Facebook could have been added). Indeed with the movie, the Social Network, it’s the best movie I have seen about high-tech entrepreneurship. What I had nearly forgotten in The Social Network is the closed Boston society (Zuckerberg desperate efforts to enter high-end social clubs). Here also, the Wild West explains its success through openness and risk taking.

And the authors did not cheat. It is also about painful memories, how Powerpoint ended up in Microsoft hands, maybe because the entrepreneur had found it too tough before or how one of the rare women in this world, Sandy Lerner, the co-founder of Cisco, may have not forgiven her firing from the company she had created: “you gotta understand the game that you’re in. […] Look, there wasn’t a box for me.” So yes, it is also about failures, “living deads”, but there is a “feel good” attitude, funny moments, such as when Valentine visiting the Atari factory does not recognize the cigarette brands he smokes!! Or when Gordon Moore (the famous Moore law) remembers that Intel went public the same day as PlayBoy.

So if you do not know much (or even if you do know a lot) about Fairchild, Intel, Atari, Tandem, Genentech, Apple, Cisco, and even if you do not care about entrepreneurship, run and watch Something Ventured. Hopefully you will care!

The Dark Side of Innovation

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If you read the Englsih version of my blog, you probably do not know the excellent, brilliant Philippe Meyer and his Chronicles on France Culture. He is usually funny, but when he talked last Friday about innovation (which does not happen often), it was tough to smile. You can listen to his mp3 file here.

Philippe Meyer is in fact refering to an article from the New York Times: How the U.S. Lost Out on iPhone Work. Meyer mentions the famous Titan Diner, where President Obama invited some of the Silicon Valley personalities. He talks about the price we pay to have our electronic gadgets, the price paid by the Chinese workers at Foxconn or by the American middle-class and its high level of unemployment.

I do not have any (good) answer to the question. But it is sometimes good to think about the dark side of innovation and economy in general. I am currently reading a biography of Schumpeter. Already, more than a hundred years ago, the problem was addressed by Keynes, Marx and the free-market economists. Have we make any progress? Is the situation worse?

Andy Grove had the same concern in 2010 when he wrote How America Can Create Jobs for Business Week. The Americans are nationalistic, Intel was known to produce almost exclusively in the USA and now Grove is worried. Again I do not have an answer.

Triumph of the Nerds

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When I published Start-Up, a friend and colleague told me: “Why do you want to write something about high-tech entrepreneurship and start-ups. Nobody reads anymore. Make movies, videos!” He may have been right. Now that I heard about a new documentary about Silicon Valley and I will talk about this later in this post, it gave me the opportunity to look backwards. Triumph of the Nerds is a 3-episode (50 mns each) produced in 1996.

It is great, sometimes boring, often funny. Its author Robert X. Cringely is also the author of the related and very good book, Accidental Empires. You can watch the videos on YouTube and read the transcripts on PBS. I found Part I, the best. Part II about Microsoft and IBM is more serious, Part III about Apple is in-between.

First I found the best definition of a Nerd: “I think a nerd is a person who uses the telephone to talk to other people about telephones. And a computer nerd therefore is somebody who uses a computer in order to use a computer.”

Then about the semiconductor industry: “Intel not only invented the chip, they are responsible for the laid-back Silicon Valley working style. Everyone was on a first-name basis. There were no reserved parking places, no offices, only cubicles. It’s still true today. Here’s the chairman’s cubicle… Gordon Moore is one of the Intel founders worth $3 billion. With money like that, I’d have a door.” […] “Only Intel didn’t appreciate the brilliance of their own product, seeing it as useful mainly for powering calculators or traffic lights. Intel had all the elements necessary to invent the PC business, but they just didn’t get it.”

“What was needed was a version of some big computer language like BASIC, only modified for the PC. But it didn’t yet exist because the experts all thought that nothing would fit inside the tiny memory. Yet again the experts were wrong.” And here came … Microsoft … and Apple

Steve Jobs: “Remember that the Sixties happened in the early Seventies, right, so you have to remember that and that’s sort of when I came of age. So I saw a lot of this and to me the spark of that was that there was something beyond sort of what you see every day. It’s the same thing that causes people to want to be poets instead of bankers. And I think that’s a wonderful thing. And I think that that same spirit can be put into products, and those products can be manufactured and given to people and they can sense that spirit.”

Part III talks about how Xerox missed the high-tech revolution and Apple or Adobe used Xerox inventions. The output? “A software nerd is the richest man in the world.” We are in 1996. Gates: “You know, if you take the way the Internet is changing month by month, if somebody can predict what’s going to happen three months from now, nine months from now even today eh my hat’s off to them, I think we’ve got a phenomena here that is moving so rapidly that nobody knows exactly where it will go.”

Yes, it was an Accidental Empire.

There is another documentary Pirates of Silicon Valley but it looks very similar to Triumph of the Nerds, without the humour or Cringely. But the reason of this post, is the recent released of Something Ventured. This I will watch soon and hopefully show at EPFL to students and colleagues.

Here is the trailer:

The New Silicon Valley(s)

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Nice series on French-speaking Swiss Radio broadcast les Temps Modernes, this week about five stimulating experiments of high-tech clusters. Probably to fight the depressing mood around WEF and the economic crisis. (And not only because I was given the opportunity this morning to comment the last case! I was only invited on Wednesday… 🙂 )

Monday it was about Russia’s Skolkovo, which I had mentioned in a post a few months ago.

I did not know at all Kenya’s Konza, and this was really refreshing.

You cannot avoid China, but here also surprise, surprise, it was not Shanghai neither Shenzhen, but Zhongguancun.


I had heard of Startup Chile, because Stanford supports the experiment in South America.

Finally, I could comment the stimulating British case, the Silicon Roundabout, in East London. You can listen to or download the mp3 file (in French).

A spontaneous emerging cluster, a name given by a local entrepreneur, no real support by decision makers, at least in the beginning and a nice and enthusiastic atmosphere. And all this attracts people from abroad. Is this finally the cluster Europe has been waiting for? We shall see… The experiment is really interesting and if you want to know more, you may wish to read (French) Le Monde, Le “Silicon Roundabout”, un succès britannique, or The Economist, Silicon Roundabout.

Innovation is not about small or large, it’s about fast.

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The debate is recurrent and in my last post, I was questioned about my fascination for start-ups and Silicon Valley. In a way this is related, I will come back on this at the end. Two recent articles nearly surprised me. The first one has a famous author, Clayton Christensen. The Empires Strike Back – How Xerox and other large corporations are harnessing the force of disruptive innovation was published in the latest issue of the MIT Tech Review.

Here are short extracts: “It has been a long time since anyone considered Xerox an innovation powerhouse. On the contrary, Xerox typically serves as a cautionary tale of opportunity lost: many obituaries of Steve Jobs described how his fateful visit to the Xerox Palo Alto Research Center in 1979 inspired many of the breakthroughs that Apple built into its Macintosh computer. Back then, Xerox dominated the photocopier market and was understandably focused on improving and sustaining its high-margin products. The company’s headquarters became the place where inventions in its Silicon Valley lab went to die. Inevitably, simpler and cheaper copiers from Canon and other rivals cut down Xerox in its core market. It is a classic story of the “innovator’s dilemma.” […] But now Xerox is turning things around […] In the past, Xerox’s success would have been an anomaly. Less than a decade ago, when we were finishing the book The Innovator’s Solution we highlighted the fact that disruptive innovations are typically introduced by startups, the rebel forces in the business universe. […] Throughout the 1980s and 1990s, only about 25 percent of disruptive innovations we tracked in our database came from such incumbents, with the rest coming from startups. But during the 2000s, 35 percent of disruptions were launched by incumbents. In other words, the battle seems to be swinging in favor of the Empire, as the following examples confirm. The author mentions examples such as GE, Tesla competing with GM, Dow and Microsoft in the article.

The second article comes from The Ecomist and is entitled “Why large firms are often more inventive than small ones.” Let me quote it a little more extensively: “Joseph Schumpeter […] argued both sides of the case. In 1909 he said that small companies were more inventive. In 1942 he reversed himself. Big firms have more incentive to invest in new products, he decided, because they can sell them to more people and reap greater rewards more quickly. In a competitive market, inventions are quickly imitated, so a small inventor’s investment often fails to pay off. […] These days the second Schumpeter is out of fashion: people assume that little start-ups are creative and big firms are slow and bureaucratic. But that is a gross oversimplification, says Michael Mandel of the Progressive Policy Institute, a think-tank. In a new report on “scale and innovation”, he concludes that today’s economy favours big companies over small ones. Big is back, as this newspaper has argued. And big is clever, for three reasons.” The arguments are that 1-ecosystems are big, 2-markets are globals and 3-problems to be solved on a large scale. This is not for small companies. “He is right that the old “small is innovative” argument is looking dated. Several of the champions of the new economy are firms that were once hailed as plucky little start-ups but have long since grown huge, such as Apple, Google and Facebook. […] Big companies have a big advantage in recruiting today’s most valuable resource: talent. (Graduates have debts, and many prefer the certainty of a salary to the lottery of stock in a start-up.) Large firms are getting better at avoiding bureaucratic stagnation: they are flattening their hierarchies and opening themselves up to ideas from elsewhere. Procter & Gamble, a consumer-goods giant, gets most of its ideas from outside its walls. Sir George Buckley, the boss of 3M, a big firm with a 109-year history of innovation, argues that companies like his can combine the virtues of creativity and scale.”

Well I was not surprised for long. The debate is not about small or large. Let me explain by quoting my book again and more specifically the section Small is not Beautiful [page 111] “There is one misunderstanding concerning start-ups. Because they would be young, recent companies, and because many macroeconomic analyses focus on the jobs generated by small structures, there is a tendency to consider with high regard that “small is beautiful” as if it were a motto for start-ups. The ambition of a start-up is not to stay modest. On the contrary, the successful companies have become large, sometimes dinosaurs. In early 2007, Intel had 94’000 employees, Oracle 56’000, Cisco 49’000 and Sun 38’000. These “start-ups” have become multinational companies. […] The San Jose Mercury News, the daily newspaper at the heart of Silicon Valley, publishes once a year for example the list of the 150 biggest companies. The simple comparison of the list between 1997 and 2004 shows that among the top 50 in 2004, 12 were not part of the first 150 in 1997. Zhang also analyzed this astonishing dynamics by comparing the 40 biggest high-tech Silicon Valley companies in 1982 and in 2002 as provided by Dun & Bradstreet. Twenty of the 1982 companies did not exist anymore in 2002 and twenty one of the 2002 companies had not been created in 1982. These dynamics of birth and death are known and positively acknowledged.”

It is exactly what the Economist article explains: “However, there are two objections to Mr Mandel’s argument. The first is that, although big companies often excel at incremental innovation (ie, adding more bells and whistles to existing products), they are less comfortable with disruptive innovation—the kind that changes the rules of the game. The big companies that the original Schumpeter celebrated often buried new ideas that threatened established business lines, as AT&T did with automatic dialling. Mr Mandel says it will take big companies to solve America’s most pressing problems in health care and education. But sometimes the best ideas start small, spread widely and then transform entire systems. Facebook began as a way for students at a single university to keep in touch. Now it has 800m users. The second is that what matters is not so much whether companies are big or small, but whether they grow. Progress tends to come from high-growth companies. The best ones can take a good idea and use it to transform themselves from embryos into giants in a few years, as Amazon and Google have. Such high-growth firms create a lot of jobs: in America just 1% of companies generate roughly 40% of new jobs. Let small firms grow big The key to promoting innovation (and productivity in general) lies in allowing vigorous new companies to grow big, and inefficient old ones to die. On that, Schumpeter never changed his mind.”

I say it again, there is a difference between start-up and SME. This does not fully answer Christensen argument about the Empire striking back. Well it means large companies have smart managers who learnt from the mistakes of the past. But he also implicitely say that 65% of disruptive innovations come from new comers, not incumbents. Gazelles still have a bright future.

Patents inhibit innovation, let’s delete them!

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My first post for 2012 is a translation of an interview I gave to French magazine La Recherche. It was published last December and you can have an electronic version of the French version here or a pdf document by clicking on the cover page below. It is followed by my own translation. Now I should say that I was a little surprised by the title which I had not expected. I was more thinking in something like “start-ups are the forgotten children of innovation!” The title focused on my cautiousness about IP and patents in particular. It is certainly too strong, but that is what titles are made for…

Patents inhibit innovation, let’s delete them!

Innovation is a matter of culture. An admirer of Silicon Valley, which he has known for twenty years, Hervé Lebret calls for Europe to be inspired by the dynamism and creativity of its start-ups. But is it good to take everything in this model?

La Recherche: A report of the Commission of the European Union stresses that the EU is more increasingly lagging behind the U.S. in terms innovation with a comparable level of research [1]. How do you explain that?
Hervé Lebret: The main reason for this innovation gap in Europe is cultural. I was always struck by how much the students are interested in the applications of research in the U. S., while in Europe we think more in terms of knowledge. And then there are the role models of young entrepreneurs who have experienced success. It is striking in Silicon Valley: Bill Gates was 20 when he founded Microsoft, Steve Jobs 21 when he founded Apple, Larry Page and Sergey Brin, 25 when they created Google. They are powerful models to which a young student can identify to.
La Recherche: The same report argues that another reason for the gap is partly related to differences the patent system which would be more complex and more expensive in Europe. What do you think?
HL: I am skeptical about legislation or rules in general as an explanation in the differences. It is in the people’s head that things happen. In the U.S., they want to try; they have no fear of failure. I am not convinced that we are more innovative because we would have more patents. Look at Switzerland, which has the largest number of patents per capita: this country does not create many start-ups. Incentives and policies are only working if there is a favorable cultural terrain.
La Recherche: But aren’t patents the key for an innovative company, whose value often relies on its intellectual property?
HL: Software is not patentable, and this did not prevent Microsoft to be successful. With the risk that you see me as iconoclastic, I think that patents are an obstacle to innovation. I wonder whether we should not remove them, except perhaps in specific areas, such as biotechnology, where a patent corresponds more specifically to a manufacturing process of a molecule.
But in most industrial fields, you need to own thousands of patents to protect the innovation which is commercialized. The maintenance of this portfolio of patents is extremely expensive and that money could be better used in research and development. Whereas in the past the patent favored the inventor, it has become a defensive weapon to protect dominant positions. Look at the war between Apple and Google: the first alleges that the second has developed its operating system Android by violating certain of its patents. This goes against the theory that the traditional patent protection the weak inventor, who can develop an idea during years without fear of being stolen.
Does the weakness of venture capital, which would deprive young innovative companies from the capital needed for their development, explain some of the shortcomings of innovation in Europe?
H.L. Contrary to general belief, there has always been venture capital in Europe, especially in France. This is not a quantitative but qualitative problem: venture capital in Europe is run by people from finance or consulting, not entrepreneurs.
Again, this is a cultural difference. But this is changing. Former entrepreneurs have recently begun to create venture capital funds or to become business angels. In France, I think of Bernard Liautaud, founder of software company Business Objects, or Xavier Niel, founder of Free, the phone operator, who both joined venture capital firms. The founders of Skype have created Atomico, their own funds.
You do not hide your admiration for Silicon Valley. If the secret of its strength is, as you support, cultural, how can we be inspired in Europe?
H.L. We can draw on customs, practices, an important one being cooperation. In Silicon Valley, curiosity is shared. People know that the exchange of ideas is successful, and are not afraid of ideas being robbed. The two Google founders were PhD students in two different laboratories at Stanford University, but they have talked! It is not unusual o talk to your competitor to solve your own problems: in the 1960s, the major industry semiconductor players in California met at the Wagon Wheel bar in Mountain View to discuss their work. In Europe, many laboratories, academic and probably more private, have a culture of secrecy, they fear the exchange.
What do you put in place at the Ecole Polytechnique Federale de Lausanne (EPFL), where you teach, to develop a taste for innovation and entrepreneurship among students?
H.L. I strongly believe in the role of exemplary models. So I organize conferences with successful entrepreneurs who share their experience. This shows students that these are passionate people, who are not afraid to try, even if just one in a thousand will be successful. These models inspire. But inspiration is nothing without resources. Hence the program “Innogrants”: a salary of one year for a young researcher who is released from its research and teaching in order to concentrate on her or his innovative projects. If it works, it is hoped that the private sector will further invest. Fifty Innogrants were awarded in five years. Half of them have led to the creation of companies in life sciences, micro-or nano or information technology. And five of them have found private investors.
It nevertheless remains modest …
H.L. Yes, we must remain humble: all we can do is create a breeding ground for the creation of innovative companies, as we do with Innogrants. In total, in the last fifteen years, EPFL innovators have created about a dozen start-ups per year. Fifteen have raised venture capital, 300 million Euros in total. Four or five have been sold to industry groups, sometimes these were nice exits. Endoart, founded in 1998 at EPFL specialized in the production of remotely controllable medical implants; it has been sold nine years later for 100 million dollars to Allergan! But we feel there is a kind of modesty, self-restraint of European entrepreneurs compared to their American counterparts.
A former researcher at EPFL criticized the leadership of the university of “copy as closely as possible the American university model” [2]. Do you think everything is good in the American model?
H.L. These criticisms focus on science, not on innovation. The competitive standing of researchers, the instability of the statutes is not a good idea in research. It is very important to let the imagination speak. There is a danger to keep people under permanent pressure. But in terms of innovation, the U.S. model works.
You estimate that at most one in a thousand start-ups meets success. Isn’t this a huge waste?
H.L. We should not measure everything in terms of money or performance. What counts is creativity. For me, the Silicon Valley is the new Athens. As Greece, it is a culture: what this region brought in fifty years is fabulous. Digital technologies that were invented forever changed the way we inform, we cultivate and entertain ourselves. This is probably why the death of Steve Jobs, who was an iconic character, had so many repercussions in October. Furthermore, if one thinks in macroeconomic terms, I do not think that the American model is based on waste only. In the U.S., venture capital weighs about twenty billion dollars a year. For twenty years, 400 billion have been invested. And one company, Google, is now worth $200B. Finally, the creation of economic value is similar to the money invested. It is a collective success, even if it is based on thousands of individual failures, which are often very hard humanely.

The entrepreneur should be at the center of innovation policy

Isn’t the $200 billion market capitalization of Google exaggerated when compared to the actual value of the company?
H.L. The world of venture capital has unfortunately become a financial asset like any other. It is no longer a world of former entrepreneurs who pursue their business while investing in those of others. There is too much money, too much speculation in the U.S. venture capital. But I remember that the start-ups appeared before the Nasdaq, the stock market where shares of high technology companies are traded. Silicon Valley began in the 1960s and 1970s in the context of the counter-culture in California. Steve Jobs did not hesitate to say that some of his creativity came from drugs when he was young. The growing role of finance in the economy only started in the 1980s. Originally, the financiers were the patrons of great artists. That said, I think the current trend of large groups limiting their spending in research and development is catastrophic. Shareholders want 15% return and push to cut spending on research. Good start-up can only emerge if there is also good private research.
Do we see a slowing of the technological innovation?
H.L. I am indeed concerned about the lack of success in current innovation: the 1970s were marked by the transistor, the 1980s by the personal computer; the 1990s by the networks. But in the 2000s, I see nothing new. The Web 2.0 is not a technological revolution, it is a consolidation. More generally, biotechnology was rather disappointing; there is no revolution in energy, chemistry. It is not clear that nanotechnologies are really promising technological breakthroughs. I fear that the 2000s did not create start-ups which are equivalent to Intel in the 1960s, Apple, Microsoft or Genentech in the 1970s, Cisco in the 1980s, or Google in the 1990s. There is Facebook, but this company does not rely on high technology innovation. That said, there has always been a general pessimism about the future of innovation, so I hope to be wrong!
You mention companies in information technology or biotechnology. Is this model of start-up transferable to capital-intensive areas, and where there are already major players, such as aerospace, automotive, chemicals?
H.L. The established players are not necessarily the most innovative. Clayton Christensen from Harvard Business School, showed in 1997 that an established company is great at improving existing products [3]. It is innovation by evolution, not revolution. Renault can invent the electric car, but not a new mode of transportation. Besides, the idea of the minivan, which was then copied, did not come from internal R&D at Renault, but from the company Matra, who did not have the same experience in automotive, which made it more creative. It is also for this reason that the big companies, especially pharmaceuticals, outsource their innovation: they prefer to leave the start-up take the risks, and then buy them. Even an old startup such as Cisco replaces the term “research and development” by “acquisition and development”.
Why do you insist so much on start-ups? An academic institution can also license its patents to the industry, or form mixed private / public laboratories…
H.L. The basic problem is towards whom an innovation policy is directed. My belief is that the entrepreneur must be central. This is not what is done in France: the clusters are clusters of established companies, not tools to promote creativity and entrepreneurship. I insist on start-ups because I think they are the forgotten piece of innovation policies. Of course there is innovation in large groups. But I wonder if they can do disruptive innovative. They can set a goal – the flat screen, the smart phone, or, today, the electric car – that will come out in twenty years. But can they do something entirely new, as did Google? Or Genentech, which revolutionized the manufacture of drugs using genetic engineering techniques? I believe that only start-ups are able to do so. Christensen said if you want to make a major innovation, create a branch and place it as far as possible of your research center as the worst enemy of innovation in a company is conservatism. Innovation is the highest in small teams: this is what happens in the start-up.

■■ Interview by Nicolas Chevassus-au-Louis

[1] European commission, Innovation Union Competitiveness Report 2011, http://ec.europa.eu/research/innovation-union.
[2] Libero Zuppiroli, La Bulle universitaire. Faut-il poursuivre le rêve américain ? Éditions d’en bas, 2010.
[3] Clayton Christensen, The Innovator’s Dilemma, Harper’s, 1997.

Hervé Lebret. A graduate of Ecole Polytechnique and Stanford University, with a Ph.D. in electronics, he worked, after a few years as a researcher, as a venture capitalist, in Geneva from 1997 to 2004. Since then he has been teaching management of technology and manages a seed fund at the Ecole Polytechnique Federale de Lausanne.

> Hervé Lebret, Start-up. What we may still learn from Silicon Valley Create Space, 2007. www.startup-book.com
> www.oecd.org/sti/scoreboard An oecd study on patents
> http://vpiv.epfl.ch/innogrants The site of the Innogrants at EPFL.

Darwinian and Lamarckian innovation – by Pascal Picq

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I enjoyed reading Un paléoanthropologue dans l’entreprise, i.e. a paleoanthropologist in the corporate world, the last book of Pascal Picq, a paleoanthropologist who explores the world of innovation. He applies his knowledge of evolution to compare two types of innovation: by simplifying, Continental Europe, rather Lamarckian and the Anglo-Saxon world and especially the United States, of Darwinian type.

I warn the reader by quoting Picq’s conclusion (page 236): “the Darwinian corporation has nothing to do with all the stupid stereotypes erroneously expressed about evolution. It is a corporation that adapts to changes by mobilizing innovation mechanisms, which are based on the torque variation / selection ”

From the very beginning, we dive into the heart of the matter: “The public officials who are working to open up our French vertical society will see, in the opposition between Lamarck and Darwin, the ineffectiveness of competent organizations facing the fruitful “bricolage” (do-it-yourself) of the networks which create new sources of innovation and development.” And he adds: “Diversity is a prerequisite for innovation.” (Page 12)

Picq explains (page 44): “Natural selection works in two steps, the production of variations – ithat is variability – and, secondly, the selection. It is the Darwinian algorithm.” There is neither chance nor necessity. At each stage of evolution, innovations appear as random variations constrained by history. That’s the game of possibilities.

He is well aware that the use of biology to economics analogies is dangerous (page 51): “the concepts of corporations and species are not defined easily.” And the analogy of evolution has probably its limits. “But there’s an important message: variability” (page 52) “If the environment is favorable, there is no selection. If there is competition for resources, then it manifests itself by playing variations. Adaptation comes from this mechanism.” There is no perfect Adaptation, but (page 55) “isolationism is the penultimate step before extinction.” I can not help thinking of the work of Saxenian who has shown that the more closed culture of the Boston area partly explains its lag behind Silicon Valley and the demise of Digital Equipment (DEC).

“There is no perfect adaptation; even if we create the best products, the success or failure depends on many other contextual and contingent factors. The ways of coping are not impenetrable, but take paths and sometimes difficult to predict detours: crafts, breakthrough innovations, and also the return of products once thought obsolete which find new niches. There would be a solution, that of a planned model of needs and uses. Except that between Thomas Edison and Steve Jobs, no major innovation came out of directed economic systems. On the other hand, do we fit in an existing market or do we create new markets? For structural and historical reasons – i.e. cultural – the best European companies are excellent in markets already structured but have difficulty inventing new markets such as U.S. companies.” (Page 84). Earlier, he wrote: “The dominant idea of ​​a technological change that is linear and accumulative obscures a much neglected field of innovation: history.” (Page 63)

“If a new market emerges, everyone has a chance. The absence of pressure from competition and selection admits all possibilities, giving the false impression that one is great. But when the market is saturated or shrinks, this is where selection has a role. This was the case with mobile phones in the mid-1990s. A company like Nokia, historically out of the field of electronics, was able to find its place. In today’s highly competitive market, it would be simply impossible.” (Page 87)

I let the reader discover the concepts of preadaptation, transaptation, exaptation. Picq also describes the K and r strategies which I quote from wikipedia:
– The r-selection: In unstable or unpredictable environments, r-selection predominates as the ability to reproduce quickly is crucial. There is little advantage in adaptations that permit successful competition with other organisms, because the environment is likely to change again. Traits that are thought to be characteristic of r-selection include: high fecundity, small body size, early maturity onset, short generation time, and the ability to disperse offspring widely.
– The K-selection: In stable or predictable environments, K-selection predominates as the ability to compete successfully for limited resources is crucial and populations of K-selected organisms typically are very constant and close to the maximum that the environment can bear (unlike r-selected populations, where population sizes can change much more rapidly). Traits that are thought to be characteristic of K-selection include: large body size, long life expectancy, and the production of fewer offspring, which require extensive parental care until they mature. Organisms whose life history is subject to K-selection are often referred to as K-strategists or K-selected. Organisms with K-selected traits include large organisms such as elephants, trees, humans and whales, but also smaller, long-lived organisms such as Arctic Terns.

Here we are in the heart of the matter:
– Lamarckian innovation (page 158) is active. It responds to a solicitation of the environment and tend to the improvement. “The function creates the organ.”… “Inventions are the daughters of necessity.” It works to improve products in established industries: automotive, aerospace, rail, space, telephone, water, construction, petrochemicals …
– Darwinian innovation (page 160), initially produces diversity without thinking of the advantages or disadvantages of what emerges, then in a second step, there is the action of selection. In such a context, you have to waste time, set the conditions for the production of ideas. It allows serendipity.

These are the 20% free time at Google. He also explains (page 98) the dangers of rationalizing research expenditures (see my post on the need for wasting ideas). Then (on page 103) “Steve Jobs launched Next, without much success, in a culture of the trial and error; it allowed him to propose and test new ideas that led him to come back to Apple – which would have been inconceivable in Europe.”

And here’s his summary (page 139):

Lamarckian Culture Darwinian Culture
Continental Europe USA
Hierarchy of Schools Diversity in excellence
“I did Polytechnique” “I created a business”
Uniformity of elites Diversity of elites
Large Corporations “Small Business Act”
Culture of Engineering Culture of Research
“Agrégés” (teaching) PhD (research)
Culture of Compliance Culture trial and error
Managed innovation Darwinian algorithm
Selection on IQ Selection on creativity
Applied R&D R&D by emergence
Colbertism Freedom of territories
Career Entrepreneurship
CAC40 Top25

I could have added his distinction (page 222) between Owner/manager of a company and Entrepreneur. Another interesting anecdote: “If you look at the French CAC 40, almost all have been around for half a century. Bertlesmann is the only one being less than 40 years in the European TOP25 whereas there is one third in the United States.” I mentioned this in Start-Up by citing the work of Zhang Junfu. “Zhang also analyzed this astonishing dynamics by comparing the 40 biggest high-tech Silicon Valley companies in 1982 and in 2002 as provided by Dun & Bradstreet. Twenty of the 1982 companies did not exist anymore in 2002 and twenty one of the 2002 companies had not been created in 1982.” Here it is in full:

Forty Largest Technology Companies in Silicon Valley
1982 2002
1. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco b
4. Memorex 4. Sun b
5. Varian 5. Solectron
6. Environtech a 6. Oracle
7. Ampex 7. Agilent b
8. Raychem a 8. Applied Materials
9. Amdahl a 9. Apple
10. Tymshare a 10. Seagate Technology
11. AMD 11. AMD
12. Rolm a 12. Sanmina-SCI
13. Four-Phase Systems a 13. JDS Uniphase
14. Cooper Lab a 14. 3Com
15. Intersil 15. LSI Logic
16. SRI International 16. Maxtor b
17. Spectra-Physics 17. National Semiconductor
18. American Microsystems a 18. KLA Tencor
19. Watkins-Johnson a 19. Atmel b
20. Qume a 20. SGI
21. Measurex a 21. Bell Microproducts b
22. Tandem a 22. Siebel b
23. Plantronic a 23. Xilinx b
24. Monolithic 24. Maxim Integrated b
25. URS 25. Palm b
26. Tab Products 26. Lam Research
27. Siliconix 27. Quantum
28. Dysan a 28. Altera b
29. Racal-Vadic a 29. Electronic Arts b
30. Triad Systems a 30. Cypress Semiconductor b
31. Xidex a 31. Cadence Design b
32. Avantek a 32. Adobe Systems b
33. Siltec a 33. Intuit b
34. Quadrex a 34. Veritas Software b
35. Coherent 35. Novellus Systems b
36. Verbatim 36. Yahoo b
37. Anderson-Jacobson a 37. Network Appliance b
38. Stanford Applied Engineering 38. Integrated Device
39. Acurex a 39. Linear Technology
40. Finnigan 40. Symantec b

NOTES: This table was compiled using 1982 and 2002 Dun & Bradstreet (D&B) Business Rankings data. Companies are ranked by sales.
a – No longer existed by 2002.
b – Did not exist before 1982.

In conclusion, Europe is characterized by a very Lamarckian entrepreneurial culture, promoting and supporting the established sectors, very much organized and structured for businesses, schools, unions, governments, banks, etc.. It excels in active innovation for engineers, in highly technical fields with great success in structured markets. Obviously, (page 164) “there is a real difficulty, which is the transfer of innovation in the entrepreneurial phase.” It means to (page 168) “take risks, foster a culture of trial / error” and not to penalize failure. “There is an urgent need to develop an entrepreneurial culture at all levels of our society: schools, colleges and universities, of course, but also in business and society in general.”

This is not about to be Lamarckian or Darwinian. “And remember that R&D is research and development, R for Darwin and D for Lamarck, the two steps of the Darwinian algorithm.” All the talent is in the balance between the two phases. (Page 170)

Here Picq might be wrong. Darwin and Lamarck should both be applied to the D and it may be where we have failed in Europe. We forgot Darwin needs to be in the development phase too.

Picq develops his concept of “bricolage” (page 174): “We have too long believed that the complexity of organisms depended on the number of genes.” … “In fact, the structures are simplified by successive integration during evolution (optimization) but they allow a variety of functions (plasticity).” (Page 175) “Animals and children are not Cartesian machines, we learn to walk, eat, especially for species of type K.” (Page 179) “In addition the machine Hydra which was never beaten by the best [chess] champions was beaten in 2005 by very good players – but not the great Masters – who used computers that were connected to standard sites and other players. This is Bricolage!” … “A combination of intelligent entities, but simpler and fed with external information is more effective than the best and most sophisticated machines with its programs, routines, software and internal databases.”

I could repeat here his warning on the misunderstanding of Darwinian theory that I put in the beginning. He added: “There is a grotesque conception of the war of all against all [in ecology as well as in innovation]” (page 185). “One must think competition not to eliminate, but with a strategy of coopetition.” … “This requires an open culture, with intricate collaborations.” … “Silicon Valley is the most paradigmatic model” while Sophia Antipolis is a juxtaposition of companies. “The territories and generally peripheral populations set innovations more easily and thus evolve more rapidly.” And again (page 236) “To be Darwinian does not mean to eliminate the other, but to exclude practices and models with deleterious effects on the economy and society as a whole. Darwinian theory has never been the law of the jungle, or the selfish individualism, or the war of all against all. Life is not a Rousseau-like world, but we live much less in the world of Hobbes. ”

One last anecdote: “In the early 1980s, IBM had been reluctant to enter the market of the computer. Big Blue has followed a K-strategy with great expertise on large computer systems. Then the management decided to “isolate” a small group of very creative engineers, without the constraints of the usual processes. This led to the IBM-PC, a perfect example of rapid innovation by genetic drift in a population of small size and placed in the periphery.” This is exactly the illustration of the Innovator’s Dilemma theory from Clayton Christensen.

I’ll let you read his conclusion on why humankind went to Australia. And I have not taken the time to talk about his description of gazelles, antelopes, buffaloes and other elephants, or his defense of a Small Business Act for France (or Europe). Picq might be criticized for inaccuracies, misstatements, a little fast and simple description of a complex situation, but it would be wrong to stop at this, because this is a book extremely stimulating not to say enthusiastic.