value insights

Customer vs Patron Oriented Innovation Cultures- Valutrics

Innovation cultures in a company are shaped by the interactions between its business perspective and its invention perspective. The business perspective focuses on revenues, markets, improvements to existing products, and known customers. The invention perspective focuses on new technologies and potential future customers.
The business perspective corresponds to the usual professional practices in engineering and design, where projects are funded through clients or customers. In a company, the business and marketing groups are the clients for the research and development groups. Clients exercise substantial control over choosing projects and want to grow their current markets. Project quality is determined by testing. The client model is oriented to the short term. It focuses its attention largely on the question “What is needed?” A client does not want to turn over control of a project to inventors, since that may lead to inventions that the client cannot commercialize.
The invention perspective corresponds to the traditional professional practices in the sciences and the arts, where project funding is provided by patrons or sponsors. When the patron model is used in a company, typically upper management rather business group management acts as the patron for research. Patrons exert minimal control over choosing projects. Funding continues if the patron is satisfied; project quality is judged by peer review. The patron model is usually oriented toward the long term and toward building a knowledge base for the exploration of new kinds of products and applications. The invention perspective focuses largely on the question “What is possible?” A patron does not want to exercise too much control, because it wants breakthroughs and options that go beyond the current market and challenge current thinking.
The figure shows how the dominant orientation of the culture of innovation for a company tends to correlate with the position of its products on the technology-adoption curve. When project funding for corporate research is mainly determined through a process of contracts with the business groups, the innovation culture is client-oriented. When project funding for corporate research is determined by upper management, the innovation culture is patron-oriented. When project funding comes from both sources, a mixed model is being used.

Customer-Oriented Innovation Cultures
Fast-growing companies tend to be uninterested in finding or developing new or radical technologies. Confident in their current product and technology directions, they work to maximize their growth by focusing on their current business. Companies in this part of the S-curve use client models to manage innovation.
The customer model is easier to succeed with in the near term. There is less immediate business risk, because the client already knows how to market the product and has established customers and branding. The needs for improving a product are known with greater clarity than the needs for a completely new market. Because of the short-term focus, invention under the client model yields incremental improvements to existing technologies.


Shifting from Client Models to Patron Models
When the niche of a company changes, it needs to reexamine its culture of innovation.
Gordon Moore, co-founder and former chairman of Intel, guided the company as a dynamic high-technology organization with no central research organization. In 1996, in a personal retrospective on research, he argued that this was an important principle:
Intel operates on the Noyce10principle of minimum information. One guesses what the answer to a problem is and goes as far as one can in a heuristic way.
If this does not solve the problem, one goes back and learns enough to try some-thing else. Thus, rather than mount research effort aimed at truly understanding problems and producing publishable technological solutions, Intel tries to get by with as little information as possible. . . . Another advantage to operating on the principle of minimum information: the company generates few spinoffs. Because it does not generate a lot more ideas than it can use, Intel’s R&D capture ratio is much higher than Fairchild’s ever was.
Moore’s position is that of an engineer, firmly in Edison’s quadrant. He had seen other companies in the semiconductor business invest in research and fail to capture as people left and formed unintended spin-offs. These observations led him to focus strongly on controlling research to prevent wasted effort.
Moore’s attitude toward research was dominant during the rapid growth of Intel’s business of making chips for personal computers in the 1990s. On this part of the technology-adoption curve, a company does best by focusing on growing its market and not getting distracted by other investment opportunities, including those that could be created by research.
No niche lasts forever. By 2002, Intel faced saturation in the market for microprocessors for personal computers, and its attitude about research began to change. It expanded its internal research laboratories and developed a program of outsourcing research to “lablets” at other institutions.

In the Intel case, the innovation culture shifted from a client model toward a patron model when the markets saturated and the company believed that it needed more breakthroughs. Companies shift to patron models when they believe that the current businesses need to evolve to sustain growth.

If a client greatly narrows where to look (for example, by limiting the view to incremental improvements of current products), breakthroughs are left out of view. A future business opportunity will go unnoticed or be discarded because it looks so different from current products. In a patron model, invention is driven more by the dictates of science than by the dictates of current markets. Because of its long-term focus, invention under the patron model is less constrained by a company’s current products, and is more likely to lead to breakthroughs.

Shifting from Patron Models to Client Models

With the advent of the personal  computer, IBM saw Microsoft and Intel emerge as driving forces. IBM became just one of many suppliers.  This led to a shift in the balance toward a client model.
In the beginning of 2003, IBM announced its intention to shift its research culture even further toward a client model. The approach involves allocating a portion of the research organization to focus specifically on customers’ problems in conjunction with IBM’s growing consulting business. This move is intended not only to help IBM understand its customers but also to help the research organization, which has traditionally focused on IBM’s technology business, to find ways to support its service business.

Cultures That Mix Client and Patron Models

From the perspective of evolving businesses, neither a pure client model nor a pure patron model is reasonable. Many research cultures mix the client and patron models with a portfolio of projects. It is common for research laboratories to seek a balanced profile to accommodate both current and future prospects for a company.

When a portfolio approach is executed well, it mixes a continuous and fairly predictable stream of short-term innova- tions with episodic and less predictable long-term breakthroughs. This can create value for both present and future customers.

Keeping a portfolio of projects gives an organization some capacity not only for addressing both short-term and long-term needs but also for shifting the balance of effort between a short-term focus and a long-term focus. Such organizations recognize that different skills and aptitudes are needed for addressing short-term and long-term considerations.

Leave a Reply

Your email address will not be published. Required fields are marked *