The Innovation Capitalist

Writing in the March 2007 issue of Harvard Business Review, business school professors Satish Nambisan and Mohanbir Sawhney describe how the Innovation Capitalist can help consumer product companies with the external sourcing of innovation. The basic idea is that companies sometimes need to source innovative product ideas from outside the organization, and as a result, turn to "innomediaries" (innovation intermediaries) to help them separate the wheat from the chaff. Chief among these "innomediaries" is the Innovation Capitalist:

Innovation capitalists are firms, often with a particular industry expertise, that seek out and evaluate ideas and technologies from the inventor community and other external sources. They develop and refine those ideas to the point where their market potential is validated, and they then pitch them to large client firms. An innovation capitalist reduces a client company’s acquisition costs and early-stage risks. In return, it shares in the proceeds from the innovation.

These firms do more than “just broker the idea,” says Debra Park, the director of technology acquisition at Dial, maker of Dial soap, Purex laundry detergent, and other consumer products. “By investing in concept development and market validation, they may not always improve the invention, but they reduce our risks and offer a concept that’s more business ready.”

What's interesting, of course, is how the innovation ecosystem continues to evolve. Over the past few years, there had been a trend toward embracing "amateur" ideas from the fringes of the organization, through initiatives such as "customer co-creation" and "outside innovation." If the concept of the Innovation Capitalist takes off, is it a sign that companies are growing disenchanted with "amateur" innovators and would rather deal with "professional" innovators? Or is it a sign that a growing number of predatory players are entering the innovation ecosystem, lured by the prospect of capitalizing on other people's intellectual property?

[image: Coca-Cola Capitalist]