HP Innovation Journal Issue 01: Winter 2015 | Page 6

INVESTING FOR
IMPACT
BY KEITH MOORE,
HP FELLOW, HEAD OF PRINT AND 3D LAB
How we allocate
resources to fuel
innovation and profits
The key question facing HP Labs is where is
the next billion-dollar business? HP Labs is
responsible for inventing technology that
defines the future of HP. How do we innovate
to create the greatest impact? Do we invest in
making a difference in existing businesses or
do we invest in disruptions?
The problem is that a “true disruption is
indistinguishable from a distraction in its
infancy,” as former HP executive Frank
Cloutier once noted. While R&D tends to
generate lots of ideas, figuring out which will
truly be transformative is difficult. If one is
lucky, it takes at least seven years to scale
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INNOVATION JOURNAL ISSUE 1
a business from nothing to $1B in revenue
(or $100M in profit). HP is impatient for profit
and revenue.
The advantage of targeting the existing
business is that a 2% improvement on a
$52B business generates $1B in revenue. We
could strive to generate customer delighters
that command a premium on our products.
But is that where we should make our
research bet? To address this dilemma, we
use a portfolio approach.
We budget about 10% of HP Labs investment
in fundamental research. This has high risk
(in time and technology) but if successful
will have high return. The work in surface-
enhanced Raman spectroscopy falls in this
camp. This is an unbelievably cool approach
to molecule identification; however, we
don’t know yet how to keep samples from
being contaminated. In addition, we have
the business risk of whether HP will enter
and pursue the sensor market, which is very
exciting.
About 60% of our investment is oriented
toward existing business units. This is
because the best likelihood for return is
through creating differentiation for our
existing products/channels. Labs has to make
a contribution here beyond what the division
can do, otherwise the division resources are
way better at meeting customer needs.
The final 30% of our portfolio is in stuff that
likely will become a new business (i.e., very
unlikely to sell through our existing channel
or business units). We don’t usually start
here, but many ideas end up here. This part of
the portfolio is incubated to decide whether
to spin in or spin out the business.
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