This post is part of the Innovation 101 series, a collection of essays exploring this topic from various perspectives
As we continue to demystify the term "innovation", it's important to look at why there is such a huge amount of focus and debate around this subject in the world. Why is every magazine cover talking about the most innovative companies? Why do brands throw the term in their slogans and CEOs constantly tout their company's "innovative culture"?
In a nutshell, the reason why everyone is obsessed about it is because innovation is the single most important cause of economic growth in the world. In a world of trillion-dollar bailouts, giant levels of debt and paper trading by our most beloved too-big-to-fail financial institutions, those who can invent products and services that truly, honest-to-goodness make things better for their customers have the last laugh in the economic game.
That being said, just because everyone claims to be innovative does not mean they actually are. In fact, it's quite the opposite! Innovation is an extremely difficult practice to achieve on a regular basis, so much so that the average lifespan of your typical S&P500 component has gone from 61 years in 1958 to 18 years nowadays. Disruption is the new normal, friends.
Why is that? The story usually goes like this: a founding team has a great insight, builds up a company around it, gets big enough to join the prestigious S&P500 club and... Actually, that's pretty much it. No other subsequent breakthrough innovation follows despite all the money and resources poured into sexy divisions such as "labs", "research & development" or "product innovation".
Eventually the poor sitting CEOs, usually after the founders cash out and take with the them the culture that made the company successful in the first place, turn to marketing as their way out of the innovation problem. The thinking is "perhaps if we convince people that our product is great, they won't realize that it hasn't been meaningfully improved in years." At this point the slogans and magazines come in to keep the ship afloat.
Another common strategy is getting the finance folks involved: perhaps buying startups who managed to build something new that real customers wanted, merging with the next biggest competitor or straight up lobbying congress/cornering the market will do the trick. Meanwhile, another founding team, usually somewhere in the periphery of that market, has a new great insight and the cycle begins anew...
On top of all that, the robots are already here to automate as many human jobs as possible, so the power of innovation to make existing businesses obsolete is also true to individual workers. A person, after all, is a "mini business" that sells specialized, skilled labor in exchange for the paycheck of an employer. If/when a robot/AI can do the same job with equal or better quality for a fraction of your salary, you’re in trouble. This process, by the way, is well underway and happening faster and faster!
The good news is that, on aggregate, innovation ends up being a net positive for humanity; we all eventually live better lives as a result of entrepreneurs making things better. The bad news is that, at the pace in which innovation is happening in the world today, our society doesn't quite know what to do with the citizens being displaced by automation in the short term.
So, this is why innovation matters. Practically all growth, therefore all progress, depends on it. The stakes couldn't be higher for a business to get this right, yet most places won’t. The question then is: will you disrupt something or be disrupted by it?