Braindancing Bytes: 'INSIGHTS ON INNOVATION FOR THE CREATIVE EDUCATOR', Part III, by Dilip Mukerjea

[continued from Part II in the Last Post:]

Part III: THE INNOVATION ARENA

The expression ‘innovation’ has been defined by the great Austrian-American economist Joseph Schumpeter as:

The commercialization of all new combinations based upon the application of:

❂ new materials and components

❂ the introduction of new processes

❂ the opening of new markets

❂ the introduction of new organizational forms.

This suggests that innovations emerge from a blend of two domains, the technical and the business. When only a change in technology is involved, Schumpeter terms this as invention. However, as soon as the business element is involved, it transforms into innovation.

Felix Janszen, in The Age of Innovation, has created a mnemonic out of Schumpeter’s observations:

T a new technology;

A a new application in the form of a new product, service, or process;

M a new market or market segment;

O a new organizational form or a new management approach; or a combination of two or more of these elements.

These elements or dimensions constitute the innovation arena, and immersion into innovation involves traversing an innovation trajectory across all four of them. The four dimensions are interconnected with and interdependent upon, one another.

Thus, a specific technology can have only a limited number of applications. This means that innovation is not an isolated phenomenon, but rather a trajectory comprising several small events. We must thus look at the innovation arena as a system when analyzing an innovation: a new business has tangible and intangible features that emerge not just from one or separate origins or stakeholders, but from within the system as a whole.

To change strategies, structures, and systems, is inadequate. The thinking that produces those strategies, structures, and systems must also change ~ at a fundamental and profound level, flux-dancing with the pace of today’s mercurial challenges.

The prime objective is to spark a renaissance of
business initiative, leading to innovation. The key is to see learning and innovation as inseparable from everyday work.

PERSPECTIVES ON CREATIVE DESTRUCTION

Joseph Alois Schumpeter, the great Austrian-American economist of the 1930s and ‘40s, called the process of creation and renewal “the gales of creative destruction.”

With today’s commercial challenges, few corporate leaders have the vision, energy, or time to control the processes of creative destruction, especially at the pace and scale necessary to compete with the market. Yet this is precisely what is required to sustain long-term performance excellence in ever more volatile markets.

(J. Schumpeter, History of Economic Analysis, Allen and Unwin, London, 1954)

The pivotal difference between corporations and capital markets is the manner in which they enable, manage, and control the processes of creative destruction. Corporations work on the assumption of continuity; their focus is on operations. Capital markets evolve on the basis of discontinuity; their focus is on creation and destruction.

In the 1920s and ‘30s, a new member of the S and P 90 could expect to remain on the list, on average, for more than 65 years. In 1998, the turnover rate in the S and P 500 was close to 10%, implying an average lifetime on the list of 10 years, not 65!

This is the scenario projected upto 2020, and suggests that no more than a third of today’s major corporations will survive in an economically important way over the next 15 years. The demise of these companies will come from a lack of competitive adaptiveness.

[to be continued in Part IV in the Next Post:]
© Dilip Mukerjea