By contrast, the innovation supply chain (the process by which companies obtain and/or develop future products and improve on their current products) tends to be characterized by inefficiency, ambiguity and competition. And, in many cases, no supply chain is in place.
Most pharmaceutical companies, for example, lack effective innovation supply chains. Yet only about 15 percent of the drugs that the US Food and Drug Administration has approved recently were developed by the same company that markets and sells them, meaning that many major pharmaceutical companies depend on the innovation ecosystem to advance their products.
Drug companies often lament that the firms from which they are sourcing innovations do not perform clinical trials to their specifications, forcing them to repeat the work. Nevertheless, they are reticent about providing such specifications in advance — even when innovators request them — perhaps to protect their market position or internal efforts. Moreover, the same companies compete directly in the supply of innovative technologies. The result is a broken supply chain.
Just as individual innovators must challenge conventional wisdom, companies must replace the established approach to the innovation supply chain with one that more closely resembles how they create and maintain a manufacturing supply chain.
If market incumbents are willing to share “innovation specifications” (which should not be confused with innovation methods), they can develop an effective network of innovation suppliers, thereby increasing the reliability of the product-development engine. As with effective manufacturing supply chains, the supplier and the purchaser must build a reciprocal relationship, in which they do not compete with each other, practically or economically, in the specific activities that they are performing.
An efficient supply chain can transform innovation on both the individual and industry levels. Indeed, a common approach — defining key market needs, coupling them with solution constraints and pushing the boundaries of current thinking — applies to all kinds of innovation. With an innovation ecosystem organized along these lines, “obvious” advances could occur significantly faster. How obvious is that?
David Berry, an inventor and entrepreneur, is a partner at the venture capital firm Flagship Ventures.
Copyright: Project Syndicate