Industry Acceptable Innovation

A while back, I was talking with a friend of mine that is almost always got his fingers in some form of disruptive innovation or other. Since then, I have thought a lot about some of the things he told me, and I think I have come up with a new (or at least, new to me) concept, relating to innovation and what could be successful or not. In any industry, there are major forces at work fighting innovation. I am not talking about incremental evolutionary changes, I am talking about the big, in your face, revolutionary innovations. There are many of these forces, some of them from somewhat surprising sources.

Lets say you were to invent a megawatt wind power generator that cost less than say, $5,000. That would be a very disruptive development. Why? Because it would require changes on the part of almost every other aspect of the energy industry. The current cost of approximately $1Million per 1 megawatt wind power generator unit tells you that things would change immensely. In this case, no longer would the investment for such generation unit be limited to major power players, investors, and idealistic billionaires. At that cost, they would be springing up all over the place, putting thousands and tens of thousands of people in the current energy industry out of work. Not that the industry would stand idly by. They would refuse to connect them to the power grid, and even then, they would require new wind generator users to pay for costly upgrades to the power grid. If that didn't work (and they probably wouldn't wait to see if it did), they would seek all sorts of legislation to make it both much more costly to own and run such a unit, and much more difficult to produce. It would be in their interest to make your supplies and manufacturing process much more costly and inefficient. They also would want a piece of the action as a way to hedge their bets, but with this much disruption, they would be more encouraged to buy up the technology rights and hide them (maybe use them, but only to the degree that it doesn't negatively affect their bottom line). What most innovators seem to forget, is that energy companies are not in the business of making energy, but in the business of making money.

One more example. Lets say I created a new ERP system that increased productivity by 10 times for those implemented it. Lets say I created it in such a way that it was 10 times easier to install. Now, lets say I price it very closely to the existing systems. Sounds like a no-brainer, right? Well, maybe. Most companies love increases in productivity. They especially like it in little bites. 10 to 40 percent productivity gains make a company just thrilled. But what would it mean to have 1000% productivity gains. Well, they are either producing 10 times the product or need 1/10th the workforce to produce it. The might decide to produce only twice as much with only 1/5th of the workforce, but the changes are extreme. People, and companies, do not like that much change. It hurts. It is uncomfortable. Not to mention, existing ERP providers wouldn't like my creation of such a new disruptive presence in their market. They would scramble to develop enhancements of their products to make them more competitive, but again, as we are talking about dollars being the main purpose and not product effectiveness, it would probably come to an attempted buy-out situation or extensive use of legislation, courts, and negative marketing.

Beyond the items listed in each example, I have heard that some companies or executives (but not most) get even dirtier, and do things like economic or social or even literal assassination to get the people involved to stop ruining their party. I have never been shown any incontrovertible evidence that this has happened, but I have heard at least one businessman say that he had taken out a contract on the life of someone they found particularly troublesome. Now, whether or not this is a common consequence of radically disruptive innovation isn't really the point. The point is that there is a limit to how radical an innovation can be in any given industry and any given point before it is too radical for acceptance by the industry and consumers. It therefore follows that there might be an optimal level of innovation for any industry at any specific point in time, and that the more that optimal level is exceeded, the more difficulty there will be in turning the innovation into successful products. Most industry sponsored innovation will usually be well within that acceptable innovation limit, and generally moves much slower than that.