Innovation Isn't Just for Startups

We can all picture the scene: A couple of guys toiling away in a cluttered garage, perfecting the next innovation that will shake an entire industry. Meanwhile, the big corporate players in the market stand oblivious—fat, dumb, happy, and too bogged down by bureaucracy and conservatism to be innovative themselves.

It's a great image—one that has long persisted. There's just one problem with it: It's false. "The all but universal belief that large businesses do not and cannot innovate is not even a half-truth," Peter Drucker wrote in his 1985 classic Innovation and Entrepreneurship.

Yet what is true, Drucker added, is that "it takes special effort for the existing business" to get beyond the temptation "to feed yesterday and to starve tomorrow."

I was reminded recently of the wisdom in Drucker's words when I had a chance to chat with Mike Shapiro, engineering director and chief technology officer for Sun Microsystem's (JAVA) Open Storage operation. As much as any story I've heard, Shapiro's demonstrates that, as Drucker put it, "innovation can be achieved by any business"—even the largest. But what Shapiro and his colleagues have accomplished also serves as a textbook example of Drucker's other insight: A major company must follow specific practices if it's to convert breakthrough ideas into real results.

Leaping ForwardShapiro, his partner, Bryan Cantrill, and their small team are the brains behind a family of data-storage systems—the 7000 line—that Sun introduced late last year. It features oodles of capacity, a "killer app" that uses real-time graphics so that customers can observe and understand what their storage system is doing, and a pricing model that appears to blow away the competition. I'm more of a Luddite than a techie myself, but I can tell you that reviews in the trade press have been very strong, praising the products' speed, simplicity, and low cost.

So how can a corporation pull off something like this? First, it must focus "managerial vision on opportunity," Drucker wrote. This sounds simple, he noted, but most companies spend the bulk of their time concentrating on problems instead. And you can't exactly hit a bull's-eye if you never bother to look at the target.

At Sun, Shapiro and Cantrill made a conscious decision to hunt for opportunity. Highly accomplished engineers and close friends since their days together at Brown University, the two spent a decade working on Sun's Solaris operating system. A few years ago, they became intent on pushing Sun into an area where it hasn't tread much traditionally: making special-purpose appliances. This is opposed to general-purpose computer servers, whose underlying technology other companies have been able to exploit at times and turn into moneymaking products, leaving Sun with relatively little to show for all its high-tech prowess. (It is this vulnerability that helped lead Sun into the arms of Oracle (ORCL), which is now waiting to complete its $7.4 billion acquisition of the company.)

Shapiro and Cantrill eventually settled on data storage as a particularly rich field to explore. But the duo didn't just lock themselves in a laboratory, examine the current state of storage technology, and dream up ways to improve upon it. Instead, they spent a lot of time acting as market researchers, hitting the road and talking with potential customers about what they were really looking for—a crucial step, according to Drucker.

"Because innovation is both conceptual and perceptual, would-be innovators must…go out and look, ask, and listen," Drucker wrote. "Successful innovators use both the left and right sides of their brains. They work out analytically what the innovation has to be. … Then they go out and look at potential users to study their expectations, their values, and their needs." The Right SpaceWhat Shapiro and Cantrill realized from this exercise was that they had to devise a genuinely "disruptive product"—not just a souped-up version of what was available. Because of the hassle and expense, customers weren't going to scrap their existing data-storage solutions unless Sun came up with something far superior. "We had to cost half as much and be twice as fast," Shapiro says.

The trouble was, Shapiro couldn't figure out how to create something like that within the confines of Sun. It wasn't for lack of talent. The concern, he says, was that "in large organizations, people's ways of solving problems are limited by the horizons that they see."

Shapiro also worried that his project, which by its nature needed to draw on resources from different parts of Sun, would give way to political infighting, with various vice-presidents at the Santa Clara (Calif.)-based company vying for control.

Drucker certainly would have understood Shapiro's fears. "The entrepreneurial, the new, has to be organized separately from the old and existing," he asserted. "No matter what has been tried—and we have now been trying every conceivable mechanism for 30 or 40 years—existing units have been found to be capable mainly of extending, modifying, and adapting what already is in existence. The new belongs elsewhere."

In Sun's case, the elsewhere was downtown San Francisco, where Shapiro and Cantrill—with the full support of Sun's top brass—set up a separate organization inside an old office building. Dubbed Fishworks (the "fish" stands for fully integrated software and hardware), the venture was allowed to plug away largely under wraps.

Don't Reinvent Everything At one point, Cantrill discovered a book called Skunk Works, written by the former chief of Lockheed's (LMT) super-secret aircraft factory. Among the lessons it provided was that when Lockheed built the SR-71 spy plane, those in charge of the program didn't try to reinvent everything. They grabbed all the standard parts they could, ripping components out of old jets, so that they could direct their energy and attention to the SR-71's radar-absorbing skin and other groundbreaking advances. Shapiro and Cantrill adopted a similar strategy. "We decided we weren't going to rebuild the operating system," Shapiro explains. "That let us tease out the things that were truly innovative and disruptive."

Or, as Drucker counseled all innovators: "Don't diversify, don't splinter, don't try to do too many things at once."

He had another piece of advice, too: "A successful innovation aims at leadership" in a given market. If it doesn't boldly seek such a position, "it is unlikely to be innovative enough, and therefore unlikely to be capable of establishing itself."

With hundreds of customers out of the gate, the Sun Storage 7000 Series has definitely established itself—and Fishworks, which Shapiro continues to run, could well prove one of the hidden gems of the Oracle acquisition. In the meantime, the new product line stands as powerful proof of what Drucker preached: When it comes to innovation, it's smarts, not size, that matter most.