Large Companies Have ‘Abandoned’ Development

 

PCDworks (PCD) is a full-service product development company tucked in the piney woods of East Texas, about 35 miles southwest of Tyler, TX. The firm has been in business for 22 years, and its seven employees have helped clients on everything from product concept to design for manufacturing — and everything in between.

The company's portfolio is extensive. PCD has worked on a wide range of products, from the oil patch to the medical industry, transportation to IoT, and military to consumer goods. The company is known, in part, for its collaborative immersion sessions held at its campus. It's not all that uncommon to hold these sessions at the dinner table or on the porch overlooking the valley.

I recently spoke to Mike Rainone, the vice-president of innovation and the company’s co-founder. He founded the company with his wife, Donna, who serves as the company’s president. I wanted to pick Mike’s brain about the current state of new product development and innovation in the U.S.

According to Rainone, it all boils down to the size of the shop. “Large-scale enterprises have, to a large part, abandoned their internal [new product development] NPD efforts and now find it easier to simple pluck up budding start-ups when they have taken the risk out of the effort," he says.  

While small-scale innovation is blooming, particularly in incubators and accelerators, it has become easier for big companies to watch and then “cherry pick” the best. Large businesses have also become more risk-averse and, as Rainone says, they “realize that they are terrible at starting and nurturing innovation.”

According to Rainone, the rate of innovation in the U.S. has been declining for years in terms of corporate investment in innovation. Places like Israel, Sweden, Finland, and Switzerland far outpace the U.S. in many categories, including per capita government investment. However, he believes that there has been a shift toward self-motivated innovation (little guys in incubators) from those driven by corporate investment.

The government could play a larger role in bridging the innovation gap. While countries in Europe see a lot of investment in startups, Rainone says the free-market form of capitalism keeps the government away from seeding, except for programs like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs that can help with prototyping, R&D, and even commercialization.

Over the next two years, Rainone expects to see an uptick in small startups. He says that entrepreneurs will eventually learn to solve more problems rather than whimsically coming up with simple products that they think people will buy. But who knows? I’m sure that many companies are right now working on the next best fidget spinner.

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