Innovation Doesn’t Matter

One of the greatest myths of our time is if you create something genuinely new, something completely unprecedented, you’ll have a better than average chance of getting rich. So ingrained is this idea that a whole generation of young university graduates have stopped seeking a steady career in the large safe corporations their predecessors held dear, pursuing instead the dream of the startup. For most, the dream does not work out the way they expect. Hardly anyone builds the next Facebook, or the next Google, or the next Apple. But the reason for the poor success rate is counterintuitive and is something of a dirty little secret: despite what everyone says, genuine innovation hardly ever pays off. Consider the biggest hits recent times, such as, for example Apple’s ubqiquitious iPad. Is there really anything genuinely new in this product? Not really: it is an iphone with a bigger screen. Brilliantly executed, yes, but not genuinely new. The iPad wasn’t even the first tablet computer: the first patent for the concept was actually issued in 1888. Or the best selling drug of all time, which isn’t, as many people might imagine, Viagra. Its Lipitor, a heart drug, which is interesting only because it was by no means a breakthrough: there were a number of compounds that did exactly the same thing on the market when it was released, and Lipitor was better only because it was, essentially, stronger. Facebook wasn’t the first social network. Google wasn’t the first search engine. And Apple has invented nothing of breakthrough significance in its own right ever. But let us consider the case of a company that has invested in research and development to a surprising degree: it is Microsoft, which has typically spent between four and five times as much in R&D as Apple every year. Yet, strangely, its stock price has been flat for a decade or more, whilst Apple has surpassed it in every important metric. If genuine breakthrough innovation was truly an important driver of value, Apple should have been brought to its knees by Microsoft, yet the reverse is quite patently true. The dirty little secret those who preach the value of innovation will rarely tell you is that breakthroughs hardly ever make money. Breakthroughs are interesting and useful because they do something unprecedented. But unprecedented comes with a cost: the expense of acquisition perhaps, or complexity of use, or overall efficiency compared to available alternatives. For these and other reason like them, the more unprecedented something is, the smaller an audience it can command when it is introduced. Only time, and multiple iterations of improvements, can make a breakthrough useful to enough people that a commercial proposition is possible. This is why companies such as Google, Facebook, and Apple, all organisations which have created businesses based on incremental improvement on someone else’s breakthrough have gotten very rich indeed. So, indeed, innovation doesn’t matter. At least, not if you’re a large corporation with stockholders to please. If your objective is making large-scale returns, do more of what you already know how to do. Where, then is the true home for breakthrough innovation? The answer to that is simple: anywhere making money is not the primary driver of the creative effort. It is wherever passionate people live, those for whom the primary joy is the vista of the new frontier they’re opening. Genuine innovators are a rare and special breed. They’re the ones who pioneer, and who are unlikely to be rewarded for doing so. Most probably don’t care. But there is a final irony in all this: although breakthrough innovation doesn’t make much difference if you want to get rich, having a business that is very good at iterating on other’s genius will likely win you the title of innovator anyway. Which companies do you name as the most innovative? The likelihood you named on those discussed here is pretty high. image credit: clker.com Don’t miss an article (3,800+) – Subscribe to our RSS feed and join our Innovation Excellence group! James Gardner is the author of Sidestep and Twist published by Marshall Cavendish and is a ground-breaking book which explains why breakthrough innovation doesn’t pay, and what companies can do about it. For more information go to sidestepandtwist.com or business-bookshop.co.uk .

[via Innovation Excellence]