After 25 years studying innovation, here is what I have learned
It’s been more than 25 years since I wrote my first book, The Innovator’s Dilemma. Since that time I’ve learned that the best answers to the enormous problems we are struggling with always starts with asking the right question. I’ve since written 11 other books (and more magazine articles than I can count) but each has always started with my desire to answer a simple, but perplexing question.
The Innovator’s Dilemma asked: Why do great firms fail, especially at the hand of smaller and less resourced upstarts? The answer: Disruptive innovations.
These are innovations that are less expensive and poorer performing than existing products on the market. Disruptive innovations are often targeted at customers for whom products on the market are either too complicated or too expensive. The Innovator’s Dilemma has helped entrepreneurs, managers, and investors understand how these upstarts could eventually upend their market.
More recently, I’ve asked what may be the most important question yet:
Where does lasting prosperity come from?
The answer: Market-Creating Innovations.
These are innovations that transform complicated and expensive products into products that are simple and affordable so that many more people in society can access them. In some cases these innovations are disruptive, but in every case the new markets that are created serve as a strong foundation for sustained economic growth.
Over the years, I have had the opportunity to learn how to ask good questions from so many people — my family, my students at Harvard Business School, executives of major corporations, and Presidents and Prime Ministers of nations. But the goal of asking questions is always to get to better answers. So I offer here some of the most important answers I’ve found over my years of teaching to life’s most challenging question.
1. Not all innovation is created equal
The word innovation has become a buzzword routinely used to describe things that are new, shiny, feature-rich, and, in some cases, breakthrough. While all those are certainly characteristics of innovations, they are less helpful when trying to understand how companies and nations can organize themselves in ways that can truly foster growth. And so, for clarity, I use this definition, the same one I used in my first book: innovation is a change in the process by which an organization transforms labor, capital, materials, or information into products and services of greater value. That definition helps us understand that, from an economic development standpoint, there are primarily three types of innovation: market-creating, sustaining, and efficiency.