Invention vs. Innovation

The usage of the term innovation has grown exponentially over the years, I wonder indeed if it would be possible to open a business magazine, a newspaper or a management book without coming across it at some point. It is also a fact that during the 80s and 90s whenever managers or shareholders talked about mergers and strategic decisions they would justify everything with the word synergy. What is the purpose of such acquisition? Synergies! Why is your company investing in such segment? Synergies! Well, guess what, now they have another magic word under their belt, innovation.

But don’t get me wrong here. It is beyond discussion the fact that innovation plays a central role in the success of companies. In my article “Long Term Success or Survival?” I show how the failure rate of top companies around the world is surprisingly high also due to their inability to manage innovation. When I say that people are using innovation as a magic word, I mean that often times managers and politicians are concerned too much in filling their speeches with the term and not concerned at all in understanding the dynamics behind the phenomenon.

The first confusion to dismiss is the difference between invention and innovation. The former refers to new concepts or products that derive from individual’s ideas or from scientific research. The latter, on the other hand, represents the commercialization of the invention itself. It is important to have this difference clearly outlined because an invention may have little economic value, if at all. In order to monetize an invention it is necessary to transform it into innovation, and such transformation is possible once we find a target customer, application or market.

There are several examples of great inventions that generated little or no returns to their inventors. In 1947 some scientists at the AT&T laboratories created the first transistor in the world. The invention was obviously patented, but the organization was not able to find promptly an application for the new device. They did an outstanding job with the invention, but failed to develop the innovation. Precisely for that reason in 1952 AT&T decided to license out the transistor. For $ 25.000 companies like Texas Instruments, Sony and IBM acquired a technology that would produce billions of revenues in the coming years.

Xerox is another qualified company when we talk about missing big opportunities, just like AT&T they were very good inventors, but they lacked the ability to transform such inventions into innovations. In the famous Palo Alto Research Center (PARC) Xerox was the first company in the world to develop a personal computer (years before Apple or IBM), a graphical oriented monitor, a word processing software, a workstation, a laser printer, a local area network, a hand-held mouse, and the list goes go. Yet it profited from almost none of such breakthrough inventions.

To invent or to innovate, that is the question!

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