Has the innovation
engine run out
of steam?
A Guest Article by Paul Sloane
August 2016
www.tcii.co.uk
Building Profitable Business
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
The big advances have come to an end
The Economist recently ran a feature entitled Has the Ideas Machine broken
down? The front cover showed a Rodinesque figure sitting on a toilet and
pondering the question: “Will we ever invent anything as useful again?”
There are many pundits who think that the innovation engine that has powered
the growth of the world economy is running out of steam. Peter Thiel, one of the
founders of PayPal, says that innovation in the USA is “somewhere between dire
straits and dead”.
Consider as a marker the speed of travel. It improved dramatically through the
late 19th and early 20th centuries with major innovations such as trains,
automobiles, airplanes, jet engines and rockets. But the big advances came to
an end in the 1970s.
Movement by car now is no faster than it was then – indeed, it is often slower.
We can fly from London to New York no faster now than in 1970 – indeed, with
the abandonment of supersonic passenger flights, it takes significantly longer.
Only 12 people have walked on the moon and the last of those was over 40
years ago.
At a more prosaic level, consider the kitchen. Technology made massive
improvements in the domestic kitchen in the first 70 years of the last century,
with refrigerators, gas hobs, microwave ovens and dishwashers all making life
much better for the housewife (or househusband). But what has changed since
then? What major innovations can you name that have significantly impacted
the kitchen in the last 40 years?
Future innovations will have far less impact
Productivity in terms of output per person increased in the major economies
between 1950 and 2000, but since then it has stalled. Robert Gordon, an
economist at Northwestern University, believes that the past two centuries of
economic growth may represent a one-off spurt rather than a sign of
uninterrupted progress.
Gordon contends that there were only a few truly fundamental innovations and
they have already been made. They include the use of electricity, the ability to
travel anywhere, vaccination, mass production methods, and the ability to
communicate with anyone at will. Surely there will be many more innovations,
but they will not have the impact of electricity grids or the telephone.
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
www.tcii.co.uk
2
Building Profitable Business
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
More evidence comes from the world of research and development. Studies by
Pierre Azoulay of MIT and Benjamin Jones of Northwestern University indicate
that an average R&D worker in the USA in 1950 was seven times as productive
as one today, measured in terms of contribution to innovation and growth. Many
of the easy wins have been made. Also, it takes much longer for any researcher
to catch up with the frontier of their science or technology because there is so
much more knowledge out there.
The optimistic view
Countering this pessimism about innovation, the optimists would point out that,
although progress in speed of travel has slowed, it has continued in safety and
fuel economy. And if mature industries such as air travel have slowed,
innovations in computing and mobile technology have powered ahead.
Computers today continue to offer huge increases in computing power and
storage capacity and these are being put to use by more people in more ways
than ever before. And then of course there is the Internet – possibly the
greatest technological innovation of all time.
The pessimists remain unconvinced. They point out that all the capabilities of
the World Wide Web, mobile technology and computing power have had little
impact in improving productivity or driving economic growth. Indeed, office
productivity has stalled. It is likely that Google and Facebook are slowing down
office work rather than improving it.
Other reasons for concern
There are other reasons to worry about the pace of innovation. Governments
speak much about the need for innovation, but their actions often inhibit rather
than promote it. Regulation is much heavier now than it was a generation ago,
raising costs and making approvals of new products much more difficult.
Furthermore, governments are now unable or reluctant to fund the major new
long-term infrastructure or exploratory programmes such as the Apollo space
project.
Some of the largest sectors of western economies, such as education,
healthcare and government, have long proved difficult areas for innovation,
productivity improvement or cost cutting. It is hard to argue for, let alone
implement, radical solutions in these sectors, because of vested interests and
public attachment to familiar methods.
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
www.tcii.co.uk
3
Building Profitable Business
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
The challenge for the West
Perhaps the doubters overstate their case, but the worry persists that we have
become complacent in assuming that innovation is thriving and can continue to
drive growth and productivity in the West. Our levels of regulation and
institutional rigidity are making innovation much more difficult. The emerging
economies in Asia, Latin America and elsewhere are seizing the opportunity to
change, innovate and grow rapidly. This is the challenge that we must contend
with if our innovation engine is really running down.
Paul Sloane
Author and speaker on innovation and lateral thinking
If you would like more information on any of the points covered in this Guest
Article, please contact TCii on 020 7099 2621.
Has the innovation engine run out of steam?
A Guest Article by Paul Sloane for TCii Strategic and Management Consultants
www.tcii.co.uk
4