Look around yourself and you will find one innovation or the other. Even things that are commonplace were once a major or a minor innovation. Look at the news, the radio, the magazines and all kinds of media and you will hear about the imperative of innovation. Why is innovation the holy grail? Why do firms spend enormous amounts on innovation?
Why did Apple device iPhone when it was so successful with iPod. Why did Microsoft come up with windows operating system when it was so successful with DOS. Why did electronic firms develop and commercialize high definition television?
The profit motive is what makes firms follow innovation as a holy grail. Since better operating system allowed Microsoft to charge a premium it made perfect sense to innovate. Since iPhone made it harder for Zune or other makers to compete with iPod and at the same time allowed Apple to charge more, it was the holy grail for Apple.
The same profit motive also forces firms to innovate when other innovations either leave them behind or when competition catches up in the technology. This is the fear of loss of profit or market position. Longer life batteries from competition forces a battery incumbent such as Duracell to innovate on battery life. Higher mega pixel cameras from competition forces Kodak to innovate on camera resolution.
The essence of innovation for firms is the profit motive – whether to seek higher profits or protect existing profits.
On the other hand, individuals innovate for many other reasons – career success, more money, creativity, passion, expression, achievement, impact and many motives. No matter what the motive for an individual innovator, firms do not go ahead with an innovation unless there is a profit motive. As long as firms exist for shareholder value, profit motive drives innovation.
If innovation is such a great thing then shouldn’t we all be driving innovation in our businesses?
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