An economical system to kickstart purposeful innovation.
Category : Random thoughts
There are many kinds of innovation: You have large companies that successfully innovate by creating new products that actually bring value to customers and you have success stories of entrepreneurs building the ‘next big thing’ starting only from a good idea and a lot of stamina.
But the number of innovation stories could be much higher. What is holding us back?
For large companies?
These kind of innovations work because they are supported by a solid company with a belief in a new service and the financial power to back the investment up with large amounts of cash. Of course, for large companies, this belief is linked to the prospect of making profit out of these new products or services. Here we tackle a first limitation: Innovation in large companies will always be less destructive, as shareholders, executives, unions, employees,… will always need to make sure there is some short (or at best medium-) term payback. But the biggest problem probably comes from the fact that these companies always need to take good care that they can capture (a part) of the value they generate with these innovations. And this is where reality kicks in, because companies have an existing value extracting system: a distribution model, competences, physical presence, processes,… that needs also needs to be able to capture the newly created value. If the existing system also needs to be rebuild, not one innovation will have a valid business case.
We probably all love this kind of innovation stories, but the thing is that 99% of them has only a limited impact on society as a whole (they are very regional, only focus only a very specific niche, are limited in terms of channels (most of them are online only, so the chance they are reaching a lot of persons over the age of 70 is rather small)). As startups don’t have the size of a large company, they are focussing on the product, without having the market power to leverage the value towards a large base of society.
Now what what would happen if we could combine both? Suppose there would exist a system that would create an economic incentive for large companies and thus for the people working in those large companies to stimulate innovation even if it could not be captured directly by the company. Suppose I am working for an energy supplier* and we would have found a way to make invoicing 50% more easy, less cumbersome,… It works for us and we are confident it could bring value to a lot of companies & citizens in the country. But we know it’s not our core business, and we probably will not be the company that can make money out of it. As a consequence, nothing will happen. But what if there would be some kind of remuneration for this system if it’s developed more broadly and actually can be used by other companies? The solution will then be developed further and society as a whole will be better, won’t it?
Which kind of system do you think will work? A government that generates funding for this, the creation of a platform at country level to sort of crowd fund these ideas,…? Or am I just a dreamer?
*Full disclose: I am working for an energy supplier 😉