Sunday, July 19, 2009

Innovation - Not Always all it's Cracked Up to Be

People sing the praises of innovation like it's going to save the world, answer all our problems and grow our markets. There's only one problem, there isn't necessarily a correlation between innovation and growth. Let me give you an example.

The Japanese cell phone maker, Sharp, is currently selling the Aquos 912SH. It comes with an LCD screen that swivels 90 degrees, GPS, a bar-code reader (for researching and comparing products), digital TV, credit card functionality, video conferencing, a camera and it is unlocked by facial recognition.

It is an amazingly innovative phone that is years ahead of anything else, all except for one problem - they can't sell them anywhere outside of Japan. For years Japanese phones have innovated ahead of the world. In 1999 they had cameras, 3G networks in 2001, full music downloads in 2002, electronic payment in 2004 and digital TV in 2005. And what has all their innovation got them? Squat.

Japan has innovated at least 5 years ahead of the US and their market is shrinking. They've developed standards the rest of the world is not adopting. Innovation is only beneficial if there are growing markets that are demanding your innovations. Next time someone starts prattling on about how great innovation is, ask them why their not buying the most innovative cell phones in the world?


pellepim said...

I think it is important that we think innovation is cool, whether someone earns dough because of it or not :)

It always has been so - that the ones actually coming up with the brightest things aren't always the ones to benefit most from it.

The smartest business "innovation" is of course in synch with the market while at the same time directing the market. But if we look beyond business strategic arguments of innovation - there are other values that come into play. And thats the one thing I find cool about the innovation hype. It has to do with more than winning against competition. It simply sometimes furthers the human condition, even if the markets are not ready for it. At some point they might be.

The japanese cell phone is not a great example for what I am trying to say. But they have now made it, it is in place. And someone else, preferrably the future consumer outside of Japan can use it to great benefit, when the infrastructure is in place.

Another great example would be innovation for energy conservation. It is a business strategic nightmare - innovate to decrease the volumes you sell? Of course there is little to no interest for doing that. But how important it future innovations in that field?

Andrew Meyer said...


I agree with you, innovation doesn't have to sell, but for a company to survive, it must have products or services someone will pay for. That is the difficulty for innovators.

Inventing cool stuff is great, it's called a hobby. There are people who do that and there are companies (think Google) that innovate all sorts of things because their cool and they believe that at some point, they'll find something that the market will pay for, but they take a lot of heat for it.

Google can experiment with cool stuff because they earn so much from search, if they lose money on everything else, it doesn't matter, for now. Someday that may change.

Very few other companies can afford that luxury. Companies must innovate products their customers want to buy at a price their customers are willing to pay. Newspapers, record companies, major consulting firms, US auto companies, many banks and investment houses innovated really cool stuff, there's only one problem, their customers were not willing to pay for it and except for the 'too large to fail' banks, they are going out of business.

Innovation may be great, but as Henry Ford said almost 100 years ago, "A product isn't a product until someone pays for it."