Why We Should Never Stop Innovating
By: Henry Cabral
Tags: Advice, Innovation, Design, Entrepreneurship, Life

Humans are capable of incredible creations and remixes of those creations. We have a detailed track record that includes electricity founded by Thomas Edison and airplanes developed under The Wright Brothers, which have allowed for further design and development of new technologies such as Radium's discovery by Madame Marie Curie and the personal computer by Steve Jobs.

These discoveries have reshaped society many times over, impacting all edges of the world. And at the forefront of each technological advancement is an idea.

Ideas can stem from nature or one’s problems.

In a 2012 study, Researcher David Strayer and his colleagues showed that hikers on a four-day backpacking trip could solve significantly more puzzles requiring creativity when compared to a control group of people waiting to take the same hike — in fact, 47 percent more.¹

Exposure to nature tends to spark creativity bursts, fueling imagination and the creation of ideas. Such ideas, if cultivated, can lead to extraordinary discoveries that revolutionize the world.

Photo by Nick Fewings on Unsplash

The value of an idea lies in the using of it — Thomas Edison

What is Innovation?

According to Baregheh et al.:

Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete, and differentiate themselves successfully in their marketplace.²

The conception of ideas is fundamentally a concoction of experiences, tastes, and influences that frame how a product or movement exists. Innovation comes into play beyond the birth of the product.

A similar definition by the software industry defines innovation as:

Production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and the establishment of new management systems. It is both a process and an outcome.³

Products are introduced in the marketplace and then analyzed over months or years, depending on the distribution goals. Depending on the market history of the product, an opportunity may present itself.

Product teams review the historical data gathered from the users and begin to make inferences on how the product can be modified further. This step is on the latter portion of the product’s life-cycle management program. Innovative product transformation allow companies to:

Remain competitive in a dynamic environment

Satisfy existing needs efficiently the second time around

Meet new trends and communities among the customer base

The alteration of once proved solutions is not an invention, however. Creating a solution from scratch is an invention, something translated from an idea or concept into living existence.

For product sustainability, innovation is crucial for maintaining a presence in the market.

How does innovation play a role in the world?

Innovation is a driver for growth in businesses, markets, and the economy. The aggregation of new and old ideas contributes to economic growth; New ideas and technologies developed can provide for an environment of continual production. More technological advancements may lead to an increased product pipeline being introduced into the marketplace, thus expanding its market share.

Maradana et. Al. Found “several indicators linked to economic growth” within companies which include⁴:

Patents-residents

Patents-non-residents

Research and development expenditure

Researchers in research and development activities

High technology exports

Scientific and technical journal articles

These factors demonstrate a crucial relationship between capital economic growth and innovation but also inventions. A patent is filed to protect the intellectual property of a company’s ideas and designs. This governing document gives the owner full rights to do anything with that invention. Innovations are similar to inventions with a different spin on their use requirements.

The researchers also found a “presence of both unidirectional and bidirectional causality between innovation and per capita growth,” meaning the two are mutually linked. For capital growth to grow, innovation must grow alongside it.

Innovation activities do not only directly influence economy-wide productivity, but also promote economic growth through spurring new business formation, which further promotes employment growth and other outputs.⁵

Further improvement on existing products generate more action in the economy. This allows companies to continue to grow their portfolio, sending widespread changes throughout the organization and industry. In a sense, improvements keep the product visible in the marketplace and can even excite customers to the launch of a rejuvenated product.

Photo by Daniel Romero on Unsplash

For example, Apple’s latest iPhone release did not shock the world. Hardly, any technological announcements do today. However, what did catch a lot of people’s attention was the addition of MagSafe and the transition of Apple’s Intel-based Macs to their in-house Silicon chips. It’s fair to say that Apple will have another successful year with these two releases despite recent hiccups.

To reiterate, innovation is contagious, widespread, and exhibits and promotes higher economic growth.

Based on a sample of 58 countries for the period 1980–2003, our empirical results indicate that countries hosting firms with higher quality patents also have higher economic growth.⁵

I think you get the picture — more innovation tends to be beneficial not just for the companies leading the front but also the hosting countries’ economy.

Now let’s talk about the influence of innovation within a company.

What Does Innovation Mean For a Company?

Innovation is at the forefront of the company, meaning to innovate to succeed in the future. For example, Pfizer aims to use clinical design to “enhance and transform clinical trials and the development of new medicines.”

And if you haven’t recently heard, Pfizer has been in the news quite a bit.

Enhancement of existing products provides an additional funnel of success for the company. Modernization strategies are at the core of various companies today.

Bristol Myers Squibb, another Bio-pharmaceutical giant, uses a similar message in their mission statement:

To discover, develop, and deliver innovative medicines that help patients prevail over serious diseases.

One of their core values is Innovation, which reads:

We pursue disruptive and bold solutions for patients. We commit to scientific excellence and investment in bio-pharmaceutical research and development to prove de innovative, high-quality medicines that address the unmet medical needs of patients with serious diseases.

The commitment to innovation is apparent through a company’s core values. These are just two examples of companies willing to dedicate efforts towards the development of new technologies. To exemplify this, I’ve included two tables below which show R&D expenditures in 2018.

Top 10 Companies based on their R&D Spending in 2018

AMAZON.COM: US$22.62bn ALPHABET: US$16.225bn VOLKSWAGEN: US$15.772bn SAMSUNG: US$15.311bn MICROSOFT: US$14.735bn HUAWEI: US$13.601bn INTEL: US$13.098bn APPLE: US$11.581bn ROCHE: US$10.804bn JOHNSON & JOHNSON: US$10.554bn

And the list goes on to the Top 100 R&D Spenders of that year. Further information can be found here as well.

Now, taking a broader look at each industry shows the following:

How much each industry spent on R&D in 2018

Technology: US$268.8bn — 31.3% Pharmaceuticals & Biotechnology: US$160.7bn — 18.7% Automobiles and Components: US$143.9bn — 16.8% Industrials: US$46.8bn — 5.4% Telco: US$38.8bn — 4.5% Electronic & Electrical Equipment: US$33.2bn — 3.9% Aerospace & Defence: US$24.9bn — 2.9% Chemicals: US$23.5bn — 2.7% Healthcare: US$20.7bn — 2.4% Household Durables: US$20.6bn — 2.4% Finance: US$16bn — 1.9% Construction, Real Estate & Engineering: US$14.6bn — 1.7% Energy & Utilities: US$14.1bn — 1.6% Consumables: US$9bn — 1% Food & Beverage: US$6.9bn — 0.8% Metals & Mining: US$6.3bn — 0.7% Transportation: US$1.8bn — 0.2% Media: US$1.8bn — 0.2% Tobacco: US$1.5bn — 0.2% Retail: US$1.3bn — 0.2% Support Services: US$1.3bn — 0.1% Apparel & Luxury: US$1.2bn — 0.1% Hotels, Restaurants and Leisure: US$0.9bn — 0.1% Forestry & Paper: US$0.3bn — 0% Grand Total: US$858.8bn — 100%

Taking the Technology sector, we see that Samsung, Intel, Microsoft, Google, and Apple have increased their R&D spending from 2005 to 2014, which has been apparent to each of their recent developments in the past decade. In contrast, HP and IBM remained stagnant in that period. A total of $858.8bn of expenses were towards R&D development in 2018. More than 30% of R&D expenditures come from the Technology sector.

Creating a Culture of Innovation

To innovate, companies create innovation strategies that promote this behavior. These strategies act as a commitment to the improvement and advancement of existing and future products and services. An innovation strategy includes the following:

Innovation objectives and goals

Scope of plan

Supporting functions required (such as Marketing, Operations, R&D)

Align strategy with business goals (both should work in conjunction)

Measure and analyze progress

An example of an innovation strategy comes from Bristol Myers-Squibb’s shift from “traditional organic chemistry” towards biotechnology:

About 10 years ago Bristol-Myers Squibb (BMS), as part of a broad strategic repositioning, decided to emphasize cancer as a key part of its pharmaceutical business. Recognizing that biotechnology-derived drugs such as monoclonal antibodies were likely to be a fruitful approach to combating cancer, BMS decided to shift its repertoire of technological capabilities from its traditional organic-chemistry base toward biotechnology. The new business strategy (emphasizing the cancer market) required a new innovation strategy (shifting technological capabilities toward biologics).

Developing a good strategy involves the identification of the objectives and goals to which the system is intended to do, the scope of the plan, which departments or groups of personnel are required, thus ensuring the strategy aligns or works in synergy with the business strategy of the organization and developing important methods of feedback and analysis to ensure effectiveness.

Google’s innovation strategy aims to provide a similar approach. Susan Wojcicki, at the time the article was written, was known as the Lead of Ads and Engineering and is now the CEO of Youtube, wrote an article explaining what she calls the 8 Pillars of Innovation:

Have a mission that matters

Think big but start small

Strive for continual innovation, not instant perfection

Look for ideas everywhere.

Share everything

Spark with imagination, fuel with data

Be a platform

Never fail to fail

Notice the overlapping methodologies with the previously discussed strategy.

A mission is synonymous with an overlying objective that determines the purpose of the plan. This mission is broken down into digestible pieces or goals that allow the organization to “think big but allowing them to start smaller.” As the innovation process is developed, consistent and applied effort must ensure the mission is carried out.

Ways to continue the effort can be found anywhere, “allowing for imagination to spark newer ideas that can be collaborated and expanded upon.” As I mentioned earlier, a key factor to a successful innovation strategy is the proper utilization of data. By utilizing a data feedback loop, the team can learn what works, what doesn’t and improve it.

These insights are crucial to the implementation and success of the plan.

Lastly, by adopting an innovation strategy, Susan Wojcicki reminds us to “become a platform” and “never fail to fail,” which is also essential.

The ability to produce new ideas without recognition for failure eliminates the bounds of self-judgment, allowing for continual imagination to roam, thus fueling innovation further.

Why Should We Keep Innovating

If it isn’t evident by now, especially after almost 1800 words, we should always strive for innovation. In essence, design keeps ideas brand new. These developments are formed through a mixture of other ideas; however, the end product and by-products are new-ish.

It’s similar to getting new rims on an older car. The car isn’t new, but the latest addition makes it all more exciting to ride.

Apart from the new ideas created, several benefits arise from the modernization of new products:

Economic growth¹

Creation of new ideas and technologies

Potential increases in revenue⁴

Continual improvement of products to meet market needs.

Potential to be bought out by larger companies

A few ways to facilitate innovation include:

Creating an innovation strategy

Aligning innovation strategy with business goals

Investing in Research and Development

Researching new fields can expand a company's knowledge in niche markets and enhance new features of an existing product. This gives companies an advantage in their disciplines since other companies might not replicate the technology for some time or ever.

Successful product launches by smaller start-ups that tie into larger company goals can be bought-out or merged, often ending in large payouts for the entrepreneurs.

Another benefit to investing in research and development is the amount of marketability and advertising that newer technologies can produce. These discoveries can attract large audiences, partners, and investors willing to buy in on the idea. Working at a smaller company myself, this is currently happening for us. It acts as a driver for productivity fueled by the excitement of future collaborations that can lead to extraordinary ideas and innovative products.

Of course, implementing strategies to increase innovation does not come without some setbacks.

Risks of Innovation

Innovation deployment within a company must first understand associated obstacles when planning to modernize products in the marketplace.

Upfront cost of R&D that may not lead to products⁶

Inherent risk of failure involved

Company closure due to failure to innovate

The benefits of innovation take time.

To innovate, you need to spend a lot. A study published this year by Wouters et al. found that “the mean cost of developing a new drug lies between an estimated range of $314 million to $2.8 billion⁶”. The average cost of development is estimated at around $1.3 billion.² The inherent risk of failure is apparent in the success rate of research and development programs in the Pharmaceutical/Biotechnology industries reside at a mere 14% for just passing Phase I trials³.

Also, Wong et al. studied success rates between each clinical phase trial and overall success percentages against different therapeutic areas.

Notable mentions include: a decrease in probability of success from Phase Trial to Phase Trial for Oncology, Metabolic/Endocrinology, Cardiovascular, Central Nervous System, and a few others. Overall percentages of success range from a high 34% to a low 3.4% at best. This shows that the window for successful clinical trials is small, and there is an inherent risk of failure when bringing drugs from benchtop to bedside.

On a related note, let’s briefly discuss how long a typical product development process takes from drug discovery to production.

Calls from the public to loosen FDA regulations to facilitate more rapid approval of drugs and devices have been countered by the occurrence of patient harm and deaths after some approved drugs have reached the marketplace.⁸

The duration of medical device and treatment approvals from the FDA takes several years. There have been steps to mitigate this; recently, it has led to distrust in the system.

New drug and device approval in the United States take an average of 12 and 7 years, respectively, from pre-clinical testing to approval. Costs for the development of medical devices run into millions of dollars, and a recent study suggests that the entire cost for a new drug is in excess of $1 billion.⁸

Device and drug approvals take an average of 12 and 7 years, respectively. Factors that govern the development of therapeutics and medical devices include long-term investment, probability of success, and commercialization duration. These are necessary risks that companies are willing to endure to create the next generation of disease treatments and cures.

The brighter side of things

We shouldn’t lose sight of the incredible discoveries and reinventions that humanity has found in the last century.

Photo by Ryoji Iwata on Unsplash

To innovate is to fit the same shape but different colored puzzle piece, into another domain.

Solutions that were once created to solve one problem can be adopted into another discipline and iterated upon, forming new connections and ideologies that allow for next generational technologies to be discovered.

In the words of Anthony J. D’Angelo:

Don’t reinvent the wheel, just realign it.

Innovating can save time during the design and development process. By leveraging existing technologies and solutions, more effort can be placed on areas that require detail and attention, such as manufacturing, marketing, etc.

Your team is only as strong as the weakest link. And habits are as good as the system governing them. Solidifying an innovation strategy sets the company against its competitors, incentivizes customers, and expands its product lines. An approach to an innovation strategy should include:

Innovation objectives and goals

Scope

Supporting functions required (such as Marketing, Operations, R&D)

Align strategy with business goals (both should work in conjunction)

Measure and analyze

Not to mention, companies achieve productivity and financial gains.¹ More positives to innovation include:

Economic growth¹

Creation of new ideas and technologies

Potential increases in revenue⁴

Continual improvement of products to meet market needs.

Potential to be bought out by larger companies

I don’t believe humanity will ever stop innovating. But we should not allow innovation efforts to be threatened. We would not have been able to experience such revolutionary and innovative ideas, inventions, and solutions.

We’re truly living in exciting times.