Innovation Requires A Few Grumpy People

Grumpy babyInnovation requires a few grumpy people, according to Brian Caulfield (@brianCVC ).

A partner at venture capital firm, DFJ Esprit (@dfjesprit), Caulfield was presenting his 6 Thoughts on Innovation at Trinity College Dublin’s 2011 Innovation Award in the Science Gallery (@ScienceGallery).

Drawing on on his own experience as an entrepreneur turned VC, he also offered some public policy advice in attempting to build “innovation hubs.”

1. Why does innovation matter?

It reduces waste and environmental damage. It creates growth, productivity and wealth. It increases the standard of living — “we get better products at lower prices” — and it makes work more interesting for people, Caulfield said.

Citing Clay Christensen’a observations on the disk drive industry in his seminal book, The Innovator’s Dilemma, Caulfield traced the evolution of that industry. Since its inception, 146 disk-drive firms were founded but 125 of those failed.

A lot of VC backing went in to the industry, Caulfield noted. On the 125, he said, ‘They failed to innovate. They failed to keep pace with changes in the market. They failed to see inflection points … or disruptive innovation that fundamentally changed the structure of the industry.” The lesson is “innovate or die,” Caulfield said.

2. Innovation is not about R&D spend

Citing the Innovation 1000, he showed a chart of top innovators’ sales growth versus R&D spend as a percentage of total sales. “There is almost no correlation,” Caulfield said. Other studies showing proportion of R&D spending to profits or other financial metrics also had weak correlations, he said.

3. Innovation is not invention

Innovation is not synonymous with creativity either, he said. Innovation also requires strategic thinking and implementation where a big part of innovation is about grumpy babyselling not just inventing.

Saying academics often struggle with the notion, Caulfield said there is no shortage of ideas. “Ideas are 10 a penny,” he said. “The real challenge is how you introduce them to the market.”

 4. Innovation requires a few grumpy people

Caulfield said innovation often comes about because innovators are “generally pissed off that the world hasn’t come up with a better way.”

“This sense of dissatisfaction, this sense of ‘there has to be a better way’ … You see that again and again in great innovators,” he said.

 5. Innovation Requires us to embrace failure

“We all love to be right,” Caulfield said. But there is also a consensus to be found among populations. Being right when everyone else is right is nice. Being wrong when everyone else is wrong is safe.

But “being wrong and being in the non-consensus is a pretty bad place to be,” Caulfield said. This is where a spouse will turn and tell you precisely how stupid your idea was. Then everyone else will ask you what the hell you were thinking.

“Unfortunately being in that non-consensus half of the box is where you need to be,” Caulfield said. Because being right when everyone else is mistaken can lead to great opportunities, he said. “A huge part of that is the willingness to embrace this non-conensus area.”

6. You don’t get to decide where innovation happens

“It is a matter of supreme indifference to the market” where innovation occurs, Caulfield said. This can lead to public policy mistakes when politicians or bureaucrats try to set up “innovation hubs” in remote parts of the country, he said.

Lessons

  • You won’t make an innovation economy through research alone.
  • Stop confusing innovation policy with regional policy.
  • Focus on creating the right environment: make early stage risk capital attractive. Develop innovation skills via education (a long-term project) and an enlightened immigration policy (a short-term project).
  • Focus on lean innovation: i.e. low capital intensity startups. Reduce the complexity of regulation.
  • Innovate everywhere especially in government and local services.

Asked about Ireland’s current environment, Caulfield, who started as an entrepreneur 20 years ago, said, “I don’t think I have ever seen the grass roots and entrepreneurial environment more vibrant.” Strong points are IT and Cloud Computing, medical devices and pharma. Weaknesses are in consumer web, he said.

Asked about VC attitudes once they have invested in startups, Caulfield replied that entrepreneurs are on a bell curve. “There are some really shit entrepreneurs on the [low side of the] curve and no one should give them any money,” he said. The other side has stars who will do well, and the middle has people who work hard and can make a go of it.

“VCs are on exactly the same bell curve,” he added. On one side there are the incompetent, “and maybe even evil” ones, he quipped.

Caulfield advised entrepreneurs to vet potential VCs. “I would be extremely fussy about who I work with,” he said.

Asked to elaborate on the public sector, Caulfield said a lot can be done. He told of a recent case where he had to schedule an X-ray. He got a letter from his doctor and was told to call a hospital to schedule an appointment. He rang four times before he spoke to a person.

Caulfield was then told that bookings were not made over the phone. He had to mail in his GP referral letter and the hospital would post an appointment letter back to him.

“I’m thinking there a  million free tools on the web today that will do that job,” he said, adding that would not be a big leap or challenge — “even if they’d let me scan the damn letter and email it to them.”

Images of grumpy babies courtesy of  Geoffrey Wiseman (diathesis) and Beth Haught on Flickr.

3 thoughts on “Innovation Requires A Few Grumpy People

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