Innovation has a dirty little secret. It is unspoken, so swept under the carpet that most executives are unaware of it. And the secret is this: breakthrough innovation does not really pay, writes James Gardner, author of Sidestep and Twist.
Now, if you’ve signed up to the notion that innovation is going to be a source of all future value, this is a thought that is somewhat heretical. I mean, all the great inventors in history have become rich from creating genuine breakthroughs. Haven’t they?
The answer is, actually, no. In fact, most of those people who created genuinely new, unprecedented things did not get rich.
For example, Sir John Ambrose Flemming, acknowledged as the creator of modern electronics, retired on a modest professorial pension, despite having patents in his name covering the use of his invention. If we believe the modern dogma about innovation, though, he should have been as rich as Bill Gates.
Instead, an American named DeForrest copied his work and made a mint. He was later to lose it all in a series of bad business decisions, but that doesn’t change the fact that it wasn’t Flemming who made the money.
We have been conditioned to believe that breakthrough innovation pays, but the truth of the matter is that very few genuinely new innovations have ever made much money. On the other hand, derivative creations based on something else have a much higher rate of success.
The great poster child for invention, Thomas Edison, creator of the electric light, is a great example. Not only did Edison not invent electrical illumination (his creation was an incremental improvement in the filament of an already working bulb so it wouldn’t burn out quickly), his real achievement – the one that made all the money – was building (and charging for) an electricity supply infrastructure.
Modern hit products exhibit characteristics of being based almost entirely on breakthroughs that have occurred somewhere else, too.
Lipitor is the world’s best-selling medicine. It was actually the fifth in a whole class of new molecules. It was very nearly not made at all because everyone thought being number five wasn’t a position for success. The improvement in Lipitor, by the way, is that it is a little bit stronger than anything else available.
Facebook was hardly the first social network. In fact, there is almost nothing which is genuinely new in Facebook that you can’t trace to a precedent earlier in the dotcom boom. There was "search" before Google. There were vacuum cleaners before Dyson. There were tablets before iPad.
There was search before Google. There were vacuum cleaners before Dyson. There were tablets before iPad.
Each of these are examples of hit products that have gone on to define their categories. They have been successful in spite of not being first to market, or actually implementing genuinely unprecedented innovation.
There is a key choice you have to make if you’re considering the role of innovation in your strategy: are you trying to advance your particular frontier, or are you interested in making money?
If the latter, your best bet – at least if history is any guide – is to copy what others have done, maybe with some incremental improvements that are specific to your niche.
Are you trying to advance your particular frontier, or are you interested in making money?
For those in your organisation who are responsible for delivering an innovation agenda, this will likely be a bitter pill to swallow. Everyone wants to be known as the guy who invented the lightbulb or created modern electronics. But I leave with you with final example to help illustrate the point.
Over the past decade, Apple has spent less than 25% of what Microsoft has done on R&D. Yet, its stock price has accelerated far beyond what its rival has achieved. If going after breakthrough innovation was really that great a driver of value, surely the opposite should have been true?
James Gardner is the author of Sidestep and Twist, a controversial new book which explores the reality of innovation and how to make money from it.
This was first published in January 2012