The Economics of Innovation - is it shifting?
How we measure the value of innovation has been debated for many years. Organisations such as the World Bank, for example, have been measuring the impact of innovation on productivity and inclusiveness, at a country level, and so have Development Institutions. At an industry sector level, Impact Investment firms such as Convergence Partners, have done some superb work, into the economic fundamentals of innovations in the telecommunications and ICT space, while at the micro-level, many organisations are asking – how can we innovate our way beyond the pandemic, and some pose an even deeper question – can we afford not to?
All these questions, we find, have at the heart of them, an economic model, which outlines how value is created from various forms of innovation – most noticeably technological advancements. When we look more closely though, the aspiration of many organisations, facing disruption, to become ‘a technology business’, can be at odds with the economics of innovation. Yes, many technological innovations have generated significant returns for their investors, yet for most organizations, we are the users of technological innovation, and as such, our returns in becoming more technology adept centre around our ability to identify innovations, to adopt them and to scale their use throughout the organisation. This is where the economics of innovation rely, for the most part, not on the technology itself, but on the management innovation we employ – to identify, adopt and scale. In short, it is management innovation which determines our return from innovation at large.
And so, management innovation is increasingly being recognised as a significant force. When we speak about the World of Work post the pandemic, and strive to do better, we are essentially practicing management innovation. When we develop new operating and management models, to become a more adaptive organisation and demonstrate resilience, we are engaged in management innovation. When we discover new perspectives and step forward to redefine our understanding of customers and markets, yet again we utilise management innovation.
What is then different about the economics of management innovation? I would like to argue that while technological innovation has become an increasingly crowded space of investors, entrepreneurs and technology partners, management innovation is a relatively open space. Moreover, the barriers to entry that organisations face when employing management innovation are significantly lower.
The biggest hurdle, we found, was the breadth of our imagination. Just think of how quickly and pervasive business model design has become, once some of its visual tools and thinking aides became popular.
When we think of innovation as economists do, we can discover new spaces, in which innovation is less crowded, more open and accessible to organisations and leadership teams from around the world. When I think about our world of work in 2030, I see technological innovations, many of which already exist, being used. But more than that, I see organisations unleashing their creative powers to innovate in how they manage, how they lead and how they work.
Have a good weekend everyone!
Saar Ben-Attar (Chief Instigator)
Featured podcast ePISODE
In our latest podcast episode, Adrian Saville, Professor of Economics at the GIBS Business School, joins Hidden Growth Champions host Saar to talk about how the world’s best businesses produce win-win outcomes with their stakeholders, one such outcome (among many) being sustained profitability. In fact, measured over a ten year period, the evidence is compelling. These innovative organisations outperform their peers by a factor to 2:1.
We speak about our work with such organisations, in measuring their impact in a credible way and how this data-rich approach can (and should) inform investment decision-making. A fascinating conversation on how one can bring Business value, Sustainability and Impact together.
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