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The Innovation Problem


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The Innovation Problem
Topic: Technology 2:50 am EST, Dec 28, 2008

A series of Paul Graham's articles has led me to something I'm calling the Innovation Problem. Essentially it started when I read his article After Credentials. I enjoyed it article, but found this part is odd:

Do they let energetic young people get paid market rate for the work they do? The young are the test, because when people aren't rewarded according to performance, they're invariably rewarded according to seniority instead.
If people who are young but smart and driven can make more by starting their own companies than by working for existing ones, the existing companies are forced to pay more to keep them.

This statement about motives seemed out of sync with his essay Great Hackers:

Great programmers are sometimes said to be indifferent to money. This isn't quite true. It is true that all they really care about is doing interesting work. But if you make enough money, you get to work on whatever you want, and for that reason hackers are attracted by the idea of making really large amounts of money. But as long as they still have to show up for work every day, they care more about what they do there than how much they get paid for it.

Perhaps this is because Graham is talking about a general case of person in the first essary and a subset of people (Specifically great programmers) in the second.

Now, I don't consider myself a super hacker and nor would I ever compare myself to someone like RTM or others Graham has mentioned. Quite the contrary I've gone out of my way to deny unwarranted comparisons. I do however consider myself a hacker and I understand exactly what Graham means in his 2nd essay.

I think that performance metrics are one half of a two sided coin, depending on what drives you are a person: pay or project.

Let me explain. I work for a Fortune 15 technology corporation. They pay me very, very, very well. However in return I'm subjected to (with a fair bit of good things) unbelievably stupid bullshit. They don't seem to realize that I couldn't give 2 shits about their money otherwise I'd have alot less bullshit in my life.

Jay Chaudhry met with me twice in the spring of 2008 and asked me to join his new start up Zscalar. I turned him down for a couple reasons, the biggest being he kept appealing to the wrong side of me. He kept talking dollars, he never talked projects. How are you doing "in the cloud" security. Are you buying or building? Which parts are you buying and which parts are you building. I'm not leaving a role where I get to shape research and product features to babysit a farm of 1U Barracuda boxen. I even flat told him I don't care about money and he looked at me like I was an idiot. And still could not to my satisfaction tell me what I would do.

I go for the project. Yet at both ends of the extreme, from large to small, companies kept appealing to the money side of the "pay/project" coin. From my limited experience the "performance mertic pay" side is taken care of at both extremes of company size and type. Perhaps I'm just really lucky.

However that's not true for the project side of the coin. Smart people go where the innovative products are. And while rewarding performance may be taking hold in large corporations (and I'm certainly proof that it does) innovation is still very much tied to seniority.

So, in my view, the "performance metric problem" is one side of the problem coin. However I believe it is second in importance to the other, far larger and undiscussed side: "The Innovation Problem". The Innovation Problem is this: It is easier for smart people to develop new products or technology in a start up and have a higher degree of success than doing so of inside a large technology corporation.

This is odd considering that the costs of starting a start up are approaching zero. It should cost a corporation hardly anything to incubate new ideas. And indeed I see "incubators" at tech firms all the time. And like startups, most fail. However they fail for far different reasons than traditional startups fail. In-company incubators fail because they starve.

You don't see it unless you have lived in both worlds. At large corporations "innovation" comes from a certain group of people. Phd. Senior Fellow. Technologist. Vint Cerf style. These groups have support structures because they are somehow viewed by the corporation as the "real researchers" even though what they are doing is often identical to incubator groups.

This "innovation scaling with seniority" is true except at extremely low levels. Sure developers have to innovate to solve new problems and add new features every day. However outside of these low day to day examples any kind of high level innovation is extremely limited. Low scale innovators have no ability to create something completely new. This is because they do not have the support structure. Things like marketing, sales, leadership, and all the resouces and skills that the 90% of running a start up that have nothing to do with technology make up. Worse they cannot create it the way start ups can. It is essentially impossible for them to leverage the resources of the larger corporation. There are approval and reporting changes, budgets, priorities, policies, legal processes, etc. Ask someone who works for a less than $100 million business unit inside a large corporation about their ability to get noticed let alone affect change. You quickly see why in-company incubators fail even when they have an executive patron.

A commonly quoted figure is 9 out of 10 new businesses fail. In a nutshell "The Innovation Problem" says you have less than a 10% chance of navigating the bureaucracy of a large corporation to create something new. Its better to do it external of a large corporation.

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