"Software innovation, like almost every other kind of innovation, requires the ability to collaborate and share ideas with other people, and to sit down and talk with customers and get their feedback and understand their needs."

Gates also says he places a high value on having a passion for ongoing learning, which I've personally found and observed to be tremendously important.

Related story: a few summers ago I spent a week at Hood Canal, a fjord off Puget Sound in the state of Washington. Bill's summer house was adjacent to my resort. Each evening a helicopter landed at the dock, and Bill would pop out of the copter, briefcase in hand, with his family there to meet him. "Honey, I'm home!" The next morning, the copter would pick him up at the dock to whisk him off to Redmond. He'd kiss his wife goodbye, and you could imagine Melinda saying, "Have a good day at work, honey!" Maybe some billionaires aren't that much different than you and me.

How to overcome the law of big numbers? Grove says:

"...under certain conditions a firm can create a new growth spurt for itself by entering an entirely different industry. The target industry must be stagnant and populated with companies that cling to doing business the way they always have. The corporation that enters this environment with an innovative product or service can shake up the status quo and reap big profits... I call this phenomenon cross-boundary disruption, or XBD for short."

Grove says that the defining example of this kind of cross-boundary disruption is Apple's entry into the music business with the introduction of the iPod and the iTunes music store. At the time, Apple faced market saturation in its niche of high-end computers. Since Apple entered the music business, the company's profit has increased more than 3,000 percent.

Another example cited by Grove: Wal-Mart entering health care with in-store health clinics.

But when you stop to think about it, how much innovation do you see from large companies vs. startups?

As I previously blogged (related to a Sept 2007 feature in the Wall Street Journal), innovation is very difficult to do in most big companies. As Douglas Solomon, CTO of IDEO, described:

"Big companies have resources, but don't always have the processes, skills and permission to think outside their current business."

I'm reminded by an article about Yahoo and product innovation. Caterina Fake, co-founder of Flickr said:

"There are tons of amazing ideas in big companies, and no innovation deficit. But the obstacle to getting things built is mostly process. There is one kind of process developed for building and maintaining large-scale products... And the development processes for that are very different from what it takes to build a new product in a short amount of time."

For the many big companies that are unable to create a culture of innovation and unable to adopt new processes, they are, perhaps, best served by leaving the specialty skill to startups. And then investing or acquiring; or being a fast follower.

1) Thinking long term:

- Very difficult to do in most big companies, which have resources, but don't always have the processes, skills and permission to think outside their current business. "Corporations inherently have antibodies that come out and try to envelop and kill any innovation."

- An analogy: large companies are like farms, in which you are trying to grow rows of corn. You don't want surprises and you apply incremental innovation to be productive. In contrast, start ups are more like a small garden, requiring a different level of nurturing; or a greenhouse where you want to keep out the elements. The conclusion is the most disruptive innovation comes from start ups and research. Or, you can develop a small garden or greenhouse on the larger farm. But you have to keep them separate. And then the challenge later is transplanting.

2) Changing the culture:

- How do you change the culture of a company to make it more innovative? "With great difficulty." Four main factors: awareness and attitudes (need a degree of discomfort in your business to make the necessary changes); ways of thinking (a shift from analytical thinking to design thinking); processes and tools; and managing risk (through rapid prototyping, etc).

- Companies have to be willing to have project fail. And link this with HR and back it up in annual reviews. Reward people even if they "failed", as long as the failure wasn't for lack of trying or somebody blatantly mis-executing.

- To draw on the wisdom of the crowd, you have to have the openness in a company in which there is collaboration across multiple functions.

3) Barriers to innovation:

- The things companies have done for quality and efficiency are enemies of innovation.

- Everybody will say a new idea is too small. Going in front of a committee, and having to show a return on investment, are processes to vet an idea, but that stop people from trying and kills the surprises that are going to end up being big.

- Cultures kill what's not like them. "Innovation is something that isn't like me today." The trick is figuring out how to protect new ideas.

- Do checkpoints along the way: build a good product, get feedback from customers along the way, look at early market adoption. But ultimately measure by looking back after a few years and asking, "Has this become a successful business?"

From the article:

"The past is punctuated with stories of companies that accelerated to success and then spun out at the next turn in the road. Some were crushed in the market: Atari, Ronco, Osborne Computer. Some had the need for their product disappear completely: makers of buggy whips, for instance. Some were replaced by companies that manufactured products that did what theirs did, only better: makers of typewriters, vacuum tubes, Super-8 film and eight-track cassettes. Old-style, 35 mm film may be joining that group.

Paradoxically, companies can get into trouble by sticking with what made them succeed, said Alan Weiss, president of Rhode Island-based Summit Consulting Group. "They get better and better at a narrow thing." Surfers on technology waves find that, eventually, what was leading edge turns mundane. Companies that used to compete by offering special features and cool techniques suddenly find themselves selling a cut-rate commodity."

The one thing these have in common: survival of the most adaptable.

I started my career with IBM and have recently had some good discussions with folks from the company about the topic of innovation.

From the BW article:

"At one time the tech giant was a true believer in go-it-alone R&D. The feeling was that if a technology wasn't invented by IBMers, it wasn't as good. Now the computer pioneer realizes that no matter how big an organization is, more smart people are going to work outside its walls than inside. So it courts R&D partners aggressively."

Irving Wladawsky-Berger, Chairman Emeritus, IBM Academy of Technology and Visiting Professor of Engineering Systems at MIT, has an excellent blog on innovation. Wladawsky-Berger recently wrote:

"...the toughest problems, - requiring the kinds of breakthroughs you get from the very best technologist and scientists... [are] out there in the real world, - in the marketplace. So, if that is where the problems that inspire breakthroughs are, then that is where the research people should personally go to learn about them and hopefully come up with elegant, innovative solutions to the problems."

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