Jorge Luis Borges was a great writer whose writings were succinct and full of deep insights, woven around a wry sense of humor on some occasions. His ‘book’ titled Labyrinths is actually a collection of short essays – a must read. He could never understand why people wrote massive tomes. Inspired by his views, I look at topics which can be expressed short.
This is one of the most fashionable things to say as if this is the profoundest observation but is actually something that goes against any credible thinking. Every innovation has to be followed by a process of stabilization and standardization without which the investment made in the innovation is unlikely to be recovered. Once an innovation has ‘happened’, the primary duty is to ensure its success which requires a great deal of regular (and some not so regular) set of activities. Yes, it is possible that some innovations will require other innovations or innovative thinking for success but that is not the norm. I am thinking here of the iPod which was launched in a music event instead of the normal annual tech shows that are so part of the technology world in the US. That was an example of intelligent thinking. Here too, the subsequent success of the iPod meant a great deal of regular work.
In some businesses such as automobiles, where investment in developing and launching a new car runs into billions of dollars, ceaseless innovation will simply run the company to the ground. Any good business has to be a combination of the normal and the abnormal. This is not a fiat though as there are businesses that can flourish without ever having to innovate. In fact, their everyday predictability is what ensures their success.
Ceaseless innovation should be thought of in terms of cycles of innovation for it to be a feasible business policy, one that a Board and investors will support. The key lies in timing the cycles such that as one cycle of cash flows start petering out, you begin another. That, as anyone in business will tell you, is easier said than done, as there could be many failures, false steps behind every successful innovation. This means that successful innovations will not only have to recover their investment but a part of those that failed. And this becomes more and more difficult as a business grows in size, which, in financial terms, means that there is more at risk than earlier. Which is also why you will see more of modifications, enhancements, extensions to keep going, appear innovative while safeguarding the enterprise. It is only in the pharmaceutical industry that you will see the enormous pressure on the new product pipeline, although here we are talking not so much of innovations per se but R&D, because that is what drives the business. Even here, since the mid-90s, the novel drug delivery systems did come in as an additional dimension to developing new products or solutions.
I am sure you are already thinking of many businesses which seem to be pushing through innovations year after year. If you paid attention, there are businesses which have attracted investors who believe in the story and are willing to risk substantial sums of money. These are also instances where increased valuations is the exit option for some investors. Barring such exceptions, finding funds for innovations is challenging.
