Managing a perpetual idea machine: inside the creator's mind

Abstract

Executive Overview American corporations, hammered by tough world competition, are struggling to become stronger and more agile—able to sustain brutal market forces while still anticipating and meeting customer preferences. For many firms, however, the twin goals of strength and flexibility are proving difficult to achieve. On the one hand, large U.S. corporations often possess considerable market power, but find it difficult to harness the innovative energies of their workers. On the other hand, small, start up firms based on entrepreneurial spirit and innovative product ideas find themselves without the necessary capital and expertise to bring their products to market. Thermo Electron Corporation, a Fortune 500 company, is a technology-based firm located in Waltham, Massachusetts. It offers one innovative and successful model for building entrepreneurial energy within a company that has sufficient resources to achieve market success. In the interview that follows, we learn that for a decade its founder and CEO, George N. Hatsopoulos, has nurtured the entrepreneurial spirit in his company by allowing ventures to be structured as separate, publicly traded companies in which Thermo Electron holds a majority stake. Though frequently described as an innovation in capital financing, the structure of Thermo Electron, as Hatsopoulos sees it, addresses the critical managerial challenge of maintaining the drive to innovate within a large and growing company. The corporation uses the spinoff process,1 not to shed unwanted activities or sacrifice ventures in order to raise capital, but as a motivational tool to spur innovation within the company. The resulting structure of Thermo Electron—Hatsopoulos calls it a “federation”—provides both strong incentives for entrepreneurial behavior among employees and welcome outside capital to fund specific ventures within the corporation.