Kevin Parker: Innovation as a collective undertaking applied to newly pervasive technologies
Why is innovation the current king of management concepts? How has it become in manufacturing circles something akin to one of the “four big truths” or “five shining lights” that used to emerge with the five-year plans of command economies?
According to Paths of Innovation: Technological Change in 20th Century America , by Mowery and Rosenburg, it wasn’t till the second half of that century that economists fully appreciated “the extent to which economic growth was a consequence of the process of technological change.” As proof, studies show only a relatively small percentage of measured output in the late 19th and early 20th century as accounted for by growth in measured inputs of capital and labor.
While technological change undoubtedly accounts for much of the additional output growth, its impact, unfortunately, doesn’t last, as new products and industries “experience retardation in their growth rates as their markets reach saturation… and further cost-reducing process innovations have relatively small effects on demand,” the cited studies demonstrate.
Does that mean then, that product innovation, as opposed to process innovation, is always the key to success?
Not necessarily, as the always helpful Wikipedia points out in its entry on “innovation”: process innovation can lead directly to increased shareholder value. Product innovation, on the other hand, risks costly R&D efforts that, if they fail, can erode shareholder value.
Mowery and Rosenburg themselves feel the studies underestimate “the importance of the adoption of new technologies by mature industries.” And they point out it’s hard to untangle all the threads involved, because of globalization.
It’s become a cliche to point out that—measured by share of gross national product accounted for by exports—the U.S. economy 1900 to 1910 was more open than any time from 1910 to 1970. But the last third of the 20th century saw “an increasingly dense network of inter-firm relationships… that contribute to more rapid international flows of technology…. The spectacular improvements in the information technologies that unite this international network have lent to the term ‘globalization’ a vastly expanded significance over its meaning at the beginning of the century.”
It’s wrong also, the authors say, to think innovation only arises from fundamental research at the frontiers of science or even the institutionalization of innovation as “R&D,” but rather often draws on “existing technological knowledge.”
Perhaps that’s why innovation discussions find an audience, despite that relatively few executives, managers, or knowledge professionals are directly engaged in R&D or design efforts. New technologies are so quickly pervasive it’s as if we’re all engaged in some grand exercise to learn how to best apply them.
No one, for example, has ever been identified as the inventor of the generic engineering and production systems used in manufacturing enterprises today. Yet, while infinitely varied in detail, basic system elements are common around the world.
Innovation discussions speak to us because we’re all part of a collective effort to find best uses for new technologies that have come into our lives in the last twenty years, applying them in ever finer granularity of detail to a heritage of processes that must change in light of the evolving technology infrastructure.