Table of Contents

Title

Copyright

Foreword

Preface

Acknowledgments

Chapter 1: An Introduction to the Innovation Factory

Chapter 2: Innovation in Academia

Chapter 3: Innovation in Start-Ups

Chapter 4: Innovation in Large Companies

Chapter 5: The Role of Central Research Labs in Innovation

Chapter 6: How Large Companies Can Support Long-Term Disruptive Innovation

Chapter 7: Funding Models for Innovation

Chapter 8: Digital Technologies to Drive Product Innovation

Chapter 9: Building the Twenty-First-Century Innovation Factory

About the Author

The Innovation Factory

Prith Banerjee, Ph.D.

Copyright © 2022 Prith Banerjee, Ph.D.

All rights reserved

First Edition

Fulton Books

Meadville, PA

Published by Fulton Books 2022

ISBN 979-8-88505-315-0 (paperback)

ISBN 979-8-88505-316-7 (digital)

Printed in the United States of America

To my mother, Anima, for teaching me to be a well-rounded person and to respect others and for encouraging me to pursue my dreams; to my father, Sunil, who valued education and sent me to the best schools, colleges, and universities; and to my wife, Swati, for being my lifetime love and partner and for always being by my side during my multiple career choices

Foreword

Innovation is one of the many words in our modern lexicon that gets overused. Madison Avenue will have you believe that every new product is packed full of innovation. Résumés are brimming with key search terms like out of the box and innovative. Even simple goods and services promise innovation, just in case we need a new approach to taking portraits of our pets or for securing insurance for a boat. We know that innovation is crucial to our future successes, whether they be in business or in life. For many of us, though, we are just no longer sure what innovation even means because of its overuse. In fact, it is fair to say that the word innovation is no longer, well, innovative.

That is what makes Prith Banerjee's study of innovation so refreshing and exciting. This book is more than simply a case study of a single company's innovation journey. Rather, it is a broad-based examination of this intriguing topic, which executives across industries will value. Prith couples his own research and keen insights with a series of interviews with leaders in business and academia to explain the heart of innovation and how it drives our world forward. He details how the innovation process—from ideation, to funding, and to execution—occurs in universities, in start-ups, and in large enterprises. He also advises how large companies can pursue long-term disruptive innovation by better partnering with academia and start-ups.

Prith calls this idea the Innovation Factory, an evocative title that forces us to rethink our approach to the products we create, the processes we follow, and the strategies we develop. He describes how innovation itself can be turned into an ongoing process—literally an innovation factory—during which new ways of approaching familiar challenges can be industrialized at scale.

Over the course of his thirty-five-year technology career, which includes academia and start-ups as well as managing innovation in large companies, Prith has become a legend and a trusted adviser on the topic. Over the course of my career, I have had the opportunity to observe many chief technologists and have served in the role myself. Prith is one of the most effective leaders I have ever encountered in that role. His intelligence, passion, commitment, and unbridled energy inspire those around him to constantly push the boundaries of what is possible through the promise of technology. Those traits have enabled him to develop deep, lasting connection with other visionaries in the technology community.

As the CTO of Ansys, the global leader in engineering simulation, Prith is responsible for setting the company's long-term technology strategy. He has taken an intricate strategy and has simplified that vision into a series of key pillars, including numerical methods, artificial intelligence / machine learning, and the cloud. As a result, our strategy is more easily understood and embraced by customer, partners, and even our own employees.

His participation in the global technology community has inspired Ansys engineers to play more active roles in the greater business ecosystem. The technology strategy that Prith drives has paid tremendous dividends for Ansys and for our customers. Prior to Prith's joining, Ansys was already the market leader in engineering simulation. But with his guidance, we have extended our product leadership and our overall strength in the industry.

Prior to his time at Ansys, Prith led a remarkable career spanning academia, start-ups, and the corporate world. He spent more than twenty years as a professor, chairman, and dean at the University of Illinois and Northwestern University. He founded two start-up companies: AccelChip and Binachip. Finally, as the director of the iconic HP Labs and Accenture Labs and as the CTO of ABB and Schneider Electric, Prith managed large research organizations.

We are fortunate that Prith has found the time to share some of his unique perspectives, valuable learning, and keen business insights with us in The Innovation Factory. I believe this book will serve as a blueprint for companies large and small across any industry or geography to follow. It is time for all of us to start building our own innovation factories.

Ajei Gopal

President and CEO, Ansys

Preface

Even though a quarter of a century has passed since Clayton Christensen's The Innovator's Dilemma was first published, business thought leaders still find themselves confronted with the same problem: a profound disconnect too often exists between innovation development and business outcomes. Companies say they want the stimulus of innovation and even handsomely fund their in-house R&D. Yet when it comes time for a call to action, such as launching a new product or service, they often back away from the risk. Sadly, American corporations' decision makers all too often decide to play it safe, and the innovation doesn't go into play at all.

In my thirty-five-year technology career—from academia, to my own start-ups, and to managing innovation in enterprise environments—I have encountered many large companies that have R&D collaborations with academia and with start-ups. Open innovation with academia and start-ups, the focal point of this book, is not new. Henry Chesbrough, director of the Garwood Center for Corporate Innovation at the University of California, Berkeley, Haas School of Business, has written extensively about it. Unfortunately, many of these collaborations do not result in true innovation. My book explores the ingredients of the secret sauce required to generate successful open innovation.

The Innovation Factory provides essential, practical guidance for all parties wishing to work toward successful collaborations that achieve innovation in its many aspects. Perhaps you have already launched some partnerships; if so, this book will help both of you make them more successful. Whether you have or have not, this is the only book you need to launch and partner in open innovation initiatives.

The Innovation Factory is organized as follows: Chapter 1—An Introduction to the Innovation Factory—introduces the definition of innovation and distinguishes it from basic discovery. It describes innovation in products and processes and goes on to discuss the three horizons of innovation model developed at McKinsey & Company. Horizon 1 is short-term, horizon 2 is medium-term, and horizon 3 is long-term (and is often Christensen's) disruptive innovation.

Larger companies typically excel in horizon 1 and also do a good job in horizon 2 innovation. Universities typically focus on long-term horizon 3 innovation; however, they often end their work at the discovery phase. Start-up companies excel in taking horizon 3 disruptive innovation to market. Large companies typically struggle with long-term horizon 3 disruptive innovation. In this chapter, we interview Monty Alger, professor at Penn State University and formerly with GE Global Research, and discuss how innovation happens in academia and large companies.

Chapter 2—Innovation in Academia—discusses how discovery and innovation take place in academia. It explains that most fundamental scientific and engineering discovery happens in academia; however, the metrics of innovation in academia are commonly tied to publications in conferences and journals and to obtaining research funding. Professors are usually promoted based on funding, publications, graduate student supervision, and awards and recognition, such as being appointed as fellows of professional societies.

Most professors are not interested in transferring their technologies to businesses, although a small number of faculty do start companies and transfer the technologies they have been developing. Increasingly, large companies are funding research programs in universities with the intent of transferring the technologies they have funded to a viable product or process for their business. In this chapter, we interview Alberto Sangiovanni-Vincentelli, a professor at UC Berkeley and cofounder and board member of Cadence, and we discuss how universities pursue basic research and discovery and how technologies get transferred to companies.

Chapter 3—Innovation in Start-Ups—discusses how innovation develops in start-up companies. While large companies mostly focus on research and development for a diverse portfolio of projects, a start-up is usually interested only in one niche, product, or process on which to focus their R&D and sales and marketing effort. It is, therefore, easier for start-ups to practice disruptive innovation. Also discussed is how start-up companies create business plans to launch a business to pursue disruptive innovation. The various funding stages that start-up companies employ, such as seed, Series A, Series B, Series C, and initial public offering (IPO), are explained. The chapter concludes by describing how start-ups go about forming partnerships with large companies to scale their business. In this chapter, we interview Amit Narayan, CEO of AutoGrid, a start-up in the renewable energy industry, on how start-ups pursue disruptive innovation with funding from venture capitalists.

Chapter 4—Innovation in Large Companies—discusses how innovation is practiced in large companies. Start-ups tend to focus on a single project for their R&D effort while a large company typically has multiple products across multiple organizations or divisions. How large companies manage a portfolio of R&D projects and how they try to grow their top-line revenue and bottom-line savings through innovation are detailed. In this chapter, we interview Brad Feldmann, CEO of Cubic Corporation, and we discuss how large companies invest strategically in research and development.

Chapter 5—The Role of the Central Research Lab—focuses on the role of a central research lab (CRL) and how it is essential to supporting long-term disruptive innovation. Central research labs at Bell Labs, IBM Research, Microsoft Research, HP Labs, and GE Global Research have been very successful over the past thirty years in pursuing truly long-term R&D topics—for example, the invention of the transistor, the hard disk computer drive, and the laser. Several have won Nobel Prizes.

More recently, as the business environment has changed, some CRLs have found that they need to reprioritize their research to balance short-term and medium-term projects with their previous emphasis on long-term innovation. In this chapter, we interview Peter Lee, corporate vice president of Microsoft Research and Incubations, and we discuss how central research labs, such as Microsoft Research, are pursuing long-term disruptive innovation.

Chapter 6—How Large Companies Can Support Long-Term Innovation—proposes how large companies can develop short-term innovation using the portfolio approach described in chapter 4 yet can simultaneously pursue long-term disruptive innovation by leveraging a central research lab, as described in the previous chapter. However, the organic work on innovation needs to be complemented by partnering with academia and start-ups to achieve open innovation. Examples of how new businesses can be incubated in large companies using this approach are described. In this chapter, we interview Mallik Tatipamula, chief technology officer, Ericsson Silicon Valley, and we discuss how large companies engage with start-ups and academia to bring disruptive innovative ideas from outside the company.

Chapter 7—Funding Models for Innovation—discusses funding models for innovation. Government funding agencies, such as the National Science Foundation (NSF), the Department of Defense (DOD), the Department of Energy (DOE), the National Aeronautics and Space Administration (NASA), and the National Institutes of Health (NIH), typically fund long-term research programs at universities. The DOE and DOD also fund applied research programs at their own central labs, such as Oak Ridge National Laboratory or the Air Force Research Laboratory. Venture capitalists (VCs) actively fund start-up companies at seed, Series A, Series B, and Series C. Large companies fund their own R&D programs, often by fiat from the CEO and the board.

Increasingly, there is a cross-pollination of funding among academia, start-ups, and large companies. For example, large companies routinely fund work in academia and participate in strategic investment rounds for start-ups. Agencies of the US government often fund start-ups using either the Small Business Innovation Research (SBIR) or the Small Business Technology Transfer (STTR) funding programs. In this chapter, we interview Erwin Gianchandani, assistant director of the directorate for Technology, Innovation, and Partnerships (TIP), National Science Foundation, and discuss how NSF funds basic research among US universities.

Chapter 8—Digital Technologies Driving Product Innovation—addresses the role of various digital technologies essential to driving product and process innovation in the twenty-first century. We discuss technologies such as

CAD/CAE simulation-driven product innovation

semiconductors and nanotechnology

photonics and optical interconnects

quantum computing

wireless communications

additive manufacturing

virtual reality / augmented reality

blockchains

cybersecurity

high-performance computing

cloud computing

AI / machine learning

Internet of Things (IoT)

platforms

In this chapter, we interview Gamiel Gran, senior vice president at Mayfield, and discuss how venture capitalists fund various start-up companies in each of these digital technologies.

Chapter 9—Building the Twenty-First-Century Innovation Factory—offers concluding remarks on how large companies can set up long-term disruption as an innovation factory by complementing the organic innovation with central research labs, academic partnerships, and start-ups. Attracting, retaining, and promoting business innovation talent is essential. In the global business world, such talent is often found in the top ten cities as measured in terms of innovation and what it takes to sustain innovation. How is an innovative culture created and practiced in larger companies?

Finally, a long-term perspective on funding models that will foster more innovation in the US—for example, government funding of the United States Innovation and Competition Act of 2021 (USICA) to create a new directorate within the National Science Foundation that focuses on technology and innovation. In this final chapter, we interview Henry Chesbrough, professor of Haas School of Business at UC Berkeley, and discuss the concepts of open innovation that many companies have successfully applied to drive disruptive innovation.

(Disclaimer: the opinions expressed in this book are the personal views of the author and do not represent the views of Ansys.)

Acknowledgments

The idea to write this book came out of various interactions with CTOs of different Ansys customers during my role as CTO of Ansys. I had numerous discussions with the CTOs of other companies in multiple industries and the challenges they faced in driving disruptive innovation as part of their digital transformation journey. In 2019, I was first invited to speak on this topic to all the engineering talent at Cubic Corporation, a company where I served on the board of directors. I subsequently participated in several podcasts on innovation that Gamiel Gran hosted at Mayfield, Albert Chou at Mission North, and Ken Forster at Momenta Partners. The idea for this book came out of these podcasts.

I am fortunate to have worked in different organizations on innovation. I have spent more than twenty years in academia at the University of Illinois and Northwestern leading research, supervising PhD students, and writing more than 350 papers. I have founded two start-ups, AccelChip and Binachip, and have learned how start-ups innovate. Finally, I have been managing large R&D organizations at Hewlett-Packard, ABB, Accenture, Schneider Electric, and Ansys for the past fifteen years. I have learned so much from my colleagues in these organizations and want to acknowledge their contributions to the ideas described in my book.

I want to acknowledge the excellent education I received during my BTech degree in electronics engineering at Indian Institute of Technology Kharagpur, one of the premier engineering institutes in India. I want to recognize my professors: J. Das, G. S. Sanyal, N. B. Chakrabarti, S. K. Lahiri, P. Dasgupta, S. DeSarkar, and others. From them I learned the fundamentals of engineering. I also want to recognize my BTech thesis adviser, S. K. Lahiri, who taught me how to pursue fundamental research. Next, I want to acknowledge the excellent graduate education I received at the University of Illinois Urbana-Champaign. My professors—Jacob Abraham, Ed Davidson, Janak Patel, David Kuck, Mac Van Valkenberg, and others—taught me how to think creatively. I want to thank Professor Jacob Abraham, my MS and PhD thesis adviser, who taught me how to invent new technologies and communicate them in journal papers and conference presentations. The main thing about a PhD education is not the particulars of the PhD thesis topic but the art of learning something and discovering new knowledge. Professor Abraham taught me to be a lifelong learner.

I want to recognize my academic colleagues at the University of Illinois—Professors Jacob Abraham, Ed Davidson, Ravi Iyer, Janak Patel, Wen-Mei Hwu, and Bill Sanders. I participated in multiple collaborative research programs funded by NSF, SRC, and NASA. I want to acknowledge my colleagues at Northwestern University—Professors Abe Haddad, Alok Choudhary, Scott Hauck, Prem Kumar, and Dean Jerry Cohen. I worked on several collaborative research projects with NSF, DARPA, DOD, and NASA. I want to recognize my colleagues at the University of Illinois in Chicago, including Professors Peter Nelson and Mitra Dutta. We worked on various big bet proposals to the NSF's Engineering Research Centers.

After spending twenty wonderful years in academia working on long-term innovation, I had the opportunity to start two software companies. I learned so much about innovating in start-ups from my cofounders at AccelChip—Alok Choudhary, Malay Haldar, and Anshuman Nayak—and my cofounders at Binachip: David Zaretsky and Gaurav Mittal. I also learned a lot about the venture capital business from AccelChip, Arch Venture Partners, Interwest Capital, and Greylock Partners investors. I have also learned a lot about how start-ups innovate from my son, Swaraj Banerjee, and his wife, Anurati Mathur, who cofounded Sempre Health, a health care start-up. We have discussed the challenges and opportunities of working with their customers and investors.

Finally, I learned so much about innovating in large companies at companies like HP, ABB, Accenture, and Ansys. I learned a lot about disruptive innovation while leading HP Labs, from six hundred of the brightest researchers at HP Labs across seven locations worldwide, from the CTO of HP, Shane Robison, and from the CEO Mark Hurd. I carried out the learning at HP Labs to Accenture Labs under CTO Paul Daugherty and CEO Pierre Nanterme.

I want to recognize my colleagues at ABB, where I learned how large industrial companies drive innovation, led by our CEO Joe Hogan. I also want to acknowledge my colleagues at Schneider Electric, led by our CEO Jean-Pascal Tricoire.

I want to recognize my superb colleagues at Ansys, including Shane Emswiler, SVP of products, from whom I learned how to drive innovation across multiple products; Rick Mahoney, SVP of sales, from whom I learned how to support innovation for customers; Nicole Anasenes, CFO and SVP of finance, from whom I learned how to drive innovation using the right financial levers; Maria Shields, SVP of administration, who taught me how to scale a company; Matt Zack, VP of corporate development, from whom I learned who to develop partnerships with in large companies, start-ups, and academia, as well as mergers and acquisitions; Julie Murphy, VP of HR, from whom I learned how to drive the culture of innovation in a company; Lynn Ledwith, VP of marketing, who taught me how to communicate the vision around innovation; Janet Lee, VP of legal, from whom I learned how to protect innovation using patents and who reviewed my book; Tom Smithyman, whom I worked with to perfect my communication skills; Renee Demay, chief of staff, with whom I have regular conversations about how to engage with sales and R&D; Dipankar Choudhury, Ansys fellow, my partner in the CTO office, who helped me drive innovation across Ansys; and finally, our leader and CEO, Ajei Gopal, who has been mentoring me all these years. We have been driving innovation at Ansys for the past four years, and I have tried to write about my learning in this book. I am grateful to my CEO, Ajei Gopal, for writing a foreword for this book.

I want to thank all the leaders of innovation whom I interviewed for the various chapters in my book: Professor Monty Algers, professor of chemical engineering at Penn State University, for his insights in chapter 1 related to the topics of innovation in general; Professor Alberto Sangiovanni-Vincentelli, professor of electrical engineering and computer science at the University of California, Berkeley, for his discussion in chapter 2 related to innovation in academia; Dr. Amit Narayan, CEO of AutoGrid, for his insights about innovation start-ups in chapter 3; Brad Feldmann, CEO of Cubic, for sharing his ideas about innovation in large companies in chapter 4; Dr. Peter Lee, corporate vice president of Microsoft Research and Incubations, for sharing his insights in chapter 5 on the role of a central research lab in a large company in driving innovation; Dr. Mallik Tatipamula, chief technology officer, Ericsson Silicon Valley, for discussing his ideas on how large companies can practice disruptive innovation by partnering with academia and start-ups; Dr. Erwin Gianchandani, assistant director of the directorate for Technology, Innovation, and Partnerships (TIP), National Science Foundation, for discussing funding models of innovation in chapter 7; Gamiel Gran, senior vice president at Mayfield, for his insight on digital technologies to drive product innovation in chapter 8; Professor Henry Chesbrough, professor of Haas School of Business at UC Berkeley, for discussing open innovation in chapter 9.

I want to thank Jack Rochester, who worked with me to plan, review, and edit this book. We spent countless hours discussing the various topics of this book. Finally, I learned a lot about innovation from my elder brother, Professor Sanjay Banerjee. He is a professor of electrical engineering and director of the Microelectronics Research Center at the University of Texas at Austin. My brother and I have similar academic and career records. We both got our BTech degrees in electronics engineering from IIT Kharagpur in India. We both earned our MS and PhD degrees in electrical engineering from the University of Illinois Urbana-Champaign, and we both worked in academia and industry. We spend hours every week discussing how innovation happens in academia, in start-ups, and in large companies. Sanjay has been a mentor throughout my career of thirty-five years. He has guided me every step of the way.

Chapter 1

An Introduction to the Innovation Factory

Interview: Monty Alger, professor, Penn State University

Monty Alger is a professor of chemical engineering at the Pennsylvania State University, where he is director of Institute for Natural Gas Research. His over thirty years of experience in the chemicals and energy industries includes positions as vice president and chief technology officer at Air Products and Chemicals Inc. and as senior vice president of research at Myriant. He spent twenty-three years at General Electric (GE), where he led technology development at the Global Research Center of GE Plastics and was the general manager of technology for the advanced materials business. Before GE, he was the director of MIT Chemical Engineering Practice School at GE Plastics.

He is a member of the National Academy of Engineering and serves on advisory boards for certain organizations, including the Shenhua National Institute of Clean and Low-Carbon Energy and PTTGC (Thailand). He is also a former member of the Council on Competitiveness's Technology Leadership and Strategy Initiative. He earned SB and SM degrees from MIT and a PhD from the University of Illinois Urbana-Champaign, all in chemical engineering. He served on AIChE's board of directors (2010–2012) and finance committee and worked on investment priorities to align them with member value.

Interviewer. Monty, thank you very much for agreeing to be interviewed for my book The Innovation Factory. Tell me about your background in the corporate world and academia.

Interviewee. After my PhD, I joined the MIT Department of Chemical Engineering as an assistant professor and practice school director at GE Plastics for two years, which involved two sites in the GE Plastics business. I got to know various people at GE and subsequently joined the GE Global Research Center in Schenectady, New York. I worked on projects for several GE businesses—plastics, medical systems, appliances, motors, and lighting. Through this experience, I got to see how GE research operated in the early years.

After several years, I moved to GE Plastics and had many in technology working with sites around the world. Also, as GE globalized, GE opened facilities in Bangalore and Shanghai and worked on globalization technology. Also, during this time, I was part of the GE Six Sigma initiative. That turned out to be transformational for me. I learned how to use output measurements to diagnose products and processes. I was part of a major effort to improve the capacity in the Lexan business in GE Plastics, and we developed techniques for sharing and benchmarking across plant sites. Using data changed the approach to make it much more c with open sharing and translation of practices across sites.

I was then the technology leader for the Noryl business and, subsequently, of the Silicones business in GE Plastics. Coincidently, those two businesses were where we had the MIT practice school station years before. During my time at the Noryl business, we developed new innovation practices and learned much more about how innovation happened in the past and today.

GE Silicones was sold to a private equity firm in 2007, and GE Plastics was later sold also. I left GE and joined Air Products and Chemicals as CTO in 2007. That was a move to a very different business model, one that was much more focused on engineering than on end use products. At the time, Air Products was two separate businesses with chemicals and industrial gases. All that shifted through several divestitures and acquisitions.

Later, in 2013, I joined a small start-up company, Myriant, that had a bio route to succinic acid. I was interested in joining a start-up, and they were building a 30 mm lb demonstration plant in LA. After two years at Myriant, we learned many challenges of the route proposed; and eventually, the business was shut down. PTT in Thailand is the parent investor in this and continues to seek new innovation projects.

Following Myriant, I joined Penn State University as the director of the Institute for Natural Gas Research. Penn State had broad research capabilities in oil and gas, and with the fracking boom, they desired to build a new partnership to pull through technology. This led to several efforts over the last several years. I will add details below. I also learned about the current challenges universities faced with a rapidly changing marketplace. Ultimately, Penn State decided to not pursue a recommended direction, and so INGaR was disbanded, and I moved to the chemical engineering department as a professor. I also finished three years at the AIChE as president and worked to implement many of the concepts I initially learned at Penn State.

Interviewer. Can you define innovation? What about discovery? How does something move from the process of basic science and discovery to innovation?

Interviewee. Discovery is turning money into science. Innovation is turning science into money.