Innovation Forwards and Backwards

by Herman van den Bosch

Innovation Forwards and Backwards

I am following #innovation, resulting in an endless parade of tweets about self-driving cars, intelligent robots, business models, CO2-neutral buildings, growing efficiency in solar energy and smart gadgets.

Increasingly, I feel at odds with every one who applaud innovation as the Holy Grail for our society’s future without making any difference.

In this post I will introduce a distinction between innovation forwards and innovation backwards. Innovation will become a matter of choice! At first, three different types of innovation must be identified. Each of these types has its technical and social variant.

Technical innovation

Type 1 innovations intend to increase labour productivity: Mechanisation and IT have enabled mass production and transportation at low prices by automation of assembly lines, warehouses, administration and bookkeeping. Besides, technical devices are replacing conductors at trains, cashiers in supermarkets et cetera.

Type 2 innovations are attractive substitutes for current products that help companies to escape the downward spiral of price competition and decreasing margins. To be successful, public has to perceive the new products as contributions to the quality of their lives and be willing to pay accordingly: PC’s, iPhones, iPads, digital camera’s, navigation systems et cetera

Type 3 innovations intends to secure life and a decent level of prosperity in the long run and do not result in major financial rewards at short-term, except for a few number of companies: Sustainable energy, bio-based economy, clean-tech, biological farming, reuse of materials et cetera.

Social innovation

Type 1 innovations have improved labour productivity and humane conditions in the work place, based on large-scaled production, task-differentiation, assembly lines and flexible payment, albeit at the cost of the total destruction of craft[1]. During the last century, Frederic Taylor’s principles have been refined by competence management, lean production, ICT and sophisticated planning and control systems, which have extended to medicine, accounting and teaching.

Type 2 innovations aim at the restoration of challenging job content. Namely, improvement of labour-productivity is accompanied by an increasing number of low-strain jobs and by disappearing employee-engagement. In the meantime, engagement is decisive in knowledge-intensive companies. Consequently, smart companies skip intermediate management levels, introduce servant-like types of management, create flexible work conditions and diminish differences in compensation between managers and professionals. Besides, a growing group of former employees is creating networks of collaborating self-governed and owned companies.

Type 3 innovations partially replace representative by direct democracy. People are taking responsibility for their own neighbourhood. Employee ownership and cooperations revive. Financial institutions, healthcare, assurance and social care will redevelop bottom-up. Social enterprises will replace not-for-profit bureaucracies. These new ventures will operate from a welfare perspective in the first place. The rebirth of the civil society will partially replace the eroded welfare state. An already uncountable number of initiatives are moving already into this direction in many countries[2].

Innovation forwards and innovation backwards

The distinction between two pairs of three types of innovations each enables me to explain the difference between innovation forwards and innovation backwards

The principle purpose of innovation forwards is a liveable existence for future generations worldwide. Type 3 innovations (both technical and social) are its main driver, supported by type 2 and type 1. Innovation forwards does not exclude improving productivity (type 1), for instance by deployment of robotics, but will safeguard autonomous and challenging jobs for all in the first place[3].

The principle purpose of innovation backwards is growth of company turnover and shareholder value. Type 1 innovation is its main driver (again: both technical and social). Types 2 and 3 are supportive. Innovation backwards might include the acceptance of so-called corporate social responsibility (type 3), but only if it contributes to profit, reputation and shareholder value.

Currently, innovation backwards dominates innovation forwards.  Some overall indicators are: the on-going increase of CO2-emissions[4] and the increasing differences in between rich and pour countries and between its inhabitants[5].

At the same time, the power of innovation forwards is increasing. The Deloite report The Big Shift is unveiling global changes during the last decades including many hope-giving details[6], the following trends particularly:

  1. The connection between technology and information science (Internet of everything);
  2. The distributed character of knowledge and the emergence of the independent knowledge workers and Makers;
  3. The collapse of large multinational organizations, favouring a globalized network economy;
  4. The growing power of self-governance and local autonomy.

Forthcoming: Societal transition

One of the many new publications about forthcoming societal transition is the new book of organizational scientist Henry Mintzberg: Rebalancing Society. Radical Renewal Beyond Left, Right and Center [7].

Mintzberg offers ample evidence for the dominance of innovation backwards. From 1980 on, the multinational corporations have increased their global and national power[8]: The economy of free enterprise has become societies of free enterprises. Except for maximization of profits and shareholder value, private companies have encouraged consumption[9] and borrowing large amounts op money. They have externalized their costs and evaded paying taxes. The ever-weakening government lost its countervailing power[10]. However, restoration of the power of the state is no option. A repetition of all well-known arguments between social democrats and liberals will occur and will not generate any change.

The on-going growth of the plural sector is Mintzberg’s hope for the future. The plural sector has always been of utmost importance, for instance by the emergence of cooperations and associations. In the US, in average, each citizen is a member of two associations. There is a myriad of new initiatives by citizens in every field, varying from health, education, neighbourhood, and environment.

In addition, education, health and transport are parts of the plural sector, although these sectors have been weakened by privatisation. The growing group of social enterprises should be added.

This leaves us with the question how each of us can support innovation forwards. To which question Henry Mintzberg’s answers: The place to start confronting the exploiters of this world is in front of our own mirror.

You and I are called on stage. Find your character in the table below

image credit: dailycaller.com

[1]Less humane practices can be found in the apparel and mechanical industry and in construction in emerging countries. These activities are all parts of the supply-chains of western (and Chinese) companies.

[2] Paul Hawken describes in his book  Blessed Unrest in 2007 the emergence of thousands of citizen’s initiatives in many fields.

[3] Carl Benedikt Frey and Michael A. Osborne (University Oxford, UK), The future of employment: how susceptible are jobs to computerization (September 2013)

[4] See for details until 2014: https://infographics.pbl.nl/website/globalco2-2014/

[5] See for details Piketty: Capitalisme in the 21e century (2014)

[6] The Big Shift https://goo.gl/QaNXdy is edited by ‘The Edge’, Deloite’s research institute.

[7] An earlier version of this book (2014) can be downloaded free: https://www.mintzberg.org/sites/default/files/rebalancing_society_pamphlet.pdf

[8] The withdrawal by the US of the Bretton Woods Agreement, resulting in decoupling of the value of money and gold was a first step in the financialization of capitalism.

[9] With respect to food and beverages: In 2014 two of three adults in the US are overweight or obese (69%) and one out of three is obese (36%) www.hsph.harvard.edu/nutritionsource/an-epidemic-of-obesity/

[10] In 1952, companies paid 32% of all tax incomes in the US. This percentage is decreased to 9% now.

image credit: desvadgama.com

Follow @ixchat on twitter

Wait! Before you go!

Choose how you want the latest innovation content delivered to you:


Innovation ExcellenceHerman van den Bosch is a Professor and former Dean of the School of Management, Open University of the Netherlands, Open Universiteit. He works on curriculum innovation (implementation of e-learning in distance education and blended learning solutions) and research in the field of educational methods and the strategy of business education from the perspective of societal changes (social innovation and globalization).