Who exactly is an innovator?

Think about the last time you made an innovative improvement to your machine’s automation system. Did you invent and patent a basic new technology, or instead did you take an off-the-shelf product and use it to make your machine better?

It probably was the latter, and that’s why real innovation depends on more than just inventions and patents.

In addition to applying technology that’s been invented elsewhere, you have to get your customers to accept and apply your innovative machines to improve the productivity of their manufacturing operations. In the end, which party was the most important to the innovation: the original inventor of the technology, the machine builder that employed the technology to improve their machine, or the customers that employed the innovation to increase their manufacturing productivity?

Traditional thinking says the innovator invents and patents new technologies. The innovator almost always is a technical person, often an engineer or a scientist. Because China and India graduate a gazillion more technical people than the rest of the world put together, they will be the innovators of the future, while every other country falls behind.

Amar Bhidé of Columbia University’s business school argues in a paper titled “Venturesome Consumption, Innovation and Globalization” that an innovation does not occur until it is put to productive use. This puts the U.S. in the lead because it is the country best at commercializing innovation. Although Bhidé’s paper primarily covers innovation in consumer markets, his studies are very relevant to our machine builder industry.

Academia and the media are awash with studies and articles that claim the U.S. needs to be the world leader in nearly every area of basic technology. These studies and articles predict dire consequences from any slippage in technological leadership. Virtually none of them discuss an “inconvenient” fact that the U.S.’ worldwide technical leadership has been slipping for decades. This slippage has been accompanied by a corresponding gain in productivity and per capita GDP relative to much of the world.

“Japanese per capita incomes reached 80% of the per capita incomes in the U.S. by 1989; after that, relative incomes in Japan have actually fallen a bit,” says Bhidé. “The growth rate in output per hour during 1995-2003 in Europe was just half that in the U.S.”

Traditional theories about technological leadership suggest that European and Japanese incomes should have been catching up with U.S. incomes due to substantial increases in their share of PhDs and scientific articles.

Bhidé identifies two main reasons that technological leadership is not tied directly to productivity. The first is that the success of new firms is seldom based on proprietary use of new inventions. “My studies of over 500 new and emerging businesses over the past 18 years suggest that few entrepreneurial ventures—including those characterized as high tech—undertake cutting-edge upstream R&D,” claims Bhidé. “Rather, they combine and distribute innovations generated by others. They play the role of system integrators or value-added resellers.” This is a pretty good description of how machine builders use innovation to improve their automation systems.

The second reason is innovation does not occur without venturesome and resourceful customers. Customers must be willing to take a chance on new products and services. To use Bhidé’s terminology, venturesome consumption is key to innovation.

Hidebound and conservative machine builder customers won’t apply new and innovative machines to their manufacturing processes. These customers aren’t venturesome and won’t use innovation to increase productivity and their country’s wealth.

There also is a third factor that applies to these dynamics. As I said, the machine builder must innovate and customers ultimately must accept and apply the innovation. But, there has to be linkage between the two parties. This linkage is a technically astute sales force.

Your sales force must be able to explain the benefits of your latest innovation to customers. In fact, they often need to help customers prepare a detailed cost/benefit analysis to justify the extra initial cost of adopting the new innovation.

The U.S. technological lead might be slipping, but its share of risk-taking customers prompted by astute salespeople and marketers continues to grow. Looking at the entire innovation equation results in a truer picture of the productivity growth of nations than solely evaluating scientific papers, patents, and numbers of engineering graduates.