A Word About Innovation
Dan Weber, MC2 Consulting International -- Semiconductor International, 1/1/2000
In April 1997 I spoke at a seminar in Geneva during Semicon Europa. The various conversations of the day were dominated by surprise over continued, sudden and dramatic drops in DRAM and other chip prices on the spot market. The Asian Flu developed, in earnest, a couple of months later, so we couldn't talk about that quite yet; but I do remember a lot of concern about the over supply of fab capacity. Taking the optimistic tack, I decided to have my closing remarks carry us all on a journey down the information highway birthing an era of broadband communications, with cable companies offering telephone service and phone companies offering video services, gaining improved PC connectivity from both. Digital network capacity would expand rapidly, and a variety of new applications would emerge suddenly to more fully diversify the chip industry's customer segments. These would be the key drivers of SOC development. Lower and lower chip prices would fuel these new applications, and we would all live happily ever after.At the time, my closing remarks were received with enthusiasm, and I must say I continued to read articles in the months and years that followed still focusing on the exciting future ahead. Don't get me wrong; I do believe the future is still tremendously exciting. However, the future is not what it used to be. A fundamental change was taking shape (already brewing from 1995). Prices were dropping for good, independent of the next technology/product wave! This is affecting the semiconductor materials and equipment businesses in new and lasting ways. Economic realities are holding back the pace of advancements. Those companies poised to recognize the change, and to develop the opportunities that always accompany change, are prospering through rapid merger, acquisition and strategic alliance. Fewer and bigger suppliers will serve fewer and bigger customers, and the model of the start-up is changing forever. Since much of our innovation as an industry has been rooted in the start-up, it is important to consider the nature of innovation and prepare for the changes underfoot.
There is still much confusion about what innovation is and how to make it happen. What precisely constitutes innovation is hard to say and even harder to measure. Innovation is usually thought of as the creation of a better product or process. But, it could also be the substitution of a cheaper material in an existing product, or a better way of marketing, distributing or supporting a product or service. We often confuse innovation with invention. Inventing is one part of the creative process; however, innovating takes time, money, access to markets and entrepreneurial insight. Two key things characterize the most innovative organizations: a) they hire and encourage individuals who are driven by a strong need for personal achievement; and b) they pursue innovation in a systematic manner, constantly searching for change. The sources of change can be in technology, materials, prices, environment, taxation, demographics and other areas or in combinations of areas. Successful organizations identify the sources of change and then carefully evaluate the potential to exploit a given change for economic benefit.
Rather than do the work in-house, big firms are increasingly using their strong share price to acquire start-ups and smaller established companies for their innovations. As a result, more and more entrepreneurs are starting a company with the sole purpose of being acquired. Instead of seeking to topple the big boys, the new model is to join them. In the years ahead, it will be more important than ever that leaders watch over the process of innovation so vital to the health of our industry. We must avoid developing bureaucracies that stifle the essence of creativity. We must maintain and nurture the creative process within the larger organizational structures.
Larger high-tech businesses run the continuous risk that leadership will, unknowingly, impede the creative process as well as the organizational learning and communication that should accompany the creative process. Managers find themselves engrossed in day-to-day tactical matters. Leaders must continually communicate the top priority: to develop and maintain customer relationships that retain loyalty, enable new customer segments, and serve customers effectively and efficiently. This priority is achieved by the introduction of innovative, customized, high-quality products and services delivered at low cost and with short lead times. This priority is nurtured through mobilizing employee skills and motivation for continuous improvements in process capabilities and response time, and by deploying effective information technology and communications.
Dan Weber is president and founder of MC2 Consulting International, and has served the semiconductor equipment and materials industry for 20 years. He has worked with both service and manufacturing firms at the CEO, vice president and director levels, holds patents in his field and has authored several technical publications.
