“The word ‘innovation’ is invoked with alarming frequency by companies trying to sound up to date but with little or no systematic idea about how it occurs.” Matt Ridley.
Innovation is central to economic growth, but the concept is often misunderstood and the word vacuously used in many settings. Those who equate innovation with novelty miss both the importance of innovation and the unpredictably of its process. Yes, innovation creates something new, but just being new does not make it useful or economically valuable.
To better understand innovation, I suggest two recent books, one by Matt Ridley (and the source of the quote above), “How Innovation Works: And Why It Flourishes in Freedom,” the other by W. Bryan Arthur, “The Nature of Technology: What It Is and How It Evolves.”
All innovations utilize natural phenomena as their enabler and use those phenomena to some purpose. Previous innovations make possible subsequent ones — innovation builds on innovation. In other words, all innovations are combinations of other innovations. Innovations evolve.
Because innovations rely on natural phenomena and evolve by combining other innovations that are typically widely known, a related feature of innovation is how often others come up with the same or similar innovations at almost the same time. For example, although we are taught that Thomas Edison invented the light bulb, at least 21 others did so, as well. Likewise, we are told that the Wright brothers invented the flying machine, when at least two others in France and Brazil also demonstrated the feasibility of flight.
Just like innovation flourishes in different places at almost the same time, it is often concentrated in places that have high numbers of people and companies working on similar problems or technologies. The Council on Competitiveness calls this concentration “Clusters of Innovation” and argues convincingly that such clusters are the basis of U.S. competitiveness.
Of course, even when they are useful, some innovations don’t catch on at first (the idea of personal computers comes to mind), or may be actively feared and resisted (GMOs like yellow rice come to mind). Likewise, some innovations are initially too expensive to be commercially viable until other innovations bring costs within the reach of larger numbers of individuals. For example, although many are calling for less reliance on fossil fuels to combat global warming, the fact is that currently, alternative technologies cost more.
It is not easy to foresee how innovations will evolve. The impact of many innovations is overestimated in the short range and underestimated long term. Innovations increasingly arise by combining innovations from disparate disciplines or industries. That is why prize-driven innovation and crowd-sourcing have been so successful in recent years — by putting a problem out to be solved by anyone, novel solutions often come from unlikely sources.
Finally, innovations both shape and grow the economy, with some enabling new industries. The discovery of DNA and progress in molecular biology made it possible for genes from one species to be transferred to another. Likewise, microelectronics and digital technologies made possible the integration of multiple technologies into devices like the iPhone.
Innovation is not about something being new, it is about creating economic value by the successive and successful combination and evolution of previous innovations. The result is what we call progress and what has consistently improved our standard of living.
Luis M. Proenza is president emeritus of The University of Akron