When you look at the world of startups and entrepreneurs today, you will find an number of variations on the theme of disruptive or radical innovation. It seems like every new company wants to change the world as if nothing less could be worthy of their efforts. However, what most companies do today is not radical, but incremental innovation, especially as advancements in internet and smartphone technologies are consolidated and standardized.
Real radical innovations, such as railroads, electricity, automobiles, and the internet, may start in one industry, but they spread, changing the entire economy in their wake. Radical innovations, i.e., those that after the socioeconomic system as a whole, don’t come along all that often. Instead, most change is incremental, building on and increasing the influence of groundbreaking innovations. Because of this, there will only ever be a few people who can genuinely day they changed the whole world, and this is why so few companies dominate mature industries, such as Ford, GM, and Toyota in the automotive industry.
Nevertheless, someone has to create the radical innovations of tomorrow, even if the risk is high, and the networks of technology that underpin future drastic changes are probably already growing. Smart entrepreneurs, investors, and inventors looking to the future for foundation-changing innovation should look beyond the narrow interests of previously consolidated digital technologies. If you want to change the world, look for future radical innovations in areas that are only just beginning to emerge, such as energy storage for renewable power generation.
Radical innovation is a Once in a Lifetime Event
The line between incremental and radical innovations is often blurry. Every piece of technology relies on an interlinked network of previous advances to make it possible. Nevertheless, pioneering economist Joseph Schumpeter defined radical innovations as those that hit at the very foundations of existing industries.
Radical innovations often start in a discrete corner of a small industry, but they offer so many advantages that they rapidly expand across the whole economy. Railroad technology, which initially was developed for coal mining, ended up utterly changing the way people and goods moved across the world. The internet, designed as a decentralized network for the military, has entirely changed the way people exchange information across the globe.
Nikolai Kondratiev was a Russian economist, and the first to note the wave patterns of radical incremental innovation, giving his name to the process. The Kondratiev Wave describes an economic cycle where each radical innovation spreads through the economy via accumulative changed before leveling off and leaving room for a new wave of radical innovation.
Economist Carlota Perez divides this into a two-stage process. First, during an installation phase, change accelerates and spreads across economic systems. Second, in a deployment phase, the radical advancement of the installation phase is consolidated with incremental innovation and monopolization by massive corporations, such as Ford and GM in the automotive era, or Google and Facebook in the internet era.
There is nothing wrong with incremental innovation; its what takes radical innovation and spreads it out across the word, hopefully changing it for the better in the process. Incremental innovation works out the kinks and helps radical innovations through their growing pains. Radical innovation threatens the bedrock of previous industries, but when done incrementally, changes disassemble those foundations. For instance, Uber and Lyft incrementally innovated on radically innovative smartphone technology to dismantle the foundations of the taxi industry.
Radical Innovation Requires More Than Dreams
The problem with radical innovation is that it is often hard to recognize before the fact. Radical change requires foresight and an understanding of the needs of industry, the economy, and society at large. Even if you do recognize radical innovation, bottlenecks often stand in the way of advancement. However, those bottlenecks are often the best places to look for the start of an innovation wave. For instance, railways only became possible after a whole series of other innovations, such as precision matching and limited liability corporations.
Sometimes this constellation of innovation inputs comes together by itself, but often times it is a small group of individuals who make the final push. What sets these people apart is the vision they have to take an already existing technology and make it not only viable but profitable. Thomas Edison’s real genius was not inventing: he has other people do that for him. His real talent wasd knowing where to direct his innovation. He saw the potential in emerging markets electric technology to change the world, and he had the vision to recognize that selling electric power to the world required a game-changing product, so his team got to work creating the light bulb.
For all of the love given to Edison’s rival, and former employee, Nicola Tesla, he did not have much in the way of a realistic vision. Tesla was a genius, but he got lost in dreams of a utopian future provided for by free, wireless electric technology. Even if that were possible, however, it was indeed far beyond the technological capabilities of the late 19th Century. A realistic vision takes dreams and applies them to current technologies. Tesla’s goals did not fit with a realistic image of the economy in the late 19th Century.
To be fair to Tesla, knowing what that new radical innovation is realistic and how to get it to market is incredibly difficult. Most initial attempts at implementing a fundamental change fail during the first phase of a Kondratiev wave. Every pioneering company like Google leaves thousands of failed company in its wake.
What industry do you believe is ripe for radical innovation?