The Many Sources of Innovation

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Following on for the last blog post on Insightful Innovation, we can now raise the question of whose insight is it?

Many potential sources of innovation have been identified. However if one narrows down the sources to mainly persons or organisations, the list becomes more manageable:

  • Individuals
  • Corporates
  • Users
  • Outsiders
  • Spillovers


In the popular media the individual inventor still reigns supreme. The resilience of the individual inventor can be linked to a number of factors. First, there is the growth in the small firm sector that has taken place during recent years. Second, a variety of organisational devices, such as strategic alliances, have enabled small firms to work with large firms. Third is associated with applications of technology and while large firms may be proficient where the development of technology is concerned, small firms will often have greater knowledge of applications. A further factor has been the increased popularity of spin out companies. Not only do these provide a means for individual inventors to leave the corporate sector and set up on their own in order to develop an innovation, they also provide a very powerful role model for would be innovators.


The primacy of large firms as a source of innovation does seem to be borne out in some cases. There are large firms such as 3M or Merck or Intel that not only spend a great deal on R&D as a proportion of turnover, but also have a strong record on innovation. Similarly, there are some industries, such as aerospace and pharmaceuticals where large firm are the main source of innovation. However, it is important to note that there is no necessary connection between the size of a firm and its record on innovation and similarly there have been large firms that commit large amounts of resources to R&D, which nonetheless exhibit a very poor record of successful innovations.


Certain industries users play a critical role not only in generating ideas for innovations but their subsequent development. Scientific equipment is a good example of users playing a significant role in innovation. New forms of experimentation may well require new forms of monitoring and measuring equipment. Manufacturers of scientific equipment are simply not close enough to the research to perceive or predict the new requirements.   Similarly, users, more often than not, do not possess the capability to make scientific instruments so that once they have developed a prototype they turn to manufacturers to produce the equipment in quantity.


A consistent feature of innovations over many years has been the substantial proportion derived not from those working in a given field, be it an industry or a particular sector but from outsiders who have previously had little to do with it. For example. Steve Jobs and Steve Wozniak, the pioneering Apple II computers innovators were college drop outs and although Wozniak worked for Hewlett Packard, he was in calculators not computers. Also Jeff Bezos, who pioneered internet based retailing with Amazon, was a fund manager in the financial services industry.

None of these individuals worked in the field where they were to achieve success as innovators. They were not part of the community in which their innovation was based in that sense they were outsiders.

Why are outsiders important then? Outsiders may be more willing to try unorthodox ideas because they are not familiar with the conventional wisdom. As well as being willing to try unorthodox ideas and approaches, outsiders may also be more willing to try simple ideas. One of the biggest advantages enjoyed by outsiders is that they often have external contacts in fields which may be unrelated but nonetheless prove useful. A feature of these contacts is likely to be their diversity, enabling the innovator to draw from a relatively wide knowledge base.


Spillovers occur when a firm benefits from another firm’s investment in R&D. The nature of the spillovers can vary, but they might for instance result from one firm making an investment in R&D that leads to a scientific discovery or the development of a new product that other firms are able to imitate or copy. Alternatively if the firm that has developed the new product chooses not to commercialise it, it might license it to others. Either way a firm other than the one that made the initial investment is able to bring an innovative new product to market.


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