Innovation is a complex process, with many variables and constantly-changing forces at play. This book provides insights into the true processes behind innovation, and presents a universal model that explains how key stakeholders (including innovators, investors, corporations, universities and governments) can contribute to, and reap benefits from, a robust innovation system.
In this summary, we’ll outline how innovation truly works, some of the challenges involved, and the solution to rebuild a healthy innovation pipeline. For more details, do get a copy of the book, or our complete book summary bundle!
Innovation is the process of translating new ideas into useful forms that bring value to the marketplace. A robust innovation system is the foundation of national economic growth, and affects all its stakeholders. While the book is written primarily from a U.S. perspective, the insights are relevant outside of the US.
• Fundamental Innovations (FINNs) change industries and behaviours in ways that would’ve been impossible without the innovations, e.g. the first steam engines and first personal computers. Such innovations take at least 10-15 years before they can be successfully deployed in the marketplace, and the book explains why this is so.
• Incremental Innovations (IINNs) are minor improvements to what already exists, e.g. enhancements from Windows 8 to Windows 10.
• FINNs and IINNs lie on two ends of the same spectrum. Specifically, FINNs create paradigm shifts that propel long-term growth and wealth. IINNs create more-immediate value and ongoing improvements which add up over time. We need the full range of innovations on the continuum for a thriving ecosystem.
THE INNOVATION CRISIS
The authors suggest that the true problem behind USA’s ailing economy is its shrinking innovation pipeline. Since the early 2000s, there has been a lot of IINNs, but barely any FINNs to propel new growth. Yet, this trend isn’t obvious because of Moore’s Law and VC-backed startups that create facade of exponential progress (more details in the book or our full book summary). To fix the economy, we need to fix the innovation system.
The True Process of Innovation
The book reveals 2 important misconceptions about innovation:
• It’s not just science or technology. Innovation is about bringing new ideas to the market, in a way that delivers value. This requires an entire pipeline to shape the innovation and bring it to market, including 3 essential components:Technology, Market, and Implementation (I).
• It’s not a linear process but an iterative one. Innovation is not a linear process from discovery to development and profit. It’s an iterative process – an ongoing interaction between product, implementation and market – that eventually results in a convergence.
The authors integrate these ideas and components into a universal innovation model, that’s applicable to any innovation, industry or environment:
• 3 Components of Innovation. As mentioned earlier, innovation is about bringing a great idea to the marketplace. In the book/ our summary, we elaborate on the 3 components that must jointly drive innovation: Technology (T), Market (M), and Implementation (I), or “T-M-I” for short. Each of the T-M-I components contain multiple variables. As part of the iterative innovation process, the innovator must figure out whether the individual pieces will work, which pieces can fit with the other components, and find the optimal combination.
• 3 FINN Enablers. The FINN process is volatile and unpredictable, and you need 3 additional enablers with ample time for it to mature – Talent (Innovation skills, including interdisciplinary skills & knowledge, and the ability to learn and abstract), Investment (with different types of investors playing different roles at different phases of the innovation), and a Conducive Environment (macro-factors like individual mobility, ease of organizational adaptability, ability to retain earnings from innovation, and a strong rule of law).
All the elements above are crucial for successful FINN, and are elaborated in the book (with a detailed overview in our book summary). To fix the economy, we need to rebuild the innovation system, incorporating these elements.
INNOVATION IN PRACTICE
Given the extremely long and convoluted process of FINN, it’s hard to capture the full process. Fortunately, one of the authors, Eugene Fitzgerald, was personally involved as the lead innovator of strained silicon (a technology that greatly enhances the performance of integrated circuits) for the entire innovation journey over 2 decades. This gives us a rare insider perspective of the FINN process, from the technology’s inception to its commercialization almost 20 years later. The book captures the people, inputs, environmental factors, random events and other variables , as the technology evolves across different innovation phases and multiple organizations. In our full summary, we extracted the key highlights of this case study, and outlines how it relates with the model presented earlier.
The book ends with a review of how the American Innovation System has evolved, so we know where we stand today, why the innovation pipeline has dried up, and what must be done to rebuild it. We’ll now take a quick look at what the solution entails.
Building a New Innovation System
Given the various inter-connected components of the innovation ecosystem, it will be ineffective to merely increase research funds or encourage entrepreneurship. To fix the entire ecosystem, we must involve 2 groups of inter-dependent stakeholders.
• Nation-state players must undertake the early iterations of FINN, as these can’t be profitably addressed by free market players. Specifically, 2 nation-state stakeholders are crucial in their research & education roles, viz. (a) Universities (to provide early FINN research and train innovators), and (b) Governments (to fund early FINN research and facilitate the various stakeholders). However, the old ways of funding/ research are sub-optimal – the book explains the refinements/ changes needed for a new system to work.
• Free market players must complete the later iterations of FINN to realize the profits (which can’t be achieved by nation-state players). Since corporations’ research timeline is much shorter than the 10-15 years required for FINNs, there’s a 3-10 year gap to be filled by (a) individual innovators (to acquire innovation skills and be self-sufficient for the initial 3-10 years), (b) free-market investors (to become savvy about innovation and ROI), and (c) corporations (to invest in and cultivate innovations-in-progress).
This is a must-read book for innovators, investors, corporations, universities and government institutions, who wish to harness long-term growth and wealth from innovation. For more details, do get a copy of the book, or our complete book summary.
Understand the true innovation process and build long-term competitive advantages!