In search of the best books about innovation and entrepreneurship, The Economist reviews four important new books that might make some good holiday reading for that innovator on your shopping list:

(1) Joe Ellis and the Creation of Xerox - “Chester Carlson’s invention of xerography would never have become the hugely profitable Xerox photocopying business were it not for what Charles Ellis calls the “extreme entrepreneurship” of Joe Wilson.”

(2) Mavericks at Work: Why the Most Original Minds in Business Win - “A pivotal work in the tradition of In Search of Excellence and Good to Great and featuring many of today’s most interesting corporate rising stars. These are companies that blend the revolutionary zeal of the late 1990s dot-com era with an emphasis on values in a way that has set them apart from the ethical crisis gripping American business in the first years of this century.”

(3) Outside Innovation - “Patricia Seybold focuses on the potential for using customers more in the innovation process… She does a decent job of justifying her Martin Lukes-esque subtitle, “How Your Customers Will Co-Design Your Company’s Future”. Her case studies cover a number of web-based companies and are written up with even more breathless enthusiasm than those of Mr. Taylor and Ms. LaBarre (authors of Mavericks at Work).”

(4) The Entrepreneurial Imperative: How America’s Economic Miracle Will Reshape the World (and Change Your Life) - “Mr Schramm, who, as head of the Ewing Marion Kauffman Foundation in Kansas City pays for a lot of research into the subject, argues that America needs to do more to maintain its entrepreneurial edge. At the same time, it must promote the American model abroad as the centerpiece of its foreign policy—the global spread of wealth being the best recipe for national security.”

ASIDE: In case you’re wondering just exactly who Martin Lukes is, it’s an inside joke about a character that appears in the Financial Times on a regular basis. Patty Seybold, author of Outside Innovation, explains the Martin Lukes reference on her Outside Innovation blog:

“For those who aren’t loyal readers of the Financial Times, Martin Lukes is the main character of a hilarious email soap opera that runs every Thursday in the FT. I admit to being an addict–so much so that on a recent Thursday on which the column was inexplicably missing from my edition of the paper, I was miffed all day. Martin Lukes is delightfully depicted (by his creator, Lucy Kellaway) as a complete fool and idiot. He is particularly prone to coining over-the-top terms like “creovation” and to sexist and boorish, insensitive behavior. His escapades never cease to delight and amaze!”

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.

In the current issue of Barron’s (link via Reuters), there’s a great story about the transformation of DuPont from a traditional chemicals and plastics company into a rip-roaring biotech giant. (If Dustin Hoffman were to reprise his part in The Graduate, he would be given advice about “biotech,” not “plastics”). Anyway, as Thomas G. Donlan of Barron’s explains, a major impetus behind the innovation transformation at DuPont has been the active role played by Charles (”Chad”) Holliday, the chairman and CEO of the company:

“Charles O. Holliday, CEO of DuPont, has been giving the same speech since becoming president in 1997 and CEO in 1998. His message: DuPont’s cash cows - commodity chemicals and petroleum - are no longer giving enough milk. DuPont, he has said, would have to return to its roots as a science company and blaze new trails into the frontiers of biotechnology. […]

The company, with a market value of $44 billion, is launching one new product after another and making a real mark in the realm of genetically modified seeds… All told, DuPont’s shares probably have room to rise 15% to 20% over the next year. Longer term, each of DuPont’s five major businesses has significant growth potential.”

So how much is this new focus on innovation worth to the company? Well, the company’s stock price was about $47.5 headed into the publication of the Barron’s article. On Monday (the first day traders could digest the news and act on it), shares of the company skyrocketed to $48.25 before cooling back down to about $48 by the end of trading. Even the most bearish analysts on the Street think the company is worth $50 a share, and some of the more optimistic analysts think the company is worth $55 a share. Thus, the answer to the question: between five to ten points on the stock price, if not more.

ASIDE: DuPont CEO Charles Holliday will be among the speakers at the upcoming FORTUNE Innovation Forum.

[image: Charles Holliday]

Dr. Dmitry Orlov, member of the RIA Novosti Expert Council, explains that Russia must become more than just an exporter of raw materials - it must become an energy superpower that is able to transform oil and gas resources into innovation. Below, he outlines a vision for building an innovation economy in Russia:

“Some experts describe the Russian economy as “an extended raw materials model”, while others claim Russia is “an energy superpower.” In my opinion, both definitions are true, but one describes the current economic structure, in which energy revenues are mostly accumulated and used, and only partly invested in long-term development. The other is an aspiration… An energy superpower differs from a raw materials supplier in that it turns oil and gas into innovation.

Russian President Vladimir Putin enthusiastically speaks about an innovation economy. In particular, he spoke about it in his spring 2006 state of the nation address. The issue is addressed even more frequently by the economic authorities, notably Economic Development and Trade Minister German Gref and IT and Communications Minister Leonid Reiman.

The priority national projects, which Putin initiated a year ago and entrusted to First Deputy Prime Minister Dmitry Medvedev, should pave the way to an innovation breakthrough. However, they are so far limited to roughly balanced state programs aimed at increasing allocations to social projects. The time has come to turn national projects into the main tool of the state’s industrial and infrastructure policy, or at least to add several innovation aspects to them.”

With that in mind, Orlov outlines various projects that could jump-start the innovation economy — such as establishing new business incubation and innovation zones, working to solve the “digital divide” in rural Russia, and helping the economy to become more energy-efficient. The goal is nothing less than an innovation revolution:

“When everyone has access to these communications and business zones, it will mean that we have achieved what Alvin Toffler described as a fast-paced economy, where any strategy must be agile and flexible. Mobility will become a fact of life, though young people will no longer want to move from rural areas to big cities. Just like the spread of electricity and roads in the 20th century, technology parks and the Internet can change the Russian landscape in the 21st century.”

[image: “You - have you signed up as a volunteer for the Revolution?”]

Booz Allen Hamilton examined R&D spending patterns at 1,000 global companies and found that less than 10% of them were deriving full value from money spent. Which leads, of course, to the inevitable question: Why do some high-tech companies get great bang for their R&D dollars while others seem to get very little?. Being a “big spender” may work on Broadway, but it is not necessarily the best way to go about innovation at America’s biggest and best companies. David Gardner of Information Week explains:

“Led by chief investigator Barry Jaruzelski, a Booz Allen VP, the team sought to find the key, if any, to the attributes that lead to innovation at companies. “We tortured the data,” says Jaruzelski, observing that 10,000 separate analyses were performed. “People think there are predictable black boxes out there. They think if you put money in, innovation comes out. If only it worked that way,” he says. While high-tech firms with winning innovation strategies approach R&D with different tactical methods, they employ a major standard that seems to work for all: a deep understanding of customer needs, says Jaruzelski. They also used an end-to-end multifunction process in developing products, he says.”

Using this methodology, Booz Allen found that Apple, eBay, Google, Research in Motion (makers of the Blackberry) and Yahoo! were among some of the “high leverage innovators.” Somewhat disturbingly, Ford Motor Company was the #1 spender on R&D in 2005 - and we all know how well that has gone…

[video clip: “Hey Big Spender”]