“America cannot even produce the things it invented” is the title of a recent New York Times opinion piece. The author, co-director of the innovation policy lab at the University of Toronto, opined that America should bring manufacturing back on American soil. Consequentially, it will bring back good jobs and protect the national interest. The obvious question is, why cannot America produce its own invention? Is it because American firms migrated manufacturing to developing countries for sourcing low-cost labor? Or, is it due to the fact that American firms have lost their innovation edge as firms of some other countries have been outperforming American counterparts? Or, is it that Americans invent for others to innovate?
There is also a finding, in a recent brainstorming session at Stanford University on “Lessons for new administration—Technology, Innovation, and Modern War”, that American institutions often end up their journey with technology demonstration.
Among others, the example of display technology invention and innovation underscores such an observation. As a matter of fact, the invention in the form of demonstration of great ideas does not generate profitable revenue. Neither does it produce firms nor jobs. Often, public R&D fund is flows to demonstrates ideas for solving a pressing problem. Sometimes, American universities and defense contractors get R&D grants for making such demonstrations. Of course, demonstrated technologies are used to develop customized solutions for meeting special purposes. Often, those demonstrations are not thoroughly followed up to the last mile through further improvement. It has been found that Japanese firms picked up some of those inventions and pursued relentless refinement for exploiting commercial potentials. Hence, in certain cases, it’s not unfair to reason that Americans invent for others to innovate.
Profiting from invention demands a relentless journey of perfection
Irrespective of the greatness of the ideas, invariably, they show up in the primitive form. Inventions themselves are of no value. For example, the invention of the airplane or the electronic image sensor was of no use at the beginning. They required further advancement for performing useful tasks. Moreover, unless innovations of usable products around them brought in the market, there is no means for extracting economic benefit from the market. For example, the image sensor invented by the Bell labs needed more than 10 years of Sony’s relentless advancement to support innovation.
To produce economic value out of image sensor, there has been a need for product and process innovation. For example, smartphones with the digital camera are innovations for producing revenue out of image sensor technology. In the absence of further advancement and innovations, image sensor technology invention has no economic value. Hence, there is no natural correction between invention and economic value creation.
Moreover, in certain cases, the technology cores of existing innovations are changed. Such change is made to make the innovations far better and also cheaper. During this race, initial inventors and innovators also suffer from loss in economic activities. For example, General Electric brought light bulb innovations out of Thomas Alva Edison’s invention of filament bulb technology. Despite GE’s continued role in refining filament technology, a Japanese company Nichia outperformed GE. Nichia succeeded in replacing the filament with LED for producing better quality light at less cost. Hence, American GE has suffered from the disruptive effect on its invention by Nichia’s LED. In certain cases, Americans left their inventions to others to improve them further and innovate useful products around them. One of the notable examples is LCD display technology.
LCD Display Technology—Japanese firms leverage the early lead of Americans to exploit commercial prospects
During 1888-1911, European scientists like Friedrich Reinitzer (Austrian), Otto Lehmann (German), and Charles Mauguin (French) made early contributions in studying the science of liquid crystal display. Subsequently, such scientific investigations led to the inventing and patenting of the LCD (liquid crystal display) display technology concept in 1936 by British Firm Marconi. The invention of Transistor technology led to further work by American Bell labs and RCA in inventing thin-film-transistor (TFT) technologies in the 1960s. It led to demonstrating the concept in 1968 with an 18×2 matrix LCD. However, till 1970, the advancement of scientific knowledge and technology invention over 80 years could not support any practical innovations. Hence, this journey of 80 years cost money to Europeans and Americans.
In the early 1970s, Japanese firms noticed innovation potentials around the LCD technology. Seiko showed interest in using LCD for electronic watches. Tetsuro Hama and Izuhiko Nishimura of Seiko received a US patent dated February 1971 for an electronic wristwatch incorporating an LCD. Subsequently, Sharp corporation, Citizen, and Epson—among other Japanese firms—joined the race of fining tunning LCD technology and innovating products using LCD panels. Later on, Hitachi and NEC also joined the race.
With the humble beginning of using LCD as the display of watches and calculators, Japanese firms targeted to improve the technology further to replace CRT. The demonstration emerged in 1982 with the unveiling of Seiko’s LCD pocket television in 1982. The race to keep improving led to making LCD TVs better than CRT based ones in 2007. Japanese firms have also led LCD technology updating to OLED (organic light emitting diode). Subsequently, Korean firms also made an entry to flat panel displays. Recently, Chinese firms have also established a presence. This case LCD appears to be a textbook example of ‘Americans Invent for Others to Innovate.’
Japanese firms are after the profitable segment of LCD technology invention
Accoding to some estimates, the flat panel display technology market will reach $190 billion by 2026. As opposed to Europeans and Americans, Japanese firms have been dominating the supply. Even American Apple has been sourcing displays for its iPhone, iPad, and iMac from Japanese and South Korean firms like Japan Display, Sharp, Samsung, and LG. China’s BOE is also aiming to supply OLED panels for iPhone.
The long history of flat panel display offers the lesson that scientific discoveries and inventions are not good enough to derive economic benefit. Timing of entry with the support of the flow of ideas for refinement is critical in profiting from the technology invention and innovation race. In the flat display panel, it appears that Americans have lost the early lead to Japanese, and lately to South Koreans and Chinese. The loss of leadership is not due to the fact that the Japanese brought low-cost labor, or Japanese firms infringed the intellectual properties. Instead, the Japanese outperformed Americans in the last mile—rapid fine-tuning with a focus on commercial exploitation.
Multidimensional lessons from the long journey of LCD
To begin with, scientific discoveries and inventions are not good enough to derive economic benefits. It seems that the approach of Europeans and Americans are good for breaking new ground. But Japanese are quite smart for determining the right time of entry in the race. Most importantly, Japanese firms pursue it with a sharp focus on commercial innovations. Furthermore, Japanese firms’ speed in fine-tuning half-backed American technology appears to be extraordinary—far higher than American firms. By the way, Japanese firms have shown similar responses in many other cases. Hence, it appears to be a reoccurring pattern.
To bring back American glory and profit from the invention, American firms should focus on refinement speed during the commercial innovation stage. Hence, pursuing protectionism for bringing back manufacturing is not good enough to get back good jobs and protect American national interest. The focus should be in changing the prevailing situation, Americans Invent for Others to Innovate.
There is also a lesson for aspiring developing countries. They should follow the path of the Japanese for rapidly fine-tuning half-backed technologies. Timing, speed, and target innovations are critically important for profiting from technology potentials out of the flow of ideas.