In Biotech Startups, Knowledge Bridging Can Be the Key to CreativityPublished: July 12, 2006 in Knowledge@Wharton
For nearly 25 years, engineers at Massachusetts-based Bose Corp., a famed maker of stereo speakers and other audio equipment, quietly toyed with a problem -- improving automobile suspensions -- that had nothing to do with sound.
Bose's founder, Amar Bose, suspected that his company's knowledge of the physics of acoustics could also help drivers defeat bumps and potholes. So in 2004, Bose introduced a startling new product -- an automobile suspension that abandoned traditional liquid-filled shock absorbers in favor of high-voltage electrical coils and magnets. The suspension is ready for the mass market, and Bose is negotiating with carmakers about making it available commercially.
Bose's breakthrough exemplifies a technique known as knowledge bridging -- taking expertise from one field, applying it to a completely different one and thus creating an unprecedented product or service.
A recent study by Wharton management professor David Hsu and Kwanghui Lim, a professor at the National University of Singapore, suggests that knowledge bridging can help companies bring products to market faster and raise money more quickly. According to their study, "Knowledge Bridging by Biotechnology Startups," all a firm has to do to become a knowledge bridger is hire the right people and give them the freedom to follow their curiosity.
"Consider the case of serial entrepreneur Alejandro Zaffaroni, who successfully launched seven biotechnology companies across different fields of the industry," Hsu and Lim write. "One of his former colleagues remarked about Zaffaroni: 'He is totally unafraid of any new technology in any area of human creativity. He has wonderful contacts with people in many different areas, so he sees the bridges between otherwise disparate fields.'"
Zaffaroni-style leaps aren't limited to the corporate world. Innovative fields in academia show the same aptitude for linking seemingly unrelated disciplines. Witness the emerging field of evolutionary economics. "Borrowing key ideas from evolutionary biology -- such as principles of genetic variation and selection -- evolutionary economists have advanced our knowledge of how organizations evolve in a way analogous to that of living organisms," the authors write.
The Patent Trail
Hsu, an expert in entrepreneurship, has long been fascinated with the history of invention and the tension within companies between making big leaps forward and taking care of everyday business. How, he wondered, could firms position themselves to make revolutionary advances when they needed to focus on tasks like tweaking existing products and driving down costs? His curiosity led him to one of his alma maters, Stanford University.
Recombinant DNA technology, the foundation of modern biotechnology, had been invented there. The university owned the patent underpinning it. Any firm could license the patent, and many did.
These companies provided a unique laboratory. They were, by necessity, technology-intensive enterprises that had filed subsequent patents of their own. And their patents were genealogies of their technological roots, showing where they had found their inspirations. (Patents cite prior ones.) Hsu and Lim figured that the knowledge bridgers among Stanford's licensees would cite a broader array of patents than other companies. And since patents also list inventors and their affiliations, they would show scientists' movements among firms.
Knowledge bridgers, the professors figured, would hire researchers with diverse backgrounds, which would spur intellectual cross-fertilization. They would also enter into corporate alliances or work with venture capitalists, well-known for carrying Palm Pilots brimming with contacts. "Reputable venture capitalists connect their portfolio companies to external resources, such as the capital and labor markets, and they act as a source of valuable knowledge, facilitating the entrepreneurial firm's development," the authors write. Two databases gave Hsu and Lim information on corporate alliances and venture investments.
Identifying creative firms and understanding how they acquired knowledge was only the first step. Hsu and Lim then needed to figure out whether knowledge bridging gave firms a performance or financial edge. After all, in the corporate world, wide-ranging curiosity does little good if it doesn't eventually yield cash.
After collecting and crunching their numbers, Hsu and Lim concluded that knowledge bridging does pay. The knowledge bridgers whom they identified were more likely to have a drug approved by the U.S. Food and Drug Administration and more likely to raise money in an initial public offering than companies that didn't bridge.
Not all of Hsu and Lim's hypotheses about how firms bridge fields of learning panned out. Neither the number of alliances that a firm entered into nor the amount of venture capital it received pointed to whether it would be a knowledge bridger. Only hiring a diverse group of researchers seemed to matter.
Their venture capital finding might seem surprising since reams of studies have been done about how venture capitalists hunt for innovative companies. Hsu and Lim offer up several possible explanations for their counterintuitive conclusion. Seeking venture money may eat up the time and energy of managers and thus distract them from efforts at knowledge bridging, they point out. "A second possibility is that VC involvement in the venture helps focus the entrepreneurial team on product development and execution for commercialization success," they write. In this stage, companies would focus more on the nuts-and-bolts of bringing their products to market and less on the sort of research that yields patents.
Even though hiring researchers from a variety of fields propelled knowledge bridging among the firms that Hsu and Lim studied, the practice isn't without risks. "People with heterogeneous backgrounds and areas of expertise may not ultimately be productive," they write. Researchers may be unable to find areas where their backgrounds complement each other. Or their collaborations may fail to yield valuable new ideas.
Although the study didn't delve into human resource practices, Hsu suspects that knowledge-bridging companies do more than just recruit brainy people from a variety of fields. Once these workers arrive, firms have to pay them well and, just as important, offer a stimulating environment. "Maybe creative people don't work somewhere just to get the most money," Hsu says. "Maybe they want a long leash, or a budget to go to cool conferences, or a lack of restrictions on whom they can work with."
Other ways that companies can try to spur knowledge bridging include setting up information clearinghouses where researchers can share ideas and solicit advice on projects, and hosting brown-bag lunches and outside speakers on technology topics. A few firms even try gimmicky techniques like lining their hallways with whiteboards, so employees can scrawl ideas whenever inspiration strikes them or post half-formulated notions and ask for comments from their colleagues, Hsu says. Or they stock break rooms with appealing snacks, not just to reward employees and boost morale, but also to encourage chance encounters by people who work in different departments.
Those sorts of efforts square with the view of innovation offered by Steve Jobs, chief executive of Apple Computer, in a 2004 interview with BusinessWeek. "Innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea," Jobs said. "It's ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea."
Maybe the most promising, but also riskiest, step for encouraging knowledge bridging is giving researchers unstructured time to work on projects that pique their curiosity. "It's like trying to replicate the academic environment," Hsu explains. "3M and Google have done that. The danger is that people play Tetris with that 20% of their time, and there's no accountability."
3M goes so far as to hand out "genius grants" to scientists who want to work on projects outside of their normal duties. Researchers apply for the grants, and 3M awards more than a dozen, of $50,000 to $100,000 each, annually. Recipients can use the money to hire additional staff or buy needed equipment. Even genius grants can't guarantee a payoff, however. Researchers may not play video games during their free stints, but their intellectual wanderings may not yield products. "You have to be prepared for some failure," Hsu points out. "Sometimes, employees will try things that won't work."
Even so, Hsu and Lim are "bullish on the payoffs of knowledge bridging," Hsu says. Simply put, in their sample of biotechnology firms, the creative companies performed better.
Still, Hsu isn't ready to tell managers to overhaul their internal policies and procedures. Hiring smart people and giving them lots of liberty would seem to make sense in many fields, but Hsu and Lim studied only biotech, and it's possible this process works differently in, say, software or telecommunications.
More important, the two scholars only studied half the corporate equation, that is, the potential to improve performance and, in theory, revenues through greater creativity and productivity. Their study gave them no insights into how much it costs a company to be a knowledge bridger.
"We can only see the successful patents, not the ones that were turned down," Hsu says. "And we don't observe the internal policies that companies put into place, and the formal costs and management costs of [doing that]. Those costs could be significant. That's why we hesitate to make cost-benefit statements."