Company Innovation Reading Passage
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Company Innovation Reading Passage
A.
In a run-down office in downtown Manhattan, 30 AI (artificial intelligence) programmers from Umagic are trying to copy the brains of a famous sexologist, a famous dietitian, a popular fitness coach, and a bunch of other experts. Umagic Systems is an up-and-coming company that creates websites where clients can get advice from the virtual versions of those figures. Users put in information about themselves and their goals, and then it's up to Umagic to advise as a star expert would. Even though marketing has always paid attention to the neuroses of American consumers, it's hard to tell what the future holds for Umagic (who knows what it will be like in ten years? It could be normal or crazy to ask a computer about your sex life. However, companies like Umagic1 are starting to make big American companies nervous because these young companies see half-crazy "creative" ideas as the key to their success in the future.
B.
Innovation has become the buzzword of business management in the U.S. Companies have realised that they are running out of things that can be outsourced or re-engineered (worryingly, by their competitors too). Companies like Dell, Amazon, and Wal-Mart that have come up with ideas or products that have changed their industries tend to do well in American business today.
C.
In the last 15 years, the top 20% of firms in Fortune magazine's annual innovation survey have earned twice as much for their shareholders as their peers, according to a new book by two consultants from Arthur D. Little. A large part of the merger boom we're seeing right now is fueled by companies' desperate need for new ideas. The same goes for money spent on licensing and buying the intellectual property of others. According to data from the Pasadena-based Patent & Licence Exchange, the amount of money traded in intangible assets in the United States went from $15 billion in 1990 to $100 billion in 1998, with small businesses and individuals getting a larger share of the money.
D.
And that scares big companies because it seems like innovation doesn't work with them. Some big, well-known companies that are known for their "innovative ideas," like 3M, Procter & Gamble, and Rubbermaid, have been stuck in a creative rut lately. Peter Chernin, who runs the Fox TV and movie empire for News Corporation, says, "In the management of creativity, size is your enemy." It's impossible for someone working on 20 movies to be as involved as someone working on 5. So, he's tried to divide the studio into smaller parts, even though it might cost more.
Ideas are more likely to succeed outside of big companies these days. In the past, a smart scientist who had an idea and wanted to make money from it would first take it to a big company. But now that there is so much cheap venture capital around, he might want to sell it himself. Umagic has raised $5 million so far and is on its way to raising another $25 million. Even in businesses that need a lot of money, like pharmaceuticals, entrepreneurs can do early-stage research and then sell out to the big companies when they have to do expensive, risky clinical trials. About a third of a drug company's total income now comes from licensing in technology.
E. Ideas are more likely to succeed outside of big companies these days. In the past, a smart scientist who had an idea and wanted to make money from it would first take it to a big company. But now that there is so much cheap venture capital around, he might want to sell it himself. Umagic has raised $5 million so far and is on its way to raising another $25 million. Even in businesses that need a lot of money, like pharmaceuticals, entrepreneurs can do early-stage research and then sell out to the big companies when they have to do expensive, risky clinical trials. About a third of a drug company's total income now comes from licensing in technology.
F.
When it comes to stealing and incorporating the scores of small businesses, some major corporations, such as General Electric and Cisco, have been impressively victorious. Other grants, on the other hand, are concerned about the amount of money available and how to retain the geniuses who came up with the idea. Everyone wishes to generate more ideas within their organisations. Procter & Gamble is currently shifting their entire business focus from countries to products; one of the goals is to get the entire company to accept the innovations. In other places, the desire for innovation has fueled a frenzy for intrapreneurship, which involves transferring power, establishing internal idea workshops, and tracking inventory to retain talent.
G.
Some people don't think this kind of reorganisation is enough. Clayton Christensen says in a new book that the many benefits that big companies have, like taking care of their current customers, can get in the way of the innovative behaviour that is needed to deal with new technologies that change the market. Because of this, there has been a trend of cannibalisation, which brings about businesses that compete with and threaten the ones that are already there. For instance, Bank One has made Wingspan, an online bank that competes with its real branches.
H. Innovation is a big deal. But do big companies have to be this pessimistic? Industry Week recently looked at the top 50 innovations in America and found that ideas are just as likely to come from big or small companies. Big companies can use new ideas when they are mature enough and the risks and rewards are clearer.
I.
Mr. Sanders had to dispel the notion at Kimberly-Clark that jobs working on new products were for "those who couldn't make it in the real industry." He has attempted to transform the culture not only by preaching nebulous notions but also by creating concrete incentives, such as raising the rewards for those who come up with great new ideas and avoiding punishing those whose attempts fail. The genesis of one of the company's current bestsellers, Depend, a more dignified incontinence garment, may be traced back to a prior failure, Kotex Personals, a type of disposable underwear for women who are menstruating.
J.
Will huge businesses become more innovative due to all this creative destruction, cannibalisation, and cultural tweaking? The founder of Umagic, David Post, is sceptical: "The only successful entrepreneurs are ones who quit and become entrepreneurs." To which he cheerfully adds, "of course, they could have been correct," he remembers with amusement the blank stares he had three years ago when he tried to sell his "virtual experts" notion to the ideal laboratories of businesses like IBM. Computers can't give advice on sex, parenting, or fitness, but they can help you with innovation.
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