At a dinner at the Auckland Uni buisness school on Tuesday night there was a lot of use of the word innovation and how you teach it and so on it goes all the way from "first mover advantage". Well that worked well for Apple, IBM, eXcite and any number of other 'innovators" who don't appear to own the world. Marco Rinesi argues:
"But for all of its undeniable power, the printing press wasn’t the source of large fortunes for the engineers, investors, and businessmen involved in this industry. Profits were made, yes, sometimes significant ones, but nothing quite proportional to the influence of the technology. The bulk of the benefits came to the organizations that leveraged this technology for their own ends like modern states, which would have been logistically impossible without the printing press, or the myriad business that cannot be conceived without a superbly well-educated (for pre-modern standards) source of workers and consumers.Adam Elkus adds some notes to that.
The same pattern can be seen in many other technical advances, specially those that impacted society the most. Contraceptives, telecommunications, refrigeration: they are often overlooked foundations of the contemporary world, each of them enormously disruptive, yet none of them, over the long term, a gold mine of extraordinary returns."
There’s nothing guaranteeing that today and tomorrow’s disruptive technologies like the Internet, genetic engineering, or nanotechnology, won’t follow the same pattern, utterly changing the world but without profits at the same scale. We do not argue against investing in disruptive technologies, though. After all, they still offer a better chance of extraordinary results that non-disruptive technologies. And even if in the long term something like genetic medicine becomes as mundane as TV sets, that doesn’t mean that there aren’t very large sums of money to be made in that industry, specially in its early stages.
But always keep in mind that in most industries, no matter how advanced, you are selling tools to other people. They are the ones that will use the tools, and they are the ones most likely to reap the bulk of the benefits of them. And they should: they are the ones changing the world.
When reading of this, I think mostly of Mikhail Kalashnikov, whose humble assault rifle was widely pirated and copied. Despite the production of 100 million AKs, Kalashnikov lives on a meager state pension and is buying shares in umbrella companies. This is a reason to look askance at claims of disruptive innovation making instant billionaires. Rather, it's worth reflecting on how niche inventions and tools developed out of existing platforms have been the most successful. Kalashnikov did not invent the first assault rifle--rather he invented the most cheap, reliable, and user-friendly variant. Similarly, the team behind Facebook didn't invent social network sites but created a juggernaut through innovative redesign of an existing template and platform.The other facet to keep in mind is that innovation and disruption, of themselves are nothing, you still need to pop them up in the right place at the right time, luck matters. Otherwise you are just another target in the game of cosmic Whack-a-Mole