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]

Information Week examines last month’s patent spat between IBM and Amazon, viewing it as symptomatic of the broader flaws within the U.S. patent process. Critics maintain that the convoluted and murky patent process inevitably leads to a situation in which companies like IBM must apply a double standard when it comes to the protection of their intellectual property:

“Almost two years ago, IBM donated 500 software patents to the open source community, with a pledge that it would not enforce its license rights to the technologies. But the company remains fiercely protective of its vast portfolio of intellectual property, as Amazon.com learned when IBM filed a patent-infringement suit claiming the Internet retailer built its business using IBM-developed technology and processes. Welcome to the tortuous world of technology patents and intellectual property, where community-minded vendors share original ideas manifest as software code one day — then bring the hammer down on suspected scofflaws the next.”

Even IBM seems to be a bit bemused by its waffling on the intellectual property issue:

“IBM’s top attorney for intellectual property rights acknowledges his company’s position can seem contradictory and confusing. “We’ve referred to our patent policy as apparent schizophrenia,” David Kappos says. Yet he maintains that “on a deeper level, our actions are consistent.”

Apparently, IBM’s patents include things like “storing data in an interactive network,” “ordering items using an electronic catalog” and “presenting advertising in an interactive service.” As The Guardian (U.K.) notes, attempting to defend these patents - all of which are fundamental to online commerce - is like imposing a hidden tax on online shopping.

[image: Thomas Edison’s patent application for the light bulb]

The world of online gaming and virtual entertainment is growing in size on a daily basis, leading an increasing number of experts to believe that many advances and breakthroughs in areas such as health care, education and business could come from a better understanding of these virtual worlds. With that in mind, Irving Wladawsky-Berger, the Vice President of Technical Strategy and Innovation at IBM, joined the Second Life online community over the weekend. Below, he explains what IBM might learn from the brave new world of virtual gaming as it experiments with new IT applications:

“In the last couple of years I have become increasingly interested in 3rd generation user interfaces (3GUI) inspired by advanced gaming technologies such as those found in Microsoft’s XBOX 360 and Sony’s PS3. Over time I have become convinced that such highly visual, interactive interfaces will revolutionize the way people interact with IT applications of all sorts. I have also become convinced that such virtual world capabilities will profoundly transform business and related institutions in society. […]

What a world it is! I have only been there a short time, and I have primarily explored the IBM sites my colleagues have built, but it is impressive how rich and innovative these virtual worlds are. While generally virtual worlds are inspired by and sort of look like the real worlds they represent, their appearance and behavior can be just about anything you want, limited only by the imagination of the designers. I can now appreciate how Alice must have felt in Wonderland.

My colleagues have built virtual world sites that replicate the IBM Hursley Labs in England and the Almaden Research Center in California. They are building a virtual Beijing Forbidden City. They are designing a set of conference centers devoted to business with our customers, public policy issues and internal collaborations. And they are creating meeting spaces for ex-IBMers and current employees to meet, catch up and even collaborate – part of a new alumni program called The Greater IBM Connection.

Multiply that kind of activity 100-fold, just in Second Life, and then factor in the many other virtual world sites that are either already in existence or under construction, and you get a picture of the innovative energy being unleashed by large numbers of people around the world. I think that what we are seeing is the evolution of the Internet and World Wide Web in incredibly important new directions. Foremost among them is a much more people-centric Web.”

For more on IBM’s Second Life initiatives, check out this Reuters clip, which explains how IBM became interested in virtual gaming. According to CNET, IBM is now hosting some employee meetings in Second Life.

[image: IBM in Second Life]

What is Google’s secret formula for innovation success? According to Amy Rowell of Innovate Forum, it is the company’s willingness to experiment with “wild, ambitious” ideas, while at the same time, understanding that failure can be a catalyst for innovation success. Also, it doesn’t hurt that the company has created “a sort of playground for adults” to get the innovation juices flowing:

“Google is one of those companies that just seems to keep getting it right. But as even its management team will tell you, that’s in large part because it’s not afraid to get it wrong – at least some of the time. In fact, Google’s innovation process leaves plenty of room for experimentation and failure, and does so by having a rather novel workplace environment.

By design, Google’s product development environment is a sort of playground for adults. In a campus setting, Google employees can, for example, reportedly enjoy the benefits of an outdoor wave pool, an indoor gym, free meals and the use of company-provided scooters to transport them between buildings.”

[image: Life in the Googleplex]

In a one-hour video presentation for MIT World, Novartis Chairman and CEO Daniel Vasella explains the innovation process behind one of his company’s flagship pharmaceuticals, Gleevec. The discovery, development and marketing of this drug, which fights the rare chronic myeloid leukemia (CML), highlights some of the things Novartis does right. For example, during an important period of coordinating clinical trials and winning FDA approval for the drug, employees at Novartis volunteered to work in 24-hour shifts, seven days a week. In summarizing the success of the innovation process at Novartis, Vasella cites “intrinsic motivation in each Novartis staff member, high standards, savvy risk-taking and persistence in both research and marketing, and a company culture that brings out the best in everyone.”

As always, MIT World provides excellent show notes for the one-hour presentation. There’s also a brief bio sketch for Vasella and a short history of how Gleevec started out as an untested idea and emerged as a multi-billion-dollar blockbuster drug.

[image: Daniel Vasella of Novartis]

That is, if you’re a tech-savvy C-level executive from a hugely successful U.S. corporation. In a free Wall Street Journal Online feature, Brian Steinberg describes a clever new advertising pitch from Unisys, in which the company is using the cover of FORTUNE magazine to sell its wares to some of the leading IT decision-makers in the country:

“Around 20 high-ranking executives at corporations such as Subaru of America, DHL, Citigroup and Northwest Airlines will get a surprise when FORTUNE magazine arrives on their desks this week. Each will find his or her own face gracing the cover. The covers are one-of-a-kind mock-ups wrapping the actual FORTUNE edition, part of an advertising ploy conducted by IT company Unisys that brings new meaning to the idea of niche marketing. Unisys is sending the magazines to get the attention of executives - mostly CIOs - responsible for making buying decisions about their companies’ technology products and services. In other words, the people Unisys most wants to influence.”

As Steinberg goes on to explain, the FORTUNE cover wraps are personalized to the needs of the particular corporate executive. Moreover, the company is placing outdoor signs and billboards in strategic locations that these executives might see, even going so far as to map out morning commutes in order to find the most advantageous locations.

In short, the new advertising initiative is based on influencing the influencers: “We’re not trying to have grandma at home understand who we are and what we do. We’re not even trying to have every business executive understand who we are and what we do. It’s a very narrow set of executives that we really want to reach.”

[image: Unisys trade show]

Responding to the proposed merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, James Grant (editor of Grant’s Interest Rate Observer) wrote a great op-ed piece for the Wall Street Journal called, provocatively enough, Innovate or Die. Innovation, quite simply, is the key to future success within the financial services industry.

Mention the Chicago Merc today, and you probably think of sophisticated financial derivatives and financial innovation. Yet, the Chicago Merc actually started out life in 1898 as the much humbler Chicago Butter and Egg Board, trading contracts on commodities such as butter, eggs and onions, Suffice it to say, the Chicago Merc in those days was well on its way to becoming a “relic of the Old Economy.” By the 1950s, it was left with a single type of contract to trade - the egg contract - that was itself the subject of constant manipulation by traders. So what happened? The Chicago Merc decided to innovate its way to success:

“They picked innovation. The same government that had stamped out the butter and onion contracts proceeded to create new opportunities through inflation and monetary turmoil. The end of the Bretton Woods system of fixed exchange rates opened new vistas in currency trading. The Merc seized them as it more recently did the chance to develop markets in interest rates and equities…

The Merc didn’t burst when the Nasdaq bubble did. Today, it is generating over $1 billion in annual revenues, up from $210 million in 1999. Its stock market capitalization tops $17 billion, a nice, neat 17-fold appreciation in value for the seat holders in less than seven years… Properly, the CME Group is the envy of the New York Stock Exchange and of brokers and dealers worldwide…”

[image: President Bush at the Chicago Merc]

In a restructuring move, Vodafone is shutting down its stand-alone New Business and Innovation Unit (NBIU) and folding some of these operations back into other operating units of the company:

“Vodafone has announced that it is axing its new business and innovation division and as a result of the restructuring, the unit’s CEO, Thomas Geitner, will quit the company. Vodafone has said that its new business and innovation unit (NBIU) will be absorbed back into the structure of the company and as a result of this, Geitner, who joined the company in 2000, will be leaving in December 2006. Vodafone had created the NBIU earlier this year in a restructuring process that also included dividing the business into two geographic regions. Under the terms of the latest initiative, the NBIU’s responsibilities in developing the mobile plus strategy will be devolved to the operating companies and to the European region. A group strategy and new business function will identify new business opportunities and key partners.”

[image: Building 4 Vodafone]

Michael Urlocker of the On Disruption blog has put together a comprehensive innovation case study of what went wrong at Sony, including numerous links to outside sources and articles that document the role of innovation at the company. According to Urlocker, the company fell victim to The Innovator’s Dilemma. Unable to come up with disruptive innovations of its own, the company was instead blindsided by a number of recent market developments in areas such as digital music.

For nearly 30 years, Sony was one of the leading innovators in consumer electronics:

“Sony was the great innovative company that invented technologies that defined innovation and pop culture from the 1950s through to the early 1980s with a string of new-market disruptive innovations… One way to look at this is to consider Sony as a serial disruptor that had little to lose in the early days. When Sony had no share of the U.S. radio business in the 1950s and no share of the TV business in the 1960s, Sony took chances, it innovated and it pursued what looked like small or marginal market opportunities to gain toeholds in the market.”

That all changed, however, once the company began to dominate large markets. Of late, the company has been downgraded, delayed and disrupted:

“As Sony grew in the consumer electronics business and in the music business, Sony had a lot to lose. Hence in the past 20 years, Sony became a company more concerned with protecting and defending its dominant position and seeking proven large market opportunities. Largely, Sony did the right things that successful companies must do: It served its customers, it released better products and it did not compete against its cutsomers.

But as a result, there was less disruptive innovation and no appetite for potentially cannibalizing businesses, like the $1-a-song download business. After all, it is certainly not easy for a company that sells music to record stores to compete against those same customers with a direct-download business. But ignoring a threat does not make it go away. Sony left that disruptive innovation to a music-industry outsider: Apple and its iTunes service…”

[image: Sony trade show]

The Creating Blue Oceans blog consistently provides illuminating case studies of companies that are leveraging the power of Blue Ocean Strategy. Recently, Gabor George Burt highlighted the blue ocean thinking at Seattle-based Brown Paper Tickets:

“We were recently tipped to the exploits of Brown Paper Tickets which seems poised to take the event ticketing and distribution world by storm. Brown Paper Tickets enables even the smallest of merchants to become an event producer and ticket distributor. All one needs to do is plug in the event information and then direct people to the Brown Paper Tickets website to purchase a ticket. So if you are having a charity luncheon for ten people, or a concert for ten-thousand, Brown Paper Tickets can handle the entire ticketing and distribution process.”

Brown Paper Tickets has also been profiled by Springwise, which explained how the company is fast becoming a “consumer- and vendor-friendly alternative to Ticketmaster.” For example, Brown Paper Tickets offers buyers low ticketing fees ($0.99 per ticket plus 2.5% of the sale price), thereby enabling individuals, small businesses and nonprofit organizations to sell tickets to their events quickly and cheaply.