Innovation in a Virtual World

One of the defining symbols of the early twenty first century environment for innovation is the Internet. Born out of informal exchanges and a desire amongst scientists to share and collaborate more effectively this has grown into a framework for change which bears comparison with the advent of the railways in the nineteenth century. It has fuelled and been fuelled by the rise in the power and versatility of ICT and it has generated an enormous user base estimates vary but from a figure of around 35 million users in the late 1990s there are now probably over 1 billion people with access to the Internet around the world.

Mobile telephones provide a similar example of huge growth and penetration. There are currently around 600m units per year sold and markets in developed countries close to saturation. Even in developing countries there is a high access rate — for example, telephone ladies in Bangladesh rent out by the minute so even the poorest citizens have access.

Such developments and their parallel and complementary versions inside organizations, across private networks and using different media – wireless , cable , satellite , etc – create a communications and participation revolution which one might expect, has all the characteristics of a discontinuous shift in the innovation . Yet if we analyze this we can see the same forces for innovation at work as were operating centuries ago. On the technology push side the range of opportunity created by ICT developments is enormous – it has become a solution looking for problems. But similar characteristics were present when steam power first became widely available and reliable. And as the glut of failed Internet start ups demonstrates – simply having the technological means is no guarantee of business success – innovation as always is about effective coupling of needs and means within a strategic framework.

Similarly on the demand side, there are forces at work which are acting to pull innovations through and to shape and direct the pace and nature of change. Not surprisingly, much of the impact has come in areas which are essentially information rich in terms of their content and delivery – for example services like banking and insurance have been heavily hit by new developments. Two useful concepts in this connection are those of richness and reach terms coned by the Boston Consulting Group to help think about where the impacts of the e-revolution are likely to be felt. Richness refers to the content of an information service how customized and deep it is whereas reach refers to the extent to which it can be offered to a population. Normally there is a trade off you can have rich services but they tend to be high price and reach only a few people with the means to access them – for example, a personalized bank or a tailored travel package via a personal consultant . Equally low cost services with high reach tend to be characterized by a one size fits all mentality and to compete on the basis of low cost. What the ICT revolution does is shift the balance between these two so that rich services are available but with global reach – and a new economics emerges.

This is a seductive argument and there are certainly good examples where industries or sectors have been transformed by the new balance of richness and reach – in addition to banking ad insurance we can think of travel (last publishing (Amazon) retailing (QXL, e-Bay) and many others . But there are clear limits to the extent to which even revolutionary changes in the availability of service delivery options will lead to discontinuity. Not all sectors are information rich and consumers still consume goods as well as services. For much of the retail end of the e-revolution there is still the problem of the last mile — getting the physical goods delivered to particular households. These goods have to be manufactured and although the co-ordination and control may become increasingly subject to JCT innovation it will still be necessary to store and move physical goods around. And in hospitals automated medicine still can’t help with the growing demands of care especially amongst an increasingly aged population.

Source: Managing Innovation