Intro to Innovation
It's okay to fail
Intro
In this short piece, I briefly touch on the vast landscape of Innovation. I’ll outline what it is, who benefits, how we encourage/foster innovation (especially in these uncertain times), and I’ll give you a few examples of important innovations over the past decade, and where I expect the main areas of innovation to be moving forwards.
I will very likely cover this topic in more depth at some point in the future as this is where the majority of my professional experience lies.
What is innovation?
“Innovation is the creation, development and implementation of a new product, process or service, with the aim of improving efficiency, effectiveness or competitive advantage” – I found this definition knocking about on google somewhere, but I think it does a good job at summarising the essence of innovation.
So, let’s break it down.
‘Creation’ (or creativity) is at the core of innovation. You can’t innovate without coming up with new or novel ideas. Though, this is harder than it sounds at face-value. I would argue most businesses are not truly innovative (though this is not meant in a negative way). The true innovators are at the bleeding-edge. Pushing for change with everything they have – not being afraid to fail.
This brings me nicely onto my next point – failure. Most of us for the majority of our lives will fall into the bracket of being afraid of failure (I am definitely one of these). It can manifest in a variety of forms – typical fears include public speaking, losing hard-earned money, change, perceived negative opinion from others in a social group… the list goes on. However when you start to look into most of these fears, they don’t seem particularly rational (even though there is absolutely an evolutionary argument to be made here regarding the value of social status). My point is, true innovators are a different breed of human – a specific subset of entrepreneurs who relish in the value that failure brings, something that most of us are too scared to ever truly try.
Have you ever had a failure you didn’t learn something from? The answer for most of us in this case is almost certainly no. I think one thing making true innovators so special, and so valuable for our society, is they are willing to do the dirty work. They are willing to go where 99% of people won’t go – outside their comfort zone.
The reward for doing this is often great – both for the individual, but also for society and the economy.
Who benefits?
The answer for this part is fairly simple. Everyone… if done correctly.
The idea is, money from the government in the form of grants (cash not needed to be paid back) will encourage businesses (mainly SME’s) to attempt their innovative ideas. This de-risks the initial stage of innovation for the entrepreneur – where most ideas would be stopped in their tracks due to the lack of funding available.
This process benefits the creators and innovators as it allows and encourages risk-taking at an early stage that would otherwise not be possible. For this to work, there has to be an expectation of failure for a significant amount of these new ideas. Not all ideas are good.
Secondly, alongside the benefit for the individual entrepreneur, this type of innovation investment has a profound positive impact on the economy. When good ideas mature, they create jobs for the economy which increases the ability of people to buy and sell goods (i.e. more money flowing within the economy).
Lastly, it benefits us, the consumer. Our living standards are the best they have ever been at any point in human history – and will only improve from here on in. Much of this is directly down to the developments/innovations in technology. For example, developments in healthcare mean we now live longer, healthier, happier lives. Also, the invention of the internet has accelerated the transfer of knowledge between us, leading to increased productivity and allowing us to make the most of specialist knowledge from all over the globe.
Both of these examples are a direct consequence of investment in innovation.
How do we encourage innovation?
Put simply, the government of whatever nation pumps money towards its entrepreneurs and researchers with the hope of achieving breakthroughs and successful ideas.
Let’s use DARPA (The Defence Advanced Research Project Agency) as an example. DARPA are essentially the US state sponsored body responsible for encouraging, funding and managing research carried out by the private sector and academia in order to achieve the goal of maintaining the status of a ‘world-leading’ economy.
Over the period of time since its inception in 1958, DARPA has been able to claim ‘seminal roles in the development’ of the internet (Originally known as Arpanet), stealth aircraft, miniaturised GPS technology, Unmanned Ariel Vehicles, flat screen displays and the brain-computer interface. This is alongside all the equally crucial academic research being carried out.
In the UK, the equivalent would probably be UKRI (UK Research and Innovation) which pretty much does the same thing.
R&D during Covid
At the very beginning of the Covid pandemic it was looking very much like a huge number of people would lose their jobs. So, the logical step in order for companies to save money would be to cut any expenditure on research and development activities, which essentially means to ‘scrap innovation’.
Luckily this is where the government stepped in (at least in the UK). The government made a point of doubling down on the country’s ability to innovate – trusting that the ingenuity and determination of the innovation community would actually be a crucial step in overcoming the problem we found ourselves in.
We also had to think logically about what the scenario would be if we left the R&D community to fend for itself. My prediction is that coming out of this pandemic we would have been left with the casualty of many thousands of businesses who would otherwise not have survived the crisis. Therefore, by the government stepping in and spending more money on innovation, they made the correct decision. It could have been so much worse.
Some of my favourite innovations – and where to look in the future
These are just my opinion. More than happy to debate. In no particular order…
Elon Musk’s SpaceX method for landing and re-launching a rocket.
o This is the most mind-boggling one to me. We’re looking at the very beginning of commercial space travel. Amazing.
CRISPR (Gene editing)
o I just think it’s incredible we can literally take out the ‘bad/harmful’ part of a person’s DNA in order to prevent illness or disease. Might be some other slightly dodgy uses for this, but let’s see.
Self-Driving cars
o I want one.
AR/VR (I know these have been around longer, but only just useful)
o Personally a technology close to my heart. I know this has been around for far longer, but computing hardware is now at a point where these technologies are beginning to become useful.
AI
o I also I know this has been around for longer, but AI is starting to creep its way into almost every product we own… and it’s making them better.
Looking forwards, it’s incredibly hard to predict what is going to be the next big innovation. I would be sitting on a beach somewhere if I knew the answers. I can try to predict trends, however.
I think we are going to become more connected than ever before. 5G will be a thing. 6G will probably be a thing by the end of the decade. Logically, IoT (internet of things) will follow.
VR and specifically AR will be HUGE. Now is the perfect time for these immersive technologies to shine and show the world what they can truly offer. Tech like 5G will enable almost 0 latency transmission of large, data-rich files - perfect for this immersive technology.
I think social media will swallow us whole and spit us out – the way things are currently going can’t be good for our mental health. Either that or there will be some huge fundamental changes. (very vague)
The way in which we work will change. This has been kick-started by the pandemic, but it is here to stay.
Lastly, I believe there is a growing cry to alter and improve the way in which our entire political system is operated. This may take more than a couple of decades, but I believe we are starting to see a large shift in this aspect of our social structure.
Summary
This is only a very short, high-level, piece on a topic I will no doubt cover in far more detail in the newsletters to come. However, I think it’s important. It’s important we appreciate how much we rely on innovation in our economy to be able to push our species forwards, solve problems and pave new ways.
Most of the companies we invest in are looking for the next innovation within an industry.
Lastly, understanding the challenges innovators face and appreciating the importance of this factor in the growth of the global economy will hopefully impact some of our investing decisions.
Cheers,
Innovestor