Innovation Doesn’t Matter

Innovation Doesn't MatterOne 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

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Innovation Doesn't MatterJames 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.

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4 Responses to Innovation Doesn’t Matter

  1. Ken says:

    What the hell is he talking about ‘genuine’ breakthrough???? This article is too lame…no merit or talent at all…
    Innovation matters when it has a large impact on people…and it definitely pays off…iPad and Facebook are innovations because they hit the right note and they are LEAPS ahead of their previous iterations – not marginal…
    and, forget it – not all fresh graduates go for startups…that’s a wrong conception…most of the ‘best’ students go for the big names like Apple, Google, Amazon…most of those who don’t make it there, go to startups to prove that they are still brilliant :)

    • Ken,

      Thank you for your comment: for the purposes of my answer, let us define “genuine breakthrough” as any which has few antecedents. Steam engines, for example, were invented 200 years before they were actually well adopted (actually, more than a 1000 years, if you take the experiments by certain famous greek philosophers).

      The point, I make in the book is not that all innovation is a waste of time, but that you are unlikely to make much money if you focus on going after genuinely first-of inventions.

      iPad and Facebook are innovations, certainly, but they are *not* genuine breakthroughs. They are improvements on a whole series of products which came before them. Neither, to dispute your point, are actually leaps ahead of their previous iterations, and actually both are case studies in the book. Ipad is actually a bigger iPhone, technologically speaking. Facebook is a better MySpace. Where is the genuine unprecedented innovation in either?

      Thank you for your comment.

  2. If you follow this flawed logic and definition of innovation, there is virtually no new innovation. Everything is just an improvement on what has already been invented.
    For instance there is no innovation in transportation…everything is just another improvement on the wheel. All of the worlds patents should be discarded since they are all just copies of what went before.

  3. Dear Ken and Gary,

    I know the argument I present in the book is challenging and controversial. And both your comments are quite typical of the response I’ve had thus far.

    But it is very hard to argue with the data. If you define a “breakthrough” as something unprecedented, something with few genuine antecedents, then those are things which have historically made little money for their inventors. It really does take several iterations of “incremental” innovation before they’re really all that saleable.

    Now, i don’t for a moment suggest that we shouldn’t be working hard to create new things. Nor do I say for one moment that the process of creating breakthroughs isn’t hugely important to society. My studies, however, have led me to the conclusion that if you are doing innovation *to make money*, breakthrough kinds of work is a very, very unlikely strategy to pay off.

    Thank you both for your comments.

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