Dusting Off a Big Idea in Hard TimesReena Jana
REVIVED IN NO TIMEOne rung up the corporate ladder, Suermondt took notice in 2001 and decided to test the software on an existing product line. Kirshenbaum's algorithm, Suermondt thought, could help HP design data-storage systems customized to each corporate client and possibly lead to a new product. Kirshenbaum, excited about the software's prospects, wrote on his Web site that he was working on a "really neat genetic programming system." But market research soon showed clients couldn't care less. "Our existing customers wanted simpler-to-use, and really suboptimal, designs," Suermondt says. Although GP Lab had cost almost nothing—Kirshenbaum's support staff consisted of a few interns—Suermondt concluded it didn't have an immediate payoff and pulled the plug. Kirshenbaum didn't entirely give up, however. Believing that auto-innovation would have a second life, he carefully documented everything about the project and stored the source code and the instructions on how to use it on several hard drives. His meticulous recordkeeping turned out to be fortuitous. In 2007, even before the recession hit, HP Chief Executive Mark Hurd ordered cuts in operations spending. As sales and net income dropped in 2008, he told managers to find ways to slash their budgets further. So Suermondt began looking for new cost-cutting tools. He realized that auto-innovation software could combine financial information scoured from databases and come up with new ways to predict sales and manage the supply chain. He recruited Kirshenbaum to bring GP Lab back to life. Because it was so well documented, Suermondt recalls, "it was up and running in days." Today, HP is using auto-innovation to forecast manufacturing and shipping needs based on predicted sales growth and outfit its worldwide offices and factories as cheaply as possible. The program sorts through such information as, say, the number of computers HP has sold in each market and current spending on PCs in specific industries such as oil and gas. It then combines the data in thousands of ways to determine when and where to buy and ship supplies such as hard drives or products such as notebooks. "We can plug in 100 variables, and the software can consider nearly every possible combination," says Suermondt. "You couldn't do that in a human lifetime, but the algorithm can in pretty much real time." HP hasn't estimated how much money the program will save. Meantime, the $118.4 billion company is spending little more than Kirshenbaum's salary on the revived lab. Improving a corporate supply chain isn't nearly as sexy as inventing an iPhone killer. But Stephen Corbett, a partner in McKinsey & Co.'s operations practice, says that in the recessionary economy of 2009, saving money is just as valuable as generating revenue—and companies often can slash supply costs by 20%. "Finding new ways to identify those opportunities," he adds, "seems a logical place for companies in general to extend and focus on these days." Plus, the system might pay off in other ways. Suermondt says management wants to commercialize the software in 5 to 10 years. Auto-innovation is a key element of a larger HP Labs initiative called Analytics for Operations, which is one of HP's "big bets," or inventions that it considers most likely to spawn a new market. Kirshenbaum feels vindicated. "I always believed that it was a promising technique and a good system," he says. "And I fully expected that it would prove useful down the road."
Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkInvention Kit for the Home
What's next in automated innovation? Invention software similar to HP's GP Lab that's sold directly to consumers. The computer program could enable individuals to "crowdsource" viable product designs themselves. So argues Robert Plotkin, a Burlington (Mass.) patent lawyer with an MIT degree in computer programming, in his new book, The Genie in the Machine: How Computer-Automated Inventing is Revolutionizing Law & Business.
To read a review of Plotkin's book, go to http://bx.businessweek.com/business-innovation/reference/