By Langdon Morris

There are six distinct innovation views that typically need to be integrated into one clear perspective in order to come out with the best possible results: three outsider viewpoints and three insider perspectives: Outsider Perspectives – Knowledge Channel Innovation, Peer-to-Peer Innovation, Outside-in Innovation; Insider Perspectives – Technology-Driven Innovation, Bottom-Up Innovation, Top-Down Innovation. This is Part 6 of a six-part series examining each of these perspectives.

For most people, the word “innovation” evokes images of inventors, new technologies and new products. Iconic images come to mind – the Model T, airplanes, computers, rockets, radios, TVs, cell phones and more. The list is endless, and the impact of these devices on the development of the modern world has been tremendous. Society would not be what it is today without the progressive development of science and technology; their manifestations in the abundance of material wealth constitutes about two-thirds of U.S. economic activity.

It is worth mentioning that although technology-driven innovation is significant, it is but one among many different types of innovation. Other forms of innovation include services (such as hedge funds, discount stock brokers, professional dog-walkers and executive coaches), retail approaches (such as Amazon and Dell) and organizations (the corporation itself is a recent invention).

Origins of Technology-Driven Innovation

As innovation can take an infinite variety of forms, so its underlying insights can be derived from a great many different sources. Technology-driven innovation usually originates in scientific discoveries and in hundreds of years of accumulated technical know-how. These combined forces of science and technology drive ever greater specialization in the spheres of knowledge. When new technologies make the transition from the scientific domain to realization in technology, inventors and corporate R&D groups, companies compete to develop commercial applications.

In the early decades of industrialization the development of new technology was itself often a key source of competitive advantage. Consequently, companies invested heavily in R&D projects that produced new products in every sector of the economy. In some areas, this remains true today; pharmaceutical and bio-tech companies actively search for new genes, molecules and delivery systems; computer chip manufacturers are constantly refining the processes of design and manufacture in the endless pursuit of greater performance and smaller size; materials scientists in many fields are searching for higher performance and lower price, the twin hallmarks of innovation. Similar efforts characterize every other high-tech field.

Critical Success Factor

For companies that do not compete in the high tech sector, the development and deployment of technology is also a critical success factor, but here the role of technology is largely in operations, because technology is critical to every aspect of coordination, communication and management in today’s markets. For these companies (the vast majority), technology is completely embedded in how people work and improvements in technology applications can be a significant source of differentiation.

For example, FedEx relies on one of the largest and most sophisticated information technology operations in the U.S. to get packages to their destinations overnight, while allowing customers to track a shipment’s every step along the way. Similarly, supply chain management and automation at Wal-Mart was one of the company’s early competitive strengths and they remain so today. At major banks, millions of credit card transactions are processed each day; the pattern recognition software systems that search for fraud are run on massive computers that analyze terabyte-sized data files.

Technology Providers and Appliers

For companies that are heavy users of technologies that are not their end product, technology itself has nevertheless become a significant domain for innovation; technology-driven innovation, therefore, is central to their competitive position just as it is in high tech manufacturing. In this context, technology-driven innovation refers to the interplay between technology providers and technology appliers, and addresses the complex innovation dynamics that emerge when they work together to bring new capabilities into reality.

Discovering and deploying useful new technologies is a serious commitment for technology-driven innovation companies because of the competitive advantages that can be achieved. Managing the supply chain, managing millions of customer relationships or financial transactions, managing massively complex manufacturing sites are all critical functions that absolutely depend on technology. As technology advances new modes of operation have to be worked out, which calls forth a collaborative process of innovation between suppliers and users.

There is an ironic aspect to this – because technology is so pervasive, because access to it hardly varies from continent to continent and because its root purpose is almost always to increase efficiency, the acquisition and deployment of technology has itself become a force of commoditization. Commonly-available technology (including computers, communications gear, new materials and new methods) are all being applied globally to improve operations, to lower costs and lower prices, and to drive the process of commoditization deeper into all aspects of economic activity.

Generally, therefore, today’s technologies drive commoditization in nearly every sector of the economy – unlike in the 19th and 20th centuries, when innovation in technology was a source of competitive differentiation.

There is one exception to this trend, and that is in the creation of knowledge and the use of knowledge in services, which is often a source of differentiation through forces such as personalization, customization, and the aggregation and re-purposing of data, information and knowledge. It is for this reason that many of the most innovative companies of the last two decades are business model innovators, companies that do not innovate in the development of technology, but rather in its application in services and distribution, companies like FedEx and Wal-Mart as well as Starbucks, Home Depot, Zara, Amazon and even Nike.

Conclusion

The core process of technology-driven innovation has two very different facets:

For companies that apply science and technology to the creation of progressively more advanced technology-based products, exposing and understanding the inherent possibilities in science is essential to innovation.
For companies in services and distribution, technology-driven means something much different; it generally means applying technologies developed by others to create a competitive advantage in operations. Here, innovation is a collaborative effort between supplier and user.

About the Author:

Langdon Morris is a partner of InnovationLabs and author or co-author of six books. His most recent work, “Permanent Innovation: The Definitive Guide to the Principles, Strategies, and Methods of Successful Innovators,” is available as a free download at http://www.permanentinnovation.com. Contact Langdon Morris at lmorris (at) innovationlabs.com or visit http://www.innovationlabs.com.