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Innovation Looms Large

Industry Life Cycles.

Most of us assume that small means entrepreneurial and nimble, large means bureaucratic and plodding. So it stands to reason that small companies eat large companies for lunch when the menu item is innovation, right? A recent study, "How Does Innovation Activity Change as Industries Mature?" says that just ain't so.

Anita McGahan, a professor of strategy and policy at the Boston University School of Management, and Brian Silverman, an assistant professor at Harvard Business School, took a look at three traditional assumptions regarding innovation.

1 It's high during emergent stages of industries, then declines as those industries mature.

2 It's product-oriented as an industry emerges, then becomes process-oriented as the industry matures.

3 Industry leaders in mature industries have less incentive to innovate than those in nonmature (emerging or declining) industries.

To test those theses, McGahan and Silverman looked at patenting activity in the American economy between 1981 and 1997. (Though not perfect, patent count is an academically accepted measure of innovation.) The empirical results refuted each of the three assumptions. First, the authors found that patenting activity is at least as great in mature industries as in emerging industries. Second, they discovered that emerging industries have at least as high a proportion of process-oriented innovation as mature industries. Third, the study showed that leaders in mature industries are just as innovative as leaders in nonmature industries.

The findings suggest that industry life-cycle models based on stages of maturity may not accurately describe innovative activity. Rather, models based on the pace and kind of innovation may be more appropriate. "It's much more fruitful to see how open your industry is to absorbing new technologies," says McGahan, not at what stage your industry stands in the life cycle.

McGahan believes good customer relationship manage-ment is critical too. She cites Bertelsmann's deal with Napster: "Instead of forestalling the new technology, it thought very carefully [about] how the market for music is changing and how it can respond and deliver music the way the end customer wants it."

-Todd Datz

QUOTED: "I thought working organised crime cases in Brooklyn was tough, but when you have 35 armed customers and your e-mail system goes down, you become real concerned".

- CIO of the US Secret Service, joking about his user base, investigators into cyberterrorists and hackersPREDICTIONS Mobile DataWireless OverkillTHE HIGH-BANDWIDTH, third-generation wireless communications standard, 3G, is on its way. But at least one analyst company thinks that the power it provides isn't enough to warrant the cost of the upgrade.

PREDICTIONS MOBILE DATA

Wireless Overkill

The high-bandwidth, third-generation wireless communications standard, 3G, is on its way. But at least one analyst company thinks that the power it provides isn't enough to warrant the cost of the upgrade.

That's the conclusion of "3G in the US: Using a Cannon to Kill a Mouse", a recent Forrester Research report that examines wireless operators' upgrade strategies and discusses the market potential and hurdles facing various technologies.

The report notes that customers should be very interested in 2.5G features, such as 144Kbps transfer rates and always-on connections. But it concludes that the jump to 2Mbps 3G rates may not prove as much of a lure. The problem, according to report co-author and senior analyst Charles Golvin, is a lack of mobile applications that need the extra speed (though he notes that laptops with 3G modems may take better advantage of the new data rates than handheld devices such as phones).

Service providers, however, feel the urge to upgrade their systems in the hope that they will be able to use new features in the technology to charge on a data-rate basis - billing customers more for certain types of downloaded information and applications. Though Golvin notes that it remains to be seen if consumers will go along with such pricing models.

While we're all waiting for the new services to arrive, Golvin recommends that companies begin to solidify their wireless platforms in preparation for the coming opportunities.

-Christopher Lindquist

Spending varies, but looking at the vendors you use and the service conditions could help your cost-cutting efforts.

Best Practices.

1.Strike a balance between too many and too few vendors. You don't want to rely on only one network services provider (what if it has a severe outage?). But it's a good idea to check all your contracts for redundancies, especially if your company has added many satellite offices. Savings can also come from using the same vendor for both data and voice networks.

2.Demand price protection. Include conditions in your contracts to lower your costs when rates go down. Communications prices such as long distance have dropped in the past few years. Make sure you're not paying older, higher rates. Also look to include language that gives you room to grow as your company grows.

3.Strike a deal for service. Make sure your contracts include provisions that cover quality of networking service, reliability and what happens when something goes wrong. For example, Niel says, companies should negotiate a clause for "time to repair" - the time it takes a vendor to repair outages or other service problems. Vendors should agree to pay penalties for non-compliance.

4.Review your contracts annually.

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