It is often
stated by senior management figures within large enterprises, that innovation
is a key area of focus for them. Despite this focus, the past 50 or 60 years
has witnessed a distinct lack of breakthrough innovations. Indeed, there has been an innovation 'drought'.
Innovations
made between the late nineteenth century and about 1950 are the ones that are
having the most profound impact on our lives today. To be specific, I am
referring to innovations and discoveries such as the internal combustion engine,
the jet engine, the electric light bulb, the television, the telephone, the
radio, modern computing and antibiotics. For a London, Paris or New York City
resident who travelled in time from 1910 to 1960, the future would be
completely unrecognisable. For a resident of one of these cities who travelled
in time from 1960 to 2010, there would be few surprises. In fact, the 1960 time
traveller may be disappointed that people were not flying to work, using their
own personal jet packs.
Since the
1960s, we have seen some major innovations and discoveries but less than in earlier
years. Why has innovation slowed down? Well, there are many views on this
matter. Some say that it because of too much regulation. Others say the
opposite. My view is that there are several key reasons for this
change.
Firstly, as wages increased in the late nineteenth and early twentieth
centuries, there was greater focus on finding innovations that could replace
labour. This wage growth, in developed economies, slowed dramatically in the
1970s. In mature economies, real wages have not grown significantly since the
1970s. Firms have focussed, to a greater extent, on increasing shareholder
value by controlling real wages as opposed to engendering innovation.
A second
reason is that firms are also focussing on extracting the largest
possible amount of value from existing assets. Since the 1970s, a popular way
of doing this is by entering new markets around the globe. So, innovations made
in Western countries and deployed in the 1950s and 1960s have been sold into
emerging economies in the 1980s, 1990s and 2000s, greatly enriching large
multinational organizations, but shifting emphasis away from innovation.
Another key
point is that new innovations may impede the ability of large enterprises to
maximize the value they get from existing assets. For example, is it in the
interests of pharmaceutical firms to develop more effective treatments for
cancer, which may affect their ability to fully profit from existing treatments?
Is it in the interests of a plastics manufacturer to support research into 3D
printing?
Today,
breakthroughs in IT are creating enormous opportunities for innovation. We have
seen rapid incremental innovation in the IT industry itself. But, new
technology has yet to be deployed in a manner that fosters significant innovation
across different industries. This is set to change. In any industry, from the
automotive industry to, discrete manufacturing to healthcare, the combination
of high speed networks, cloud computing and mobile technologies are driving
change and, yes, innovation.
I’d love to
write about the impact of these technologies on all industries. To make my
point, I will focus on examples in the automotive industry, discrete
manufacturing and healthcare.
In the
automotive industry, GM and others spent years trying to develop autonomous
(self driving) cars. By taking advantage of recent IT developments, Google demonstrated how the convergence of IT and the automotive industry leads to innovation. In August 2012, Google announced that a fleet of
autonomous vehicles had completed half a million kilometres of accident free
test runs. Autonomous cars are expected to become common over the next 10 years. Further innovation around transportation is inevitable and IT is enabling this.
In the
manufacturing sector, 3D printing allows designs and techniques to be sourced
from the cloud by any device, in any location. This could potentially drive a
new industrial revolution and move the world away from mass manufacturing towards
the customization of products in locations that are close to the source of
demand. Will people make their own goods, to their own specifications, from home?
The potential is enormous.
In the
healthcare sector, high speed networks and cloud computing can potentially
enable care to be delivered to patients in any location. We can expect care to
increasingly be given in the patient’s location. At the same time, a decreasing
proportion of care will be given in hospitals. Technology can totally change
the dynamics of healthcare provision. As these dynamics change, the
opportunities for radical new innovation will be immense.
In summary,
the last 50 years have witnessed a slowdown in innovation. However, as IT
becomes embedded into industries and high speed networks and cloud computing
become commonplace, we can expect to enjoy a sustained period of rapid change
and innovation.
