Innovation that Matters

Nicholas M. Donofrio
Kauffman Senior Fellow; retired executive vice president of Innovation and Technology, IBM

The very nature of innovation is changing—I believe it has already changed, but most of us have not yet realized it or caught up.

The information technology sector—where I spent my whole career—offers a perfect case-in-point. For literally decades, innovation in IT meant mostly hardware improvements, which meant, above all, speed and power. How many calculations per second do you get for a fixed amount of money? Progress was prodigious for many years. Choose an arbitrary, round number—say, $1,000—and then look at what it could buy over time. Over one hundred years, the purchasing power of that $1,000 increased by sixteen orders of magnitude. That's ten to the sixteenth power more calculations per second for that thousand bucks over a hundred years. A thousand dollars today buys a whole lot of productivity.

Or does it? Certainly it buys sheer power. But how much sheer power do we need? How many calculations per second does the average user, or the average business, really need to do? How much memory do we need? How much storage? We've crossed the terabyte threshold. How many of us can fill a one-terabyte hard drive? How many of us really need ten? Some of us already have five million pixels of visible capability. Do we need ten? Maybe the clock speed of your processor already runs at five gigahertz. Does it have to go ten?

This is not to dismiss the importance of technological advance or to scold users who want or need more power. But it is to suggest that we begin to ask ourselves about the possibility of diminishing returns. "More" was a successful business strategy for a lot of IT companies for a long time. More speed, more power, more storage, more of everything. Developers didn't ask what it was for. They didn't need to. All their customers wanted "more" and that want translated into sales.

Some of that want was rational. Growing businesses needed more power. More speed meant more efficiency. More storage meant quicker access to a growing cache of records. But there was also an element of keeping up with the IT Joneses. The CEO had to have the smallest laptop with the fastest processor. Senior managers had to have better machines than middle managers. Company X had to have more advanced systems than Competitor Y.

That impetus for buying is mostly played out—which means it's also finished as an impetus for innovation. Technology, by itself, is no longer the necessary and sufficient condition for success. Some companies had to learn this the hard way. IBM, where I worked for forty-four years, had to undergo a near death experience to understand that times—and needs and wants—had changed.

Today, the innovation that matters is not the latest result of Moore's Law, or doubling RAM, or tripling pixels. Those things still matter, but they matter much, much less. And, as innovations, they are old hat—merely the continued refinement and improvement of yesterday's breakthroughs.

The innovation that matters now—the innovation that we're all waiting for, even if we don't know it—is the one that unlocks the hidden value that exists at the intersection of deep knowledge of a problem and intimate knowledge of a market, combined with your knowledge, your technology, and your capability … whoever you are, whatever you can do, whatever you bring to the table.

This may seem mysterious. Let me explain it this way. The microchip was an innovation—a fundamental, technological innovation. Chips keep getting better by the year. Is every new one an innovation? Perhaps, of a limited sort, but not in a fundamental way like the first one.

The PC was an innovation, not in same technical league; rather, it was the transformational application of existing technology to a new market for new uses. Operating systems like the one that ran the early Macintoshes, and later Microsoft Windows, were innovations—ones that fundamentally changed not just existing technology but existing products and markets, by revolutionizing the user experience.

There have already been several decades of this type of innovation—and some very successful recent examples. Think of the iPhone. Steve Jobs didn't invent the phone or the cell phone or the handheld computer. But he put them all together into one attractive, easy to use, engaging package. Whether a die-hard techie admits it or not, that's innovation!

Yet too many people still think of innovation solely in terms of a wholly new product or technological breakthrough. But this is limiting, and it is false. Innovations can arise from fresh thinking in any number of areas: from product to service to process to business model. Michael Dell built a Fortune 500 company by changing the way computers are built and sold—but not changing anything about the device itself.

All of these things unlocked hidden value. It turned out that a more user-friendly interface than typing in the clumsy, unattractive DOS prompt drew people into computing and changed the way business is done and lives are lived. Thank Bill Gates. It turned out that people really wanted a multi-functional mobile phone with great design and were willing to pay for it. The design genius is what Steve Jobs brought to the table.It turned out that people wanted to buy computers directly, choosing for themselves the features they did, and did not, want. Michael Dell proved that.

These innovations not only created billions in wealth and probably millions of jobs—they increased our productivity, saved us time, connected us to new people and products, and enriched our lives. Before they existed, we didn't know we needed them and we certainly didn't want them. Now we can't live without them.

The good news for innovators and potential innovators is that, given the incredible complexity and diversity of the world today, opportunities for innovation abound. As confused as you think the world is, it's great for innovators. There are so many problems—some known and some yet to come to light—that opportunities for innovation will never run out. But we have to take a new approach: start from the problem, not the solution. That is, we can no longer say to ourselves "The end product is 5 GHz" (or whatever). Rather, we must ask ourselves "What needs to change?" and then—and only then—start thinking about how to change it. The question of what specific invention or product or innovation to pursue comes after that.

The kind of people who will be best able to seize these opportunities are those I call "T-shaped" as opposed to "I-shaped." I-shaped people have great credentials, great educations, and deep knowledge—deep but narrow. The geniuses who win Nobel prizes are "I-shaped," as are most of the best engineers and scientists. But the revolutionaries who have driven most recent innovation and who will drive nearly all of it in the future are "T-shaped." That is, they have their specialties—areas of deep expertise—but on top of that they boast a solid breadth, an umbrella if you will, of wide-ranging knowledge and interests. It is the ability to work in an interdisciplinary fashion and to see how different ideas, sectors, people, and markets connect. Natural-born "T's are perhaps rare, but I believe people can be trained to be T-shaped. One problem is that our educational system is still intent on training more "I's. We need to change that.

But even the most brilliant "T" will find it difficult, and perhaps impossible, to innovate entirely on his or her own. There are so many variables in our infinitely complex and diverse world that even the best-read, most up-to-date, and most knowledgeable "T" can't possibly know even a fraction of what it is useful to know.

I believe that two inexorable trends follow from this fact. First, nearly all future innovation will be collaborative. Whether it emerges from huge corporations or the smallest businesses, from century-old institutions or the latest start-ups, innovation will be the product of collaborative, global, and multi-disciplined processes. This trend is already underway, but it will intensify. The lone scientist or engineer in a lab will still play a role, but he will be an outlier. People you've never heard of and never given a first thought, much less a second, will emerge with the keys to whatever puzzle you are trying to solve. You may know a great deal, but so do they—and they know many things that you don't know but need to. You need them.

Which means you will have to include them, and which brings me to my second point, one that will be especially hard for IT people to accept, given their reverence for the sanctity of intellectual property. We are inevitably going to move toward more open standards. There is no other way. Tight-knit circles, secrecy, and firewalls keep out the knowledge that will be needed to devise solutions and make them work. This is not to say that all innovation going forward is going to be freeware—far from it. But the old model of IP protection doesn't fit the future. And that in itself is a problem to be solved requiring—innovation.

To thrive in this new world, the "I's are going to have to transform themselves into "T's. And we're all going to have to work together more so than we have ever done before.