The Economist Debate – Rebuttal

As I mentioned last week, I am participating in an online debate with The Economist. You can follow the debate and vote online for the issue you feel is more important.

Here is the rebuttal I just posted based on the opening statements by my opponent, the moderator and feedback/comments I received from the various participants.

My rebuttal:
I am delighted by the response this debate has produced. Many thoughtful readers have pointed out that the initial premise of the debate is unnecessarily dualistic: it suggests an either/or dichotomy that seems unrealistic. Most people seem to believe that we need some combination of incremental and disruptive innovation, and both Mr Merrill and I agree. Where we differ is in the relative importance of the two.

Although I firmly believe there is an important distinction to be made between invention and innovation, several readers have brought up examples of famous disruptive inventions to bolster the case against incrementalism. What strikes me in looking at the history of great inventions is how often the same innovative steps happened in parallel. The major advances that gave us the radio, telephone, automobile and airplane took place in different countries at roughly the same time. In fact, the people we call “inventors” were often just the first to file an acceptable patent application. This goes to show that in every period there were sufficient incremental innovations creating an environment that allowed various people to achieve similar results. It was this huge, fertile field of experience and knowledge that allowed multiple individuals to connect the dots in the same way and move to the next step. In retrospect, that next step was truly disruptive, but the process of getting to it was unquestionably one of assimilating and building upon earlier developments.

For instance, many readers pointed to the automobile as an example of disruptive innovation and Mr Merrill brought up Henry Ford, who of course did not invent the automobile, did not invent mass production and was not the first to apply mass production to the automobile. In fact, Henry Ford’s greatest contribution to the disruptive power of the automobile was in marketing—in pricing his cars as low as possible and raising his employees wages to bring these products within their grasp.

The auto is often used as an example of disruptive innovation, but in reality it is just the opposite—a perfect example of a disruptive force born from thousands of incremental changes. The history of the auto spans not years but centuries (the first US patent for an automobile was granted back in 1789). While it is much simpler to teach children about Karl Benz or Henry Ford, the truth is that no one individual invented the automobile; it had a hundred fathers over a span of 250 years.

If the automobile’s history is complex and paternity uncertain, consider the much-disputed history of radio or the telephone. The airplane’s inventors are less in doubt, but its history is no less a product of thousands of incremental improvements by hundreds of contributors.
No one would deny the disruptive nature of the automobile, the telephone, the airplane, radio, television, or the computer. They were all disruptive to markets, lifestyles, business models and more. However, if we examine them closely, none of these these can be attributed to a single disruptive invention. All of them involved a long process of innovation by dozens or hundreds of contributors. These disruptive inventions were all the result of an incremental (and remember that “incremental” does not necessarily mean “slow”) process of improvement on prior art.

Even the transistor, a remarkably disruptive technology, as one reader pointed out, was developed by Bell Labs engineers working to improve upon ideas that were patented 20 years before. The microwave oven, also held up as an example of disruptive technology, was not technically innovative at all: the innovation lay in re-purposing magnetron technology which had been around for decades.

My honourable opponent claims, “the issue becomes whether incremental change makes it more likely that your company will win. Alternatively, does disruptive change … improve your chances?” Unfortunately, this phrasing of the argument presumes that disruptive change is ready at hand and a CEO has only to look at the menu and choose between the relative merits of two types of innovation. Needless to say, that is not the case. In the real world, CEOs must decide whether to bet their company’s future on a series of low-risk, uncertain-return constant improvements, which may or may not lead to some radical development down the road, or to focus resources on costly, highly speculative attempts to produce high-return disruptive results. After disruptive innovation has appeared, history (and shareholders) will amply reward the executive who bet on the latter and won. But what of those who made the bet and lost? For every successful breakthrough technology, thousands of others blew up, evaporating large amounts of capital and putting armies of talented people out of work.

If we limit the discussion to the potential success or failure of individual companies, the idea that “one guy wins, a thousand others lose; that’s business” is palatable. But when we’re also talking about public policy (as the moderator suggested), that equation becomes unsustainable. We cannot bet a majority of our resources on a crapshoot. Note that this does not mean that governments cannot champion kaizen (improvements) as a basic foundation for industrial policy while at the same time promoting R&D that might someday lead to breakthrough technologies. That, in sum, is exactly what Japan and other Asian economies have been doing for decades.

Posted by whsaito

  1. Complex Post. This transmit helped me in my college assignment. Thnaks Alot


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William H. Saito