Participating in The Economist’s online debate on innovation

I’ve been asked by The Economist to participate in an online debate. I’ve spoken for The Economist on several occasions as panelist and even keynote speaker, but this is a first for an online debate. The motion for the debate is “This house believes Japanese ‘incremental innovation’ is superior to the West’s ‘disruptive innovation.’” The debate will run online from March 8th to 18th.

Ex-Google CIO Douglas Merrill will be debating that ‘disruptive innovation’ is superior. You can follow the debate and vote online about which you feel is more important.

My intro opening:

Growing up in the West, we learn the myth of disruptive innovation early on. We are taught that inventions such as the telegraph, telephone, automobile, airplane and yes, even things like the iPod and Google prove that real genius lies in inventing something that shakes up the world and shatters the old status quo. We instinctively prefer sensational, disruptive innovation because it catches our attention and it reflects the qualities in both the individual and the organization that we admire most.

Yet I believe that the Western emphasis on disruptive innovation is not as desirable — for either a company or an economy — as a culture of steady, incremental innovation such as that found in Japan.

Of course, there is no modern economy that has only one without the other. Some disruption is always necessary, and the two approaches ultimately work hand-in-hand. Disruption creates new product categories, while incremental refinement polishes them and makes them smaller, cheaper, faster and better. Incremental innovation is like evolution: it may move slowly, but it may also produce what appear to be radically new, even disruptive events. On closer examination, though, we see that these disruptive forms grew out of the same creative gene pool as their predecessors. For example, we would not have created the telephone or airplane through incremental innovation, yet that is precisely the process that led from those early inventions to the iPhone and the 747.

I believe that disruptive innovations are over-emphasized in the West, and if one of the pair is to be held up as a model for industry and policy-makers, it is certainly Japan’s approach to endless incremental improvements.

Toyota is one of the best-known examples of Japan’s ability to make incremental innovation seem disruptive. Toyota did not invent the “just-in-time” system, but refined it to the point where it became the new bible for hundreds of manufacturers around the world. Toyota did not invent the hybrid car nor radically change its design or structure, and yet, by a thousand systematic adjustments, it has created the market leader in that field for more than a decade.
The company is famous for its “million ideas” program whereby every year tens of thousands of employees suggest ways to improve assembly, quality control, parts delivery, new business expansion, etc. This ability to constantly innovate and refine every aspect of corporate growth based on cost-free internal suggestions is one reason that Toyota continues to be seen both domestically and abroad as a symbol of Japanese business.

It also points to the truth that incremental innovation can produce disruptive effects. Just as the mass production of inexpensive, fuel-efficient cars severely disrupted America’s Big Three automakers, the application of those same quality control processes to high-end vehicles delivered a serious shock to the German luxury car makers.

All of this grew out of Toyota’s characteristically gradual, strategic process of innovation. No pressure for disruptive technologies, just a firm belief that 10,000 small improvements are just as effective as one radical new innovation.

Toyota is just one illustration of why I believe a nation needs an environment that supports steady, progressive and perhaps undramatic innovation. In fact, without this solid underpinning, disruptive innovation is not even possible, since disruptive events are not created ex nihilo; they grow out of the technical and social frameworks that came before. It is only by standing on the shoulders of past achievements that a few firms are able to reach for the stars and take on the massive risks associated with disruptive innovation.

As someone who built a successful business in California during the 1990s, I have seen first-hand the results of worshiping the disruptive innovation approach: for every successful firm on the road, there were miles of dead, burned-out companies. Of course, that is a risk that many young, entrepreneurial managers are willing to take, and the system should support them if they do. However, stockholders rarely want an established company to risk its existence on a turn of the roulette wheel.

Even in the case of venture business, companies find that targeting disruptive innovation is easier said than done. Truly disruptive events are more often the result of serendipity than the product of corporate strategy; no one can reliably produce breakthrough technologies. Once again, this doesn’t mean that radical, disruptive innovation is bad — quite the contrary — but it’s no way to run a sustainable company or underpin an economy.

Thus, I am increasingly convinced that it is more advantageous to build a climate like Japan’s that provides widespread support for sustained, incremental innovation and allows for “outlier” individuals and businesses to make disruptive bets every once in a while. The better economy is the one that emphasizes constant minor improvements, with a capacity to produce larger and faster innovation when necessary, and even, in a minority of cases, truly game-changing developments that appear to have been born spontaneously. The alternative — emphasizing disruptive, game-changing innovation at the expense of a stable foundation of constant improvement — may produce headlines, but it won’t prove sustainable.

Posted by whsaito

  1. “I am increasingly convinced that it is more advantageous to build a climate like Japan’s that provides widespread support for sustained, incremental innovation and allows for “outlier” individuals and businesses to make disruptive bets every once in a while.”

    Actually, that sounds more like the West than Japan. America does a lot a innovation, although its leaders have to do a better job at helping sustain the industries that do these innovations. But that’s not the same as saying the country doesn’t innovate — that’s far from the truth. It has the whole invention thing down pat, though.


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William H. Saito