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Innovation Insights by Stephen Shapiro

HP recently announced that they are consolidating their innovation efforts and will focus on fewer projects.

According to an Associate Press article, HP is “reassigning its worldwide research team of about 600 employees to focus on a total of 20 to 30 major projects, down from roughly 150 different ventures the labs typically have in the works.”

The idea is to place fewer and bigger bets.  HP’s chief strategy and technology officer, Shane Robison said, “We are not interested in killing our research, we are interested in killing projects that won’t succeed.”

I assume their argument for doing this is that fewer projects will reduce the dilution of their innovation effort.  This may be true.  However, the premise is that HP can “predict” which bets have a higher probability of succeeding. Unless they have a special crystal ball, this typically is not the case.

It is nearly impossible to determine which concepts will ultimately be successful.  Most companies have discovered that you can only learn this by doing a series of small experiments that scale over time.  I call this the “Built It, Try It, Fix It” model.  Instead of placing fewer big bets, you try a large number of small experiments that adapt and evolve as you gain more information.  Most of the experiments fail and are killed.  But the remaining ideas are usually real winners – and they often look quite different than the original concept.  This allows your organization to be more agile and adaptive.

I find HP’s recent announcement somewhat ironic.  A few years ago, they heavily promoted their “adaptive enterprise/agile” services.   From my perspective, this R&D consolidation is the antithesis of agile. It seems more about control and maybe cost containment.  The article noted that HP spent $3.6 billion on research and development in each of the last two years.  This represented 3.5% of the company’s revenue, down from 6% in 2002.

Time will tell if HP’s strategy will pay off.  I can’t predict the future.  And I suspect that HP can’t either.

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