When one of us (Walker) helped developed the idea that became Priceline.com, the challenge was to solve a decades-long problem: how could airplanes and hotels fill their last, otherwise empty and perishable rooms and seats while holding the line on the price and profitability of most bookings? Priceline’s unique “conditional purchase offer” – which allowed bidders to make low-ball offers which they were bound to honor if accepted – was an innovative solution that taught a big lesson: when underused assets are more fully exploited, everyone can win.
We’re being taught the same lesson by the rise of today’s “sharing economy.” Its common theme is that there are a lot of potentially productive assets sitting around, ripe for greater use. Whether we’re talking about a car, a private jet, or the guest room in a suburban home, more intense asset utilization benefits both consumer and supplier: the fractional buyer gets cheaper and often more convenient services, while many asset-owners make money in ways they never expected.
We suspect it is much less recognized that there also lots of innovation assets in the US economy that are being seriously underused. Firms constantly invest in processes of discovery and come up with innovations that others could put to productive use. Inventive people have ideas and are often able to develop them to the point of patenting (and given today’s tools, people have the capacity to do much more of this) but they lack the resources to make the world aware of their breakthroughs.
In all of these realms, the key to making assets more productive is a powerful information technology platform, with software capable of sifting through large warehouses of data – increasingly, the unstructured information coming from multiple sources known as “Big Data”. A good platform enables potential users and suppliers of assets to discover each other and do business.
This is the capability that has been lacking in the innovation asset space. Firms have often suspected that the solution they need already exists, and they hate reinventing the wheel, but they have been at a loss for how to
it. They might have scoured the Yellow Pages, but the ads there provided little real information, and making their fingers do the walking through every major U.S. city’s directory, let alone abroad, was a daunting task that few would even imagine undertaking. A little more fruitfully, they might have searched the U.S. or global patent data bases for more innovation-specific knowledge, but in pre-Internet days, this was both costly and time-consuming, and unlikely to locate useful information in adjacent fields or industries. Some firms hired expert industry consultants to help them find ideas outside their firms, but these individuals, too, had (and still have) limited knowledge, and in some cases conflicts of interest. (The best ones often are working with a firm’s competitors. How else would they really know what’s going on?).
Firms are often accused of suffering from a “not-invented-here” syndrome, but to some extent banking on homegrown solutions was rational. The tools to pursue “networked innovation” – innovation that includes and builds on ideas of others, perhaps through a patent license or a joint venture with the firm where the inventors of the ideas happen to work – have been of very limited value.
Even with the advent of the web and powerful search engines, it has been time consuming and expensive to discover patents and other documents about relevant innovations, much less their sources. The key words you enter, for example, can retrieve patents and other documents that contain precisely those words, but won’t likely lead you to other patents which use related concepts expressed in just slightly different words. Business social networks such as LinkedIn, meanwhile, enable you to find people and other firms with general expertise, but not with the highly specific expertise and knowledge that is typically required to be useful in refining an existing product or service, or developing an entirely new one.
All of this is changing now for the better. “Open innovation” platforms are connecting “seekers” of inventive answers to their problems with “solvers” who might be anywhere on the planet. Specialized search engines for conducting business-relevant searches of patent data bases and the technical literature are now coming online. The users and owners of innovation assets are finding, as they use these new tools, that their capabilities and horizons are expanding, greatly and continuously.
What difference could it make to get fuller use out of existing innovation assets? To the firm using the asset, potentially the difference between life and death. Businesses face a constant challenge to stay ahead of their competitors by making or delivering existing products and services cheaper, faster, and better, or developing entirely new ones. It has become a commonplace in business to say a company must “innovate or die.” (Indeed, researchers at the Kauffman Foundation have established that the life span of companies in the Fortune 500 has grown shorter over time.)
We’d say the aphorism already needs updating: today, firms must “get good at networked innovation or die.” They must look beyond their corporate silos for ideas to license, experts to consult, and partnerships to form in joint ventures. They can’t afford to spend a dime re-solving problems that have already been solved.
Meanwhile, higher utilization of innovation assets will prove an indisputably good thing for our economy (and others, too). Since the early years of the recovery from the Great Recession, economists have been divided over the outlook for the long-growth rate of the economy, which depends heavily on the pace of future innovation. If the growth pessimists are right and our economic pie is destined to grow much more slowly than in the past, then the political challenges of moderating or reversing the trend of increasing income inequality and undertaking major reforms in our tax system and entitlement programs will only increase.
But these challenges become a lot more manageable when the economic pie is growing rapidly. For that optimistic outcome to become a reality, innovation will have to pick up its pace. The prospect of more fully exploiting our economy’s most underused assets – our stocks of innovation – gives us reason to hope.