We Are All Innovators Now
Now, more than ever, innovation matters. There is an urgent need for solutions to the novel problems of the twenty-first century. Innovators from unexpected corners with unfamiliar pedigrees are disrupting established business models and upending entire industries at breakneck speed. But if entrepreneurs, who are the vital carriers of innovation, are rewarded for solving socially important problems, greed can indeed do much good. Innovation could then turn these wicked global crises into unprecedented economic opportunities.
However, just because the world needs innovation and innovation is becoming more democratic, it does not mean the future is inevitably bright for all. A more likely outcome is that the world economy is entering a period in which we will see much more turbulence, which may produce unexpected winners and losers. Leading economies will be challenged by upstarts. Established companies in many sectors will be blindsided by unanticipated threats. Workers, even well-educated professionals in the middle classes, will find themselves increasingly unable to compete in a world evolving rapidly beyond their recognition. Governments, companies, and individuals alike will feel like they are running just to stand still.
So how to win in this coming age of disruptive innovation? Elon Musk put his finger on something important in describing his own path to success forging not one but three disruptive start-up firms—PayPal, Tesla Motors, and SpaceX. The right formula for success as an innovative entrepreneur, he says, is drive times opportunity times talent. That points nicely to a manifesto for flourishing in the new world economy.
Start with drive. Jessica Jackley is surely right to insist that idea generation gets you nowhere unless it is coupled with the hard slog of execution. Wonderful ideas for improving products, communities, or the world at large have long been around, but the innovation process was simply too elitist and closed off in the past to pick up on many of those ideas. As it opens up, though, bright sparks anywhere in the world, regardless of status or corporate affiliation, have the chance to make their mark and maybe make their fortunes too. What is more, as political and economic obstacles have faded and information and talent flows have accelerated, plucky upstarts are creating global micromultinationals—such as Jeff Denby’s socially responsible underwear firm PACT—from day one.
Joseph Schumpeter hailed the entrepreneur as “the innovator who implements change within markets through the carrying out of new combinations.” We need to do much more to encourage such entrepreneurial drive, as it may be humanity’s best hope for increasing productivity growth, speeding the diffusion and adoption of worthwhile innovations, and tackling the world’s grand challenges. That is because the leading countries of the world, especially the United States, may be entering a period of what has been called frontier economics. As older, easier sources of growth have started to dry up, knowledge-age economies are relying ever more on innovation to save the day. That requires start-ups to push the boundaries of technologies, business models, and social norms.
Jack Hidary is one of those provocateurs who is always pushing the boundaries of what is possible. He made his fortune with two technology start-ups, EarthWeb and Dice.com, but he has been spending most of his money and time trying to kick-start a clean energy revolution. He joined the board of the X Prize Foundation and cofounded the Progressive Automotive X Prize, which sought to develop vehicles that broke the 100-mpg barrier. He worked with several partners to develop the Cash for Clunkers program, which swapped more than 700,000 cars across the country in two months for an average gain in fuel efficiency of 62 percent.
In addition to incentive prizes and policy catalysts, he argues that a new kind of entrepreneurship is required to take on such big, complicated problems as the move to clean energy. The old model—he calls it Newtonian—saw a linear path in which entrepreneurs would start off alone with nothing, stumble on an idea, lock in their intellectual property, seek out seed funding, go to alpha and beta testing, and so predictably on. “It was all very cause and effect, slow to scale, and most ideas got stuck in the technology valley of death,” he says.
In the new quantum approach he advocates, innovative entrepreneurship happens as a superposition of many simultaneous possibilities rather than a straight line, and propels multiple approaches involving entire ecosystems of players forward at the same time until a shakeout leaves just one set of winners standing. This is analogous to the wave function in quantum mechanics, which forces one pathway forward from a wide range of possibilities.
One of his main goals in clean tech has been to make electric vehicles accessible to the masses without consumers worrying about charging and infrastructure. Recognizing that the arrival of the always-on Internet-supported network enables a new generation of charging stations and vehicles, Hidary set out to build a consortium that could make this vision a reality. But instead of starting a new company, as he had in the past, he decided to catalyze a new set of consortiums and business models to push the technology forward. The key barrier to adoption of these vehicles, he reckoned, was the need for consumers and businesses to buy the car.
By a clever mix of cajoling, cooing, confronting, and cooperating with a variety of companies that make up the ecosystem of car, recharger, and power supplier, he has managed to forge a breakthrough that allows those firms to push the technology forward while advancing their own business differentiation. In mid-2011, Hertz announced that it would carry a large number of electric vehicles for rent in prominent locations in several countries, and GE came on board to supply the recharging infrastructure with other partners in tow. Parking garages, corporate campuses, utilities, and others joined in to roll out the infrastructure in distributed fashion. To tackle the world’s most wicked problems, he argues, we need a range of tools in the toolbox—government policy, incentive prizes, industry coalitions, and so on—and the challenge for the new generation of entrepreneurs will be how to coordinate all this.
That example shows why companies and countries—not to mention friends, families, and fools—that remove obstacles from the path of trailblazing, innovative entrepreneurs such as Hidary will do better than those who do not. And if you are a person with a great idea but no business plan, you no longer have an excuse for sitting on the fence. Thanks to such advances as Web-based crowdfunding, even very poor people in hardscrabble parts of the world are now changing the world. So why are you still an innovator-in-waiting?
If the answer is that you do not know where to look for opportunity, consider the advice given by the OECD: the greatest potential driver of innovation and source of future productivity gains may well be intangible capital. It is easy enough to spot the tangible capital in an economy, whether capital equipment and machinery or buildings and infrastructure. But in the Ideas Economy, much of the value of firms is not captured on the balance sheet: it walks out the door at the end of the workday, trapped in the minds of the best employees. In today’s open innovation ecosystems, one form of intangible capital is the knowledge networks that link decentralized nodes of open innovation. Of all the forms of intangible capital that look likely to drive future growth, the agency thinks the most promising are advanced software, Big Data, analytics, and design.
Those seem a bit prosaic at first. So to get a sense of the hidden opportunity here to change the world, take a closer look at design thinking. Tim Brown, the boss of IDEO, a consultancy that helped shape Apple’s first mouse, does not have solutions to daunting global problems such as climate change, epidemics, and persistent poverty. But he believes he knows how to find them: with design thinking, by which he means the open-minded, no-holds-barred approach that designers bring to their work, rather than the narrow, technical view of innovation traditionally taught at many business and engineering schools. Firms that think like designers, which means embracing experimentation via rapid prototyping and fast failure, stand to win huge new markets and profits. The concept may sound pat and wooly, encompassing everything from savvier marketing to radical technological leaps. Yet design thinking is winning many converts in both industry and philanthropy.
A holistic approach to tackling problems produces more breakthroughs than does the MBA’s traditional urge to make incremental improvements to existing products or processes. The traditional uncompromising focus on predictability and quality control exemplified by Six Sigma, a form of statistical analysis popular with manufacturers, can lead to “analysis paralysis” by discouraging sweeping changes that may cause disruptions in the short term but yield big benefits in the long run. GE is perhaps the company most closely associated with Six Sigma, but Jeff Immelt nevertheless thinks there is something to the argument for stepping out of silos. He is convinced that taking on such complex challenges as health care and energy, sectors on which he is betting GE’s future, will require systems thinking that weaves together policy, economics, strategy, and technology in entirely new ways.
The key is to focus on the needs of people without losing sight of the big picture. George Kembel, the head of Stanford University’s Institute of Design, points to Embrace, a fledgling health care firm created by a group of his former students. The problem they set out to fix was the appalling lack of proper medical care for premature babies in poor countries. One reason for this is that sophisticated incubators can cost $20,000 or more; even if a country receives the machines from donors, the lack of proper training and money for maintenance undermines their effectiveness.
Many attempts had been made to reduce the cost of such incubators, but the Stanford team took a different approach, by talking to locals in rural areas. In the process, it dawned on them that most babies in the developing world are not born in hospitals and so are unlikely to benefit from incubators even if the devices are working properly. The team designed a cheap and cheerful proxy: a tiny sleeping bag made of material that, when dipped in boiling water, retains heat for hours. The drive of these social entrepreneurs has met clear market opportunity, and they hope to start selling this $25 “incubator” soon.
Another example of how design can drive innovation and create opportunity is the democratization of manufacturing that is under way today. In the past, because the essential tools of the trade—such as lathes, injection-molding machines, and computer-aided design systems—were so expensive and large, only companies with deep pockets could aspire to design and manufacture new products for the global market. No longer. The rise of cloud computing and powerful design software, the miniaturization of essential hardware, and the rapid advance of 3-D printing are fomenting a manufacturing revolution. At the forefront of this movement is Autodesk, a California software firm that has for decades produced expensive 3-D software design tools for high-end applications (including designing Boeing aircraft and creating Hollywood films such as Avatar).
Without the knowledge of Carl Bass, Autodesk’s boss, several younger employees developed cheap and cheerful design applications for the iPhone and iPad that have become runaway bestsellers. Bass confesses that if he had been asked, he would have crushed the project out of fear that it might weaken the firm’s high-end brand. In fact, millions of new users are now familiar with his brand and existing customers are asking for more such applications. Bass says, “This was a wake-up call for us that the world is changing. It took twenty-seven years for us to get to 12 million units in sales, and now in eighteen months we’ve done it again.” He argues that the spread of affordable design software, inexpensive digital fabrication labs, and outfits such as California’s Tech Shop (which aim to do for manufacturing and design equipment what Kinko’s did for photocopiers) means that everyone can join the “maker revolution.” Bass goes so far as to say that there will be a renaissance in manufacturing in America—“as long as we redefine what manufacturing means.”
And what about talent? Elites have long sniffed that when it comes to talent, either you’ve got it or you don’t—but that view no longer holds in a world of democratic innovation. Every one of us has had an aha moment, after all, and the right sort of education and training can develop intangible skills and unleash the innovator trapped inside. At the level of many national economies, there is a massive talent crunch coming due to demographic trends that will produce a shock not seen since the Middle Ages. Experts at the World Economic Forum and the Boston Consulting Group have calculated that the working-age populations of many developed economies will start to shrink shortly, and they predict that “numerous organizations will be unable to find enough employees in their home markets to sustain profitability and growth.” By 2050, the global population of those over sixty is predicted to exceed those under fifteen for the first time in history.
There is no easy answer, so countries need to try out a mix of policies to deal with the problem. Part of the solution is to encourage more skilled migration, as increased talent mobility is part of the solution. Again, think brain circulation, not brain drain. Those countries that do not, because of xenophobia or other factors, will risk losing out. Anticipating future skills shortages and encouraging public-private partnerships to retrain workers will help, as will tax incentives for businesses to invest more in training workers. Companies will also have to redouble efforts to diversify their workforces, scouring previously neglected demographics (the disabled everywhere, the elderly in developed countries, or women in emerging markets, for example) to find and develop talent.
However, the key to the development of talent lies in the hands of the individual. On this front, there is bad news and good. The bad news is that in many countries, official school systems and universities will not prepare you for the twenty-first-century innovation economy. In America, many public schools have notoriously been falling further behind international benchmarks for quality. But there is also cause for concern in Asian countries that celebrate “tiger moms” and produce high-scoring students, because much of the education in such systems emphasizes rote learning; critical thinking, a willingness to challenge conventional assumptions, and creativity often lose out.
The good news is that thanks to the new tools of the information age, it is now easier than ever to take charge of your own education. If the local school system does not provide strong science education, go online and contract with an inexpensive tutor from Kerala. If your child’s math skills are falling behind those of her peers, improve them using the Khan Academy’s excellent free lectures on the Internet—as over one million students already do. If it is more advanced skills you wish to top up, check out the many free courses that universities such as MIT now place online. If ideas and argument are more your cup of tea, follow the provocative series of free TED talks online and in real life at the thousands of TEDx events now popping up around the world.
In the age of disruptive innovation, the competitive edge may well go not to the smartest or wealthiest but to those who best learn how to keep on learning throughout their lifetimes. This will not be easy, because while the top-down system of mass-produced education that suited the industrial revolution has become obsolete, no coherent and clear system has risen to take its place. A fancy degree from Harvard Business School may not mean the same anymore, argues Christensen, observing that even business professors such as he are becoming obsolete thanks to online offerings. Reflecting for a moment on the prospect of the very same sort of disruptive innovation he has championed for a lifetime putting him out of business, he smiles broadly. That would be a fitting tribute to a man who, along with the late Peter Drucker, has done more than anyone to advance thinking on innovation.
Decades ago, at a time when many thought innovation was mostly a fringe activity to be relegated to the long-haired creative types, Drucker saw “innovation and entrepreneurship as purposeful tasks that can be organized—are in need of being organized.” Though it may never become a quantifiable science, innovation is indeed evolving rapidly from a dark art to something resembling a mainstream practice. As the shroud of mystery fades, the process is becoming more accessible and a useful set of tools and rules is emerging. In that spirit, here are a handful of the most important new rules for the age of disruptive innovation.
The Disruptive Dozen: The New Rules of Global Innovation
The very way in which we innovate is being reinvented, with wonderful but often unexpected consequences. If you want to prosper rather than perish in this coming age of disruptive change, you need to master the new rules of global innovation:
1. Innovation is not a zero-sum game. China’s rise does not mean America’s decline—but the rising tide will lift your boat only if you patch the holes in it first.
2. Think locally, act globally. Many of this century’s thorniest problems—food and water scarcity, health scares—seem like local problems. In fact, they often arise from failures in national and global governance. Creative coalitions, regional approaches, and systems thinking are the way forward.
3. Turn risk into reward through resilience. Leaders must realign incentives for the private sector to build resilience into future infrastructure and supply chains. The key is to shift from brittle, top-down systems to modular, flexible approaches that are more future-proof.
4. Open up and say . . . aha! Ivory towers are so yesterday. Open and networked innovation recognizes that the smartest people in your business no longer work inside your firm.
5. Be the dinosaur that dances. It may be unsexy to be the incumbent firm in an industry undergoing disruption by nimble upstarts, but that is no reason to stand still. Leverage your legacy assets, and ditch outdated business models even if they are profitable today but do not have a future.
6. Elegant frugality trumps conspicuous consumption. The fallout from the great recession is clear. Consumers in developed countries, not just poor folk in emerging markets, want products and services that offer better value.
7. If at first you don’t succeed, fail, fail again. Transform your attitude toward risk so that you celebrate fast failure. It is not easy to fail elegantly.
8. Forget Father—it’s the user who knows best. Bottom-up innovation works much better than the top-down kind. When customers help you create your products and services, the resultant ecosystem gives your firm the edge.
9. Go whole hog. As the life cycle costs and externalities involved with economic activity get priced into goods and services, systems thinking will beat silos.
10. The path from stagnation to rejuvenation runs through innovation. Easing the middle-class squeeze seen in many developed economies will mean improving productivity and boosting economic growth. The best way to do this is to invest in the long-term drivers of innovation such as education, research and development, and smart infrastructure.
11. Put purpose on par with profits. In the Ideas Economy, money will no longer be a sufficient motivator of talent. Look to emerging business models of social entrepreneurship and hybrid value chains for inspiration.
12. Keep relearning how to learn. Each of us has an innovator trapped inside, and today’s innovation revolution promises to be much more democratic than the past—but you cannot rely only on traditional schools, fancy diplomas, and employers any longer. You must constantly work to figure out how innovation is evolving so that you can participate and prosper.
The democratization of innovation, once the preserve of technocratic elites in ivory towers, offers hope that the grand challenges of this new century can indeed be tackled. Ever deeper waves of innovation could, in time, even transform a world of scarcity and conflict into one of abundance and prosperity. That is because as the potential of seven billion innovators-in-waiting is unleashed, mankind will at last be tapping fully the one natural resource that we have in infinite quantity: human ingenuity.