I go to lots of meetings in Washington on innovation. Most of the time we are bemoaning the lack of an innovation policy in this country and wondering what it will take to get the US back on track.
My major complaint is that invertible, when it comes time to propose possible solutions, we fall back on the stand answers: more funding of R&D, train more scientists and engineers, and create an infrastructure that allows them to collaborate better (both social and hardware infrastructure).
That’s fine for top-down innovation — innovation that comes out of the research lab. But as a 2002 RAND study pointed out, the innovation system is much broader and deeper than that:
we immediately think of scientists and engineers working sometimes on their own but most often in laboratories or R&D facilities operated by private industry, by universities, and to some extent by the government. Yet, much innovative activity occurs outside the formal precincts of R&D labs. R&D departments tend to be an artifact of large firm organization. But in all company settings much “fixing” that amounts to innovation is done on the line by employees not principally charged with the innovation task. This type of informal activity too is an element of the national innovation system.
Another major source of innovation is users. Virginia Postrel’s column yesterday in Business > Innovation Moves From the Laboratory to the Bike Trail and the Kitchen” href=”http://www.nytimes.com/2005/04/21/business/21scene.html”>the New York Times, “Innovation Moves From the Laboratory to the Bike Trail and the Kitchen” reviews Eric Von Hippel’s leading edge work in this area:
When most people think about where new or improved products come from, they imagine two kinds of innovators: either engineers and marketers in big companies trying to “find a need and fill it” or garage entrepreneurs hoping to strike it rich by inventing the next big thing.
But a lot of significant innovations do not come from people trying to figure out what customers may want. They come from the users themselves, who know exactly what they want but cannot get it in existing products.
“A growing body of empirical work shows that users are the first to develop many, and perhaps most, new industrial and consumer products,” Eric von Hippel, head of the Innovation and Entrepreneurship Group at the Sloan School of Management at the Massachusetts Institute of Technology, wrote in “Democratizing Innovation,” recently published by MIT Press.
Unfortunately, we don’t really understand the policies that could foster bottom-up innovation. In his book, Von Hippel outlines the public policy problem:
An important first step would be to collect better data. Currently, much innovation by users-which may in aggregate turn out to be a very large fraction of total economic investment in innovation-goes uncounted or undercounted. Thus, innovation effort that is volunteered by users, as is the case with many contributions to open source software, is currently not recorded by governmental statistical offices. This is also the case for user innovation that is integrated with product and service production. For example, much process innovation by manufacturers occurs on the factory floor as they produce goods and simultaneously learn how to improve their production processes. Similarly, many important innovations developed by surgeons are woven into learning by doing as they deliver services to patients.
Next, it will be important to review innovation-related public policies to identify and correct biases with respect to sources of innovation. On a level playing field, users will become a steadily more important source of innovation, and will increasingly substitute for or complement manufacturers’ innovation-related activities.
Von Hippel makes suggestions in four areas:
1) Intellectual Property Rights, where he raises the concern that the current IPR regime is too restrictive.
2) Constraints on Product Modification:
Current efforts by manufacturers to build technologies into the products they sell that restrict the way these products are used can undercut users’ traditional freedom to modify what they purchase. This in turn can raise the costs of innovation development by users and so lessen the amount of user innovation that is done.
3) Control over Distribution Channels:
Users that innovate and wish to freely diffuse innovation-related information are able to do so cheaply in large part because of steady advances in Internet distribution capabilities. Controls placed on such infrastructural factors can threaten and maybe even totally disable distributed innovation systems such as the user innovation systems documented in this book.
4) R&D Subsidies and Tax Credits, were the bias is toward manufacturers-innovation rather than user-innovation:
important innovative activities carried out by users are often not similarly rewarded, because they tend to not be documentable as formal R&D activities.
While this is an interesting list of issue, I think it probably only begins to scratch the surface of our policy bias toward top-down innovation.
One end note: Von Hippel also warns of the challenges to National Competitive Advantage:
Nations may be able to create comparative advantages for domestic manufacturers with respect to profiting from innovation by lead users; however, they cannot assume that such advantages will continue to exist simply because of propinquity.
In other words, in an era of global manufacturing, just because something was invented here, doesn’t mean that it will be produced here. That is another dimension that we take into consideration as we development a comprehensive innovation policy.