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Winning and Losing in Reinvention Race : keeps unfolding: --making America’s innovation bucket leaky, creating prosperity out of reinvention, and turning invention successes transitory
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  • Economics of Innovation
  • Editor's Pick

Flow of Ideas–misleading business metric?

Instead of filtering a flow of ideas for detecting a great one for instant success, the focus should be on systematic flow of ideas for growing embryonic great ideas through cumulative effect

  • Rokon Zaman
  • Created: November 18, 2022
  • Last updated: December 16, 2022
Instead of looking for a diamond in the flow of ideas, we should focus on systematically creating cumulative effect in growing embryonic great ideas
Instead of looking for a diamond in the flow of ideas, we should focus on systematically creating cumulative effect in growing embryonic great ideas

Apple, Tesla, TSMC, ASML, and many more great success stories are due to ideas. Ideas are our core strength in recreating products and the world as a whole for higher prosperity. But, surprisingly, more than 90 percent of start-ups pursuing ideas fail within the first three years. Furthermore, as high as 80 percent of innovative products retire before ferreting out profitable revenue. To counter such a reality, should we just increase the flow of ideas?

From Nobel laureate economists to professors teaching innovation, experts are after creating a flow of ideas. As ideas offer better recipes in creating higher value from the same ingredients, Paul Romer came up with his Nobel prize-winning growth theory: ideas and objects.  Hence, economists, policymakers, and academics are after increasing the flow of ideas. To add further momentum, a professor of Stanford University’s d.school has come up with a book—Ideaflow. He has argued that the flow of ideas is the only business metric that matters. Does it mean a linear correlation exists between the flow of ideas firms and nation produce and the economic prosperity they enjoy?

If it were true, why has China been struggling to drive economic growth out of the exponential growth of patent filling, reaching 1.5+ million in 2021? Similarly, upon being the top smartphone patent filler, why has Samsung (4095 patents) been trailing the distant 4th position holder Apple (1739 patents)? On the other hand, upon occupying 3rd position in the smartphone patent filling race in 2021, why was LG Electronics (2338 patents) losing money in the smartphone business and ending up quitting? Besides, upon receiving more patents from USPTO in 2021 than TSMC (2807 patents), Intel (2835 patents) lost its silicon edge to TSMC. Hence, idea flow is questionable as the only business performance metric that matters.    

All great ideas emerge in primitive form—encouraging tossing out one after another great idea

It’s pretty tempting to think that innovation successes are about stunting millions of customers with a great idea. It seems that successful innovators behave like comedians or magicians. While great American comedian Jerry Seinfeld keeps looking for one after another excellent spark for exciting millions with one shot, all great ideas emerge in primitive form–exciting a few (or none) at birth. The continued growth of it through systematic idea production and integration in synergy leads to exciting millions down the road. Hence, unlike comedians looking for ideas to cut uncommon jocks from random areas, technology innovators are required to keep producing ideas along the same path, often from the same area, to create success out of cumulative effect.

Contrary to a common belief, all great ideas appear in embryonic form, irrespective of their greatness. In the beginning, they impress only a few, sometimes none. Hence, following the path of a comedian to find an idea to impress millions will lead to discarding all great ideas at birth. For example, the digital camera has been a great idea. But it emerged in such a primitive form that its inventor Kodak perceived no potential in creating a profitable business. Consequentially, it did not turn out as the only metric that matters.

Similarly, after suffering loss from selling the first smartphone idea as Simon, IBM discarded it. Even more than 100 years ago, Thomas Alva Edison found no customers for its magical voice recording idea—the gramophone. There have been many such examples. Hence, experimentation, in the beginning, runs the risk of throwing out great ideas.

The flow of ideas does not solve the high failure rate of ideas

As only a tiny fraction of ideas succeed, expert opinions are in favor of increasing the flow of ideas. The thesis could keep coming up with a flow of ideas and experimenting with them rapidly so that innovators will succeed in finding a great one. Hence, the suggestion has been increasing experimentation with a growing flow of ideas to find success. But both idea production and experimentation cost money and time. Therefore, the focus should have been on finding a path and pursuing (growing) it through systematic idea production and profitable exploitation.

All great ideas begin the journey in primitive form. Their commercialization begins the trip with a few customers, let alone creating excitement among millions. Furthermore, the low willingness to pay starts the journey at a loss.  They need a flow of ideas to uncover latent potential. Hence, the focus should be on latent potential detection and creating a flow of ideas for nurturing it. For example, the extreme ultraviolet light-based photolithograph possibility failed to draw the interest of Japanese and American innovators. But Dutch ASML embarked on it. Consequentially, turning the latent potential into a commercial miracle needed a flow of ideas, filling thousands of patents. Similarly, smartphone innovations still need a flow of ideas. In 2021 alone, Apple got 1739 patents from USPTO to uncover additional value from its highly successful iPhone.    

Experimentation of ideas is getting increasingly expensive

To deal with the high failure rate, the suggestion has been to increase the speed of experimentation. The thesis has been: experiment, fall, learn and repeat. And keep doing it at a rapid pace. But experimentation has been getting increasingly expensive. For example, despite the investment of more than $80 billion in R&D, the autonomous vehicle idea is yet to roll out.

On the other hand, upon releasing the well-engineered double-decker plane A380, Airbus figured out that customers did not like it after 20 years at the cost of $25 billion. Similarly, upon losing more than $200 million, Tata came to know that Tata Nano was a stupid idea. Hence, increasing the flow of ideas supporting the thesis of “experiment, fall, learn and repeat” does not appear to be a solution for business success.

On the other hand, ideas have been demanding high-end scientific discoverers to unlock their latent potential. For example, LED light bulb ideas as more energy-efficient means of producing light remained stuck for decades.  Hence, innovators, including its inventor GE lost interest in it. But the mission of pursuing it by Japanese Nichia led to a Nobel prize-winning scientific discovery, resulting in overcoming a significant barrier. Consequently, the LED light bulb idea succeeded in growing a force of creative destruction, unleashing disruptive innovation effect on its inventor GE.

Similarly, the journey of unleashing the latent potential of the lithium-ion battery idea has been demanding scientific discoveries, leading to the winning Nobel prize by Japanese Akira Yoshino. Similarly, Meta has been facing enormous challenges in creating a flow of ideas in exploiting its metaverse idea at the cost of billions.  Hence, the lesson from the metaverse and many other ideas tells that keep experimenting with a flow of ideas appears to be a misleading business metric.

Focus on the flow of ideas to create a cumulative effect

Jerry Seinfeld keeps writing ideas of jokes and meeting 20 people each weak to experiment with them for hitting one to impress millions. Hence, he needs a flow of ideas for finding a Diamond. But is this approach suitable for technological innovations? As explained, most likely NO. That does not mean that a flow of ideas is irrelevant. Instead, the innovators face the challenge of creating a pearl by adding layer after layer of ideas. Hence, instead of hitting the jackpot, the challenge is building it through the cumulative effect of a flow of ideas. As explained, all significant innovations like smartphones, computers, Television, and many more started the journey as not valuable ideas. They have reached a magical success level, impressing millions due to the cumulative effect created by a flow of ideas. And those ideas should be for systematically nurturing ideas instead of randomly finding and adding them.

Empathy and passion for perfection for creating a systematic flow of ideas

But how to create a flow of ideas to unleash great ideas’ latent potential? In that case, quick experiment, fail, learn and repeat have little efficacy. Instead, the focus should be on empathy and passion for perfection. Through empathy, innovators should keep feeling the urgency for improvement. The such feeling should be accentuated with the passion for perfection. Furthermore, there will be a need to advance scientific knowledge in implementing ideas to create increasing value. Such an approach appears to be at the core of Apple’s innovation strategy.

All great ideas have been progressing due to the cumulative effect of incremental ideas created through empathy and passion for perfection. Due to growing value, successful innovations have been diffusing deeper into society. Like many other great ones, the automobile idea emerged in a primitive form. Due to incremental advancement, this idea has been offering higher value, resulting in deeper diffusion.  

Reinvention opens a new wave for the flow of ideas for pursuing creative destruction

The embryonic beginning of great ideas keeps progressing toward success due to the cumulative effect of the flow of incremental ideas. But gradually, the progress reaches saturation, showing an S-curve like a life cycle. Fortunately, the reinvention of matured innovations through a change of technology core opens a new path of growth through another flow of ideas. For example, upon progressing over more than 100 years, gasoline automobiles reached saturation. Similarly, radio, telephone, television, camera, and many more also reached their limit of getting better and cheaper. But the change of matured technology core with the emerging one opened a new wave. Those reinventions appear in the inferior form, creating a demand for the flow of ideas to grow them as creative waves of destruction.   

Focus on the dynamics of the market in turning ideas into wealth or waste

Amid the high rate of failure of ideas, the high performance of a rare few ones creates the impression of magical performance. We often attribute them to filtering out a rare diamond from tons of ores. Ironically, the reality is different. All the high-performing ideas emerge in embryonic form with faint potential. To figure out how to show magical performance, we should focus on understanding the market dynamics in shaping ideas into wealth or waste. Yes, the flow of ideas matters. But that is not to find a diamond for instant success. Instead, innovators need a flow of ideas for systematically growing embryonic great ideas through cumulative effect. Hence, the flow of ideas as a business performance metric runs the risk of being misleading.

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