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Study: assemblers do better than innovators

Should successful companies skimp on R & D?
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Written by Joe McKendrick, Contributor on

A few days back, I blogged about the notion that Dell-like companies are emerging in the software applications space, which will essentially take pre-assembled pieces of commodity software and bundle them together into new types of solutions. (SOA and open source makes this all possible.)

A reader suggested that this may not be an appropriate analogy since Dell does "almost no R&D," a key requirement for new software innovation. I opined that it's likely Dell-like application providers will rely on open-source communities and foundations to do the R&D, just as Intel relies on its component partners (e.g., Intel and AMD) for much of its R&D work.

Now, a new study of CEOs by IBM Global Services seems to support the notion that successful companies will be more inclined to rely on outside sources for innovation. The survey of 750 CEOs finds that 76 percent ranked business partner and customer collaboration as top sources for new innovations. By contrast, only 14 percent intend to rely on internal R&D as sources of innovation. In fact, internal R&D only ranked eighth as a source for new product ideas. The study also finds that better-performing companies were 30 percent more likely to rely on outside collaboration to drive innovation than slow-growth companies.

Notable in the context of service-oriented architecture is the fact that CEOs see the biggest roadblocks to innovation as "unsupportive" corporate culture and limited funding (cited by 35 percent in each case). Also on the top 10 list of obstacles are "inflexible infrastructures" (14 percent) and "insufficient access to information" (12 percent).

Back in September, I quoted Mohan Sawhney, professor at Northwestern's Kellogg School of Management, who pointed out that from this point forward, the best-run companies may not be producers themselves, but networks of producers, orchestrated by a front-end broker of services. The loosely coupled, componentized nature of SOA will drive this reality, he said.