Can Innovation get us out of the current mess?

Do we need more innovation? Do we need less, or slower innovation? Or do we need other kinds of innovation?

Innovation provides for a great buzzword, and also a funny bingo game. Most readers of this blog will probably agree that innovation is a good thing. Innovation is some kind of least common denominator not only for the tech industry, but for many, if not most, other industries as well.

Things become complicated as soon as we think about the best way out of the current mess the digital industry went into. Do we need more innovation? Do we need less, or slower innovation? Or do we need other kinds of innovation?

It may help to take a closer look on the question why innovation so often fails in the first place. The short answer is: Failure is inevitable, since innovation is shorthand for a giant trial-and-error process. You need error to find out (and weed out) what doesn’t work. Innovation is what remains after a cost- and time-intensive process.

Start-up companies can follow a single-idea approach (and possibly pivot after they hit a roadblock), since they are essentially nothing more than bets on future success. Bigger incumbents need a portfolio approach, since they typically can’t afford to bet the whole company on a single idea. For them, it is essential to meet the right mix of innovation management triple-play, combining their own research and development (R&D) efforts with third-party developers as well as successful startups.

For a healthy innovation ecosystem, proper market regulation is required. You need at least some kind of level playing field, thus limiting the power of the big guys, establishing a bunch of rules, and allowing for consumer choice. The IT industry as a whole is evolving in a constant rhythm, swinging between centralised and decentralised systems. After a swing to the decentralised Web 2.0 in the first decade of the current century, the industry has again been centralised by the Big Five (Apple, Amazon, Alphabet, Facebook, and Microsoft).

New technologies like blockchain aim to again open up the market and decentralise the net, thus allowing for a new wave of innovation. Other possible game changers for the next wave are AI/ML and new interfaces like voice or VR/AR/MR. These technologies possibly provide for disruptive innovation, a term coined by Clayton Christensen in 1995.

More than 20 years and at least one wave of disruptive innovation later, his theory gives some hope that the big guys of today are not invulnerable, but potential objects of disruption as well. It will probably take a while. Each new wave of technology, disruptive or not, starts slow. The familiar pattern is the hockey stick: slow start, and then explosive growth. The PC, the Web and even the iPhone/Android revolution needed some time to ramp up.

To quote Bill Gates:

We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.

From today’s Big Five, only Apple and Microsoft are more than 40 years old. Amazon and Google are in their twenties, and Facebook is not even 15 years old. Whether Netflix, Airbnb, Tesla, or Uber are still the next bunch of candidates to rise up the ranks of the tech oligopoly remains to be seen.

It’s not easy to predict how and when disruptive innovation will unfold, but it is certainly one way to change the status quo for the better. In his book How to fix the future, Andrew Keen reminds us:

In 2013, to hoots of condescending laughter from the digital cognoscenti, Angela Merkel, using language she might have borrowed from More’s Utopia, called the fifty-year-old internet “Neuland”—meaning “new land” or “uncharted territory.” And yet in a sense, Merkel was right. If Germany is to win the second half of the game, the internet needs to once again become uncharted territory. All its orthodoxies need to be challenged. Just as the internet has disrupted old industries, so the time has now come, in the perpetual creative storm of our Schumpeterian capitalist economy, for outsiders to engineer the internet’s own disruption.

Now that’s a challenge. As of today, the probably biggest German success is Samwer brother’s Rocket Internet, and that is a very German endeavour in its own right, because it’s all about execution, not about new ideas. It takes the German approach of incremental innovation, applies it to potentially disruptive ideas and puts it on steroids, borrowing from Facebook’s move fast and break things mantra.

While clearly successful and nothing to be ashamed of, Rocket Internet cannot save the German economy on its own. What’s needed is probably again a hybrid approach to disruptive innovation, combining investments in corporate R&D with third-party development and successful startups, but this time for a whole country, or for Europe as a whole. It’s a portfolio strategy.

Perhaps the EU should shift some of their money into such a thing.

Photo by “My Life Through A Lens” on Unsplash