MEDITATIONS ABOUT INNOVATION: Why the EXPERTS will not invent the future and why investing in INNOVATION will result in GROWTH

Innovation is the driving force behind progress and growth in society. It is the process of developing and implementing new ideas, products, and services that create value and improve people's lives. Innovation is essential for businesses to stay competitive and adapt to changing market demands, and it is also critical for addressing societal challenges like climate change, poverty, and healthcare. As a recent report from the World Intellectual Property Organization states, "innovation is a powerful tool for achieving sustainable development and improving people's lives." (WIPO, 2021) Some descriptions include:

Novelty and Originality: Innovation is commonly associated with the creation of something new and original. According to the OECD Oslo Manual (2018), innovation involves the implementation of a new or significantly improved product, process, marketing method, or organizational method in business practices, workplace organization, or external relations. This definition emphasizes the importance of novelty and originality in innovation.

Value Creation: Another important aspect of innovation is value creation. According to Christensen et al. (2015), innovation is about creating new products or services that address unmet customer needs or solve problems in a better way than existing solutions. Value can also be created through improved efficiency, reduced costs, or enhanced user experience. In this sense, innovation is closely linked to entrepreneurship and the creation of new markets.

WHY INNOVATION IS IMPORTANT?

Innovation is a critical driver of economic growth and has the potential to create significant value for potential customers in a variety of ways. From improving existing products and services to developing entirely new ones, innovation can enhance customer experiences and provide new opportunities for businesses. In this essay, I will explore how innovation creates value for potential customers and provide multiple references to support my arguments.

One way that innovation creates value for potential customers is by improving existing products or services. By introducing new technologies, materials, or design features, companies can make their products more durable, easier to use, or more aesthetically pleasing. For example, the introduction of touchscreens and mobile apps has revolutionized the way we interact with our smartphones, making them more user-friendly and convenient than ever before.

Innovation can also create value by developing entirely new products or services that address unmet customer needs or desires. This can involve identifying gaps in the market and developing solutions that meet those needs in a unique and compelling way. For example, the rise of streaming services like Netflix and Hulu addressed a need for on-demand, personalized entertainment, creating value for millions of customers who were previously limited to cable TV packages. According to a report by eMarketer, the number of US households subscribing to streaming services is expected to reach 80% by 2022, up from 63% in 2018 (eMarketer, 2021).

In addition to improving existing products or developing new ones, innovation can create value by revolutionizing the way things are done. This can involve introducing new business models, production methods, or distribution channels that make products or services more accessible or affordable to customers.

Ultimately, the key to creating value through innovation is to understand the needs and desires of potential customers and to develop solutions that meet those needs in a unique and compelling way. Companies that are able to do this effectively will be well-positioned to capture market share and build long-term customer loyalty. As noted by the Harvard Business Review, "Innovation is not just about technology, but about creating new value for customers, improving existing value propositions, and discovering new ways to create, deliver, and capture value" (Harvard Business Review, 2018).

TYPES OF INNOVATION

Innovation is a critical component of success in the business world. Companies that are innovative are better positioned to adapt to changes in the market and meet the evolving needs of their customers. The Harvard Business School has identified four types of innovation: disruptive, radical, architectural, and routine radical. Each type of innovation has its own unique characteristics and can have a significant impact on a company's success.

Disruptive innovation occurs when a new product or service enters the market and disrupts the existing market, creating a new market or niche. Disruptive innovations can be a significant threat to established firms, as they can take away market share and revenue. Examples of disruptive innovations include Netflix, which disrupted the video rental market, Uber, which disrupted the taxi industry, and Airbnb, which disrupted the hospitality industry.

Radical innovation involves the development of a new product or service that fundamentally changes the way things are done or creates a new market altogether. Radical innovation often requires a significant investment of time and resources, as well as a high level of risk-taking. Examples of radical innovations include the personal computer, the internet, and the smartphone. These innovations have had a significant impact on society, changing the way we communicate, work, and access information.

Architectural innovation refers to the development of new systems or technologies that improve the performance or efficiency of existing products or services. This type of innovation involves the reconfiguration or recombination of existing components or technologies to create something new. Examples of architectural innovation include the hybrid car, which combines an internal combustion engine with an electric motor, and the iPhone, which combines a phone, camera, and computer in one device.

Routine radical innovation involves making incremental changes to existing products or services that result in significant improvements. This type of innovation is often the result of ongoing research and development efforts and involves continuous improvement over time. Examples of routine radical innovation include the development of new drugs and medical treatments, improvements to manufacturing processes, and enhancements to software applications.

Safi Bahcall's book "Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries" offers a unique perspective on innovation and how organizations can foster and support innovative ideas. The book is based on Bahcall's own experiences as a physicist and entrepreneur, as well as extensive research into the history of scientific and business innovation.

According to Loonshots, there are two types of innovation within organisations: "s-type" innovations, which are small, incremental improvements to existing products or processes, and "l-type" innovations, which are large, disruptive ideas that have the potential to transform entire industries. Bahcall argues that organisations often focus too much on s-type innovations, at the expense of l-type innovations, and that this can lead to missed opportunities and stagnation.

To foster l-type innovations, Bahcall suggests creating what he calls a "loonshot nursery." This is a space within the organization where ideas can be developed and tested without the pressure and constraints of the existing business. The key is to give these ideas the resources and support they need to succeed, while also protecting them from being prematurely shut down by the more risk-averse parts of the organisation.

INNOVATION = GROWTH

The study "Innovation and Growth: Evidence from Firm-Level Data" by Philippe Aghion, Nick Bloom, Richard Blundell, Rachel Griffith, and Peter Howitt examines the relationship between innovation and growth in UK firms. The study uses data from over 4,000 firms and shows that innovation is positively associated with growth in productivity, sales, and employment.

The study first identifies three different types of innovation: product innovation, process innovation, and organisational innovation. Product innovation involves the development of new or improved products or services, process innovation involves the development of new or improved production processes, and organizational innovation involves the development of new or improved management practices or organizational structures.

The study finds that firms that invest in product innovation are more likely to experience above-average growth in productivity, sales, and employment. Specifically, firms that introduced new products or significantly improved existing products experienced a 10% increase in productivity and a 14% increase in sales over a three-year period. Additionally, these firms saw a 4% increase in employment over the same period.

Overall, the study provides strong evidence that innovation is positively associated with growth in UK firms. The findings suggest that firms that invest in product innovation, process innovation, and organizational innovation are more likely to experience above-average growth in productivity, sales, and employment. These findings have important implications for firms that are looking to stay competitive in today's fast-paced business environment. By investing in innovation, firms can create new products, improve their production processes, and develop new management practices, all of which can lead to growth and success.

FALLACY OF EXPERTISE IN INNOVATION

Most large-scale innovations will happen from outside of those particular industries. Walmart didn’t innovate retail, Amazon did. Boeing and Lockheed Martin didn’t innovate, Space X did. Ford and BMW didn’t innovate, Tesla did. NBC and BBC did not innovate, Youtube, Twitter, and many others did. It is very difficult to find a recent innovation in the last 30 years, where an extremely large change came from the existing organisation.

Many companies think that to innovate, they need subject matter experts in the domain they are interested in. After all, why hire a consultant who is not an expert in what you are going to be learning about? A common buzzword may go something like: “How can we expect to innovate in (pick an area) if we don’t have expertise in that area? We need to hire an expert to guide us.

This is generally a recipe for innovation mediocrity. Experts are critical in knowledge acquisition; they can be detrimental to concept creation. An expert has deep, specific, and important expertise that naturally has a direct influence on a company’s ability to come up with new concepts. The issue for an innovator is not whether to tap into the knowledge of a specific expert, but?how?to use the knowledge of many experts. Expert advice is vital to the success of any company — but too much can be detrimental.

Philip E. Tetlock is a researcher who conducted a study on expert opinions (24,000 forecasts across different domains), specifically on the accuracy of their predictions. The study involved surveying many experts across different fields and tracking their predictions over time. Here are some major findings from the study:

1. Experts were not very accurate in their predictions: The study found that experts were not significantly more accurate than non-experts in making predictions. In fact, they were often less accurate than simple statistical models.
2. Experts tended to overestimate their accuracy: Experts were often overconfident in their predictions and tended to be more certain than the evidence warranted. This led to inaccurate predictions and poor decision-making.
3. Experts tended to stick to their opinions even when evidence contradicted them: The study found that experts were often resistant to changing their opinions, even when presented with evidence that contradicted their beliefs.

The study suggests that experts were wrong in their predictions for several reasons. One reason is that experts often rely on their intuition and experience rather than data and quantitative models, which can lead to inaccurate predictions. Additionally, experts may be subject to biases, such as overconfidence or confirmation bias, which can cloud their judgment and prevent them from changing their opinions in response to new evidence also the halo effect.

The halo effect can also affect the way we perceive expertise and knowledge in a particular domain. This bias occurs when our overall impression of an individual or organization leads us to assume that they are knowledgeable and competent in all areas, even if we have limited information or evidence to support this belief.

One study published in the Journal of Applied Psychology found that the halo effect can lead to biased evaluations of experts, with positive overall impressions leading to higher ratings of expertise, even when the expert's actual knowledge and skills are not related to the task or domain being evaluated (Murphy et al., 2009).

Another study published in the Journal of Behavioral Decision-Making found that the halo effect can also lead to overconfidence in our own knowledge and abilities, particularly in areas where we have limited experience or expertise (Koriat et al., 2012).

A more recent study published in the Journal of Experimental Psychology: General found that the halo effect can also affect the way we perceive the credibility of scientific research, with positive overall impressions of the researchers or institutions leading to higher perceptions of the quality and validity of their research, even when the research itself is flawed or of poor quality (Kim et al., 2020).

Overall, these studies suggest that the halo effect is a real and important factor in the way we perceive expertise and knowledge in various domains. While it can lead to positive outcomes, such as increased trust and credibility, it is also important to be aware of its potential biases and to take a critical and objective approach when evaluating expertise and knowledge.

Dan Gardner in his book "Future Babble: Why Expert Predictions Fail - and Why We Believe Them Anyway" examines the accuracy of expert predictions and the reasons behind our inclination to believe them. One of the main theses of the book is that expert predictions are often wrong. Gardner argues that this is due to a variety of factors, including cognitive biases, the complexity of the systems being predicted, and the unpredictability of human behavior. He provides numerous examples of expert predictions that were no more accurate than random guesses, including predictions about the stock market, the economy, and even the weather. Despite this, Gardner notes that we are still inclined to believe in expert predictions because of the way our brains are wired. This is due to a variety of cognitive biases, including the "halo effect," which causes us to see experts as infallible, and the "confirmation bias," which causes us to seek out information that confirms our existing beliefs.

According to Riitta Katila’s (Professor of Management Science, and Research Director of the Stanford Technology Ventures Program at Stanford) research has found that innovation thrives when expert users make up about 40% of an invention team. Any less and the company will lose sight of what its customers need; anymore and the group will tend to converge on old ideas. According to Riita, expert users have spent lots of time getting comfortable with existing tools and methods. As a result, they’re invested in their field’s status quo and may have trouble seeing the value in a novel idea. They found that although expert users excelled at refining existing products, they couldn’t always recognise a potential breakthrough innovation when they saw one.?Expert users are most helpful when they serve in positions where they can broaden the variety of ideas under the firm’s consideration?— typically, governance and technical roles. So when considering where user experts belong in the company, think, “Is this a role that focuses more on generating a variety of ideas or one that focuses on selecting from among ideas?”

''When all think alike, then no one is thinking'' —Walter Lippmann

While experts can indeed contribute valuable knowledge and expertise to the innovation process, innovation is not the domain of experts. ?Experts may be constrained by their existing knowledge and assumptions. Experts may be highly knowledgeable in their field, but this can also lead to a narrow focus and a tendency to overlook new ideas or perspectives. Innovation often requires thinking outside of established norms and boundaries, which may be difficult for experts who are deeply ingrained in a particular way of thinking.

Innovation requires diverse perspectives. While experts can certainly contribute valuable knowledge and expertise, they may not necessarily have a broad range of perspectives or experiences. Innovation often benefits from a diversity of perspectives and ideas, which can come from individuals with a range of backgrounds and expertise. Many of the most significant innovations in history have come from interdisciplinary collaborations, where individuals from different fields work together to solve complex problems. Innovation often requires expertise from a range of fields. However, expertise can create a "mental model" that limits creativity: People with expertise in a particular field may have a deep understanding of how things work, but this can also limit their ability to think outside the box and consider new approaches or ideas. This is because they may be so used to thinking about a problem in a certain way that they find it difficult to imagine alternative solutions. Experts can be resistant to change: People who have spent years honing their skills and expertise in a particular area may be resistant to change or new ideas. They may believe that their way of doing things is the best way, and be reluctant to consider alternative approaches. Expertise can lead to a focus on incremental improvements: People with expertise may be very good at identifying small, incremental improvements that can be made to existing products or processes but may struggle to see the potential for disruptive or transformative innovation.

Ali Tamaseb spent over 4 years painstakingly asking questions and finding the answers. Tamaseb collected over 30,000 data points comparing all the unicorn startups that were founded in the past 15 years with those that raised some VC funding but failed to reach a unicorn outcome.

Billion-dollar startup founders are evenly split between technical (49.5%) and non-technical (50.5%) founders, which is surprising given the lore around the importance of technical founders. Moreover, the data shows that only 40% of founders of billion-dollar startups had worked in the same industry before. Many successful startups required years and years of ups and downs. Age and industry experience didn’t matter as much as network, grit, and risk-taking.

That means 6 out of 10 built a billion-dollar unicorn in a totally new space. Soft skills such as managing a team and having a strong network were more important than domain expertise. After all, you can always hire domain expertise down the road. The catalyst for going to the market with innovative solution is down to optimism and trust.

Vinod Khosla, founder of Sun Microsystems, tweeted: No large practical innovation has been done by experts. Not knowing, experimentation, fast learning & relying on necessity as mother of invention & creativity allows one to do things others thought impossible helps. Deep experts know all these reasons to not attempt it. Optimism!

That being said, it's important to note that expertise can also be a key driver of innovation. People with deep knowledge in a particular area can often identify new opportunities and come up with innovative solutions to complex problems. The key is to strike a balance between leveraging expertise while also being open to new ideas and approaches.

CHALLENGE THE AUTHORITY

Authority and innovation are two important pillars of progress in any society. Authority represents the existing power structure and the status quo, while innovation refers to the introduction of new ideas, products, or processes. While both are essential for progress, it is equally important to challenge authority and encourage innovation to ensure that society continues to evolve and improve.

One of the main reasons why it is important to challenge authority is that it allows for the identification and rectification of injustices and inequalities. In many cases, the existing power structure can be biased or unfair, and it may perpetuate social, economic, or political disparities. For instance, throughout history, various movements and activists have challenged authority in their fight for social justice, civil rights, and equal opportunities. The abolitionist movement, women's suffrage movement, and the civil rights movement are just a few examples of the power of challenging authority to create positive change.

Innovation, on the other hand, is important because it drives progress and growth. It is the engine that powers economic development, technological advancements, and societal evolution. Without innovation, society would stagnate, and we would be unable to address the challenges we face today, such as climate change, resource depletion, and global health crises.

“Some fish love to swim upstream. Some people love to overcome challenges.”Amit Ray, Walking the Path of Compassion

Challenging authority is often necessary in technological innovation because it allows for the questioning of the status quo and the development of new ideas and approaches. This behavior can lead to breakthrough innovations that disrupt industries, improve lives, and transform society. Steve Jobs and the iPhone: Steve Jobs challenged the authority of the telecommunications industry by introducing the iPhone, which combined a phone, music player, and internet device into one sleek package. The iPhone disrupted the industry, leading to the decline of traditional cell phone makers and the rise of the smartphone. Uber and the taxi industry: Uber challenged the authority of the taxi industry by creating a ride-sharing app that connected passengers with drivers. The app disrupted the industry, leading to protests from taxi drivers but also providing an affordable and convenient transportation option for millions of people. There are countless examples in sustainable energy, media, telecoms and other industries. These companies have disrupted the energy industry, providing sustainable and renewable energy options that are reducing carbon emissions and promoting a cleaner future. It requires free thinking because it often involves going against established norms and challenging the status quo. It requires individuals to question and challenge authority figures, established systems and processes, and cultural and social norms to develop new ideas and approaches. It is not for the faint-hearted.

"The best way to predict the future is to create it'' —Alan Kay, computer scientist?

Challenging authority can lead to ground-breaking innovations that transform industries and society. While this behavior may be controversial and disruptive in the short term, it can ultimately lead to positive change and progress.

TECH FOR GOOD

Technology and innovation have become an integral part of modern society. From smartphones and social media to artificial intelligence and renewable energy, technological advancements have transformed the way we live, work, and interact with each other. While there are concerns about the negative impact of technology (think about the combustion engines) on society, there are also many examples of tech innovations that are making a positive difference in people's lives.

One of the main ways that tech innovations are bettering society is by improving access to healthcare. Medical technology has enabled us to diagnose and treat diseases more effectively, and telemedicine is making healthcare more accessible to people in remote or underserved areas. For instance, digital health platforms like Babylon Health and Ada Health are using AI to provide personalized healthcare advice and support to patients, while telemedicine companies like Teladoc and Doctor on Demand are connecting patients with healthcare providers via video consultations.

Another area where tech innovations are making a positive impact is in education. Edtech startups like Coursera, Udemy, and Khan Academy are making education more accessible and affordable to people around the world. They are also leveraging technology to improve the quality of education, for instance, by using gamification and personalized learning to engage students and help them achieve better outcomes.

Furthermore, technology and innovation are playing a crucial role in addressing some of the world's most pressing challenges, such as climate change and poverty. Green technologies like wind and solar power are helping to reduce carbon emissions and transition to a more sustainable energy system. Social impact startups like BRCK and Zipline are using technology to improve access to education, healthcare, and essential goods in developing countries.

However, it is important to ensure that new innovations are bettering society, rather than causing harm. With great power comes great responsibility, and it is up to the tech industry to ensure that technology and innovation are a force for good. This includes developing ethical frameworks and guidelines for the use of AI and other emerging technologies, as well as ensuring that tech innovations are accessible and affordable to all people, regardless of their income or background.

Moreover, companies and entrepreneurs should consider the potential social impact of their products and services before bringing them to market. This means thinking beyond profit and considering how their innovations can contribute to the greater good. For example, Google's Project Loon is using balloons to provide internet access to people in remote areas, while Microsoft's AI for Good initiative is using AI to tackle social and environmental challenges.

Technology and innovation have the potential to make a positive impact on society, but it is important to ensure that new innovations are bettering society and that tech companies and entrepreneurs are acting responsibly. As technology continues to evolve, it is up to us to ensure that it is a force for good, rather than a source of harm. By embracing innovation that is socially responsible and sustainable, we can create a better future for ourselves and for generations to come.

WHAT IS THE FUTURE FORTUNE 500 COMPANY?

The Fortune 500 index has seen significant changes over the years, with many companies entering and leaving the index. In today's rapidly changing business environment. The industry composition of the Fortune 500 has shifted over the last 50 years. In the 1970s, oil companies dominated the list, while in recent years, technology companies have taken over the top spots. This shift reflects the changing nature of the US economy, as technology and other industries have become increasingly important.

Innovation has played a significant role in the performance of companies listed in the Fortune 500 index. According to research, the most innovative companies in the Fortune 500 outperformed their peers by a significant margin. The study analysed data from 2005 to 2015 and found that the top 10% of companies in terms of innovation generated 30% higher revenue growth and 50% higher total shareholder return than the bottom 10% of companies.

Another study by Innosight found that the average tenure of companies in the Fortune 500 has declined from 61 years in 1958 to just 18 years in 2012. The study suggests that this decline in tenure is due in large part to the failure of companies to adapt to changing market conditions and to innovate in response to disruptive technologies and new business models.

Netflix is another example of a company that has prioritized innovation and customer-centricity. It disrupted the traditional video rental industry by introducing a subscription-based model that allowed customers to stream movies and TV shows on demand. It has also invested heavily in creating original content, which has helped it differentiate itself from competitors.

Apple: Apple is known for its innovation and customer-centric approach, consistently releasing new products and features that meet the evolving needs of its customers. It has also created a seamless ecosystem of products and services, such as the iPhone, iPad, and iCloud, that work seamlessly together to enhance the customer experience.

The report found that the most successful companies in the index are those that prioritise innovation as a core part of their strategy and culture. These companies are more likely to invest in research and development, collaborate with external partners, and create a culture of experimentation and risk-taking.

Therefore, the importance to think outside of the box, and being innovative will only increase. The companies which don’t embrace this mindset will be left behind.

A challenger, digital-first, innovation mindset is essential for digitally native companies to win in the digital world because it enables them to stay ahead of the curve and continuously innovate in response to changing market conditions and customer needs. Here are some reasons why:

1. Agility: A challenger and innovation mindset allows digital native companies to be more agile in response to changing market conditions. They are able to quickly pivot their strategies and offerings to meet emerging customer needs, which gives them a competitive advantage over larger and more established competitors.
2. Disruption: Digital native companies with a challenger mindset are more likely to disrupt established industries by introducing new business models, products, or services. This disruption can lead to significant market share gains and revenue growth.
3. Innovation: An innovation mindset allows digital native companies to experiment with new ideas and approaches, which can lead to breakthrough innovations and competitive advantages. They are not bound by legacy systems or processes, which gives them more freedom to take risks and try new things.
4. Customer-centricity: Digital native companies with a challenger and innovation mindset prioritize customer needs and preferences in their product development and business strategies. This customer-centric approach allows them to create products and services that meet the evolving needs of their customers, which in turn drives customer loyalty and revenue growth.
5. Failure. Research has shown that failure is not only important for innovation, but it is also necessary for it to occur. One study conducted by Harvard Business School found that companies that embrace failure are more likely to succeed in the long run. The study found that companies that view failure as a learning opportunity and are willing to take risks tend to be more innovative and have higher levels of growth and profitability.

Overall, studies provide strong evidence for the importance of innovation in the success of companies listed in the Fortune 500 index. Companies that prioritise innovation and invest in research and development during good and bad times are more likely to outperform their peers and to adapt to changing market conditions over the long term.