Innovation is Location Agnostic

World Map from 1689We don’t get to decide where innovation happens, Brian Caulfield (@BrianCVC) said in a recent talk.

But policy makers sometimes think the opposite and launch government programs to start “innovation hubs” in remote areas, he added.

A partner at DFJ Esprit (@DFJEsprit), Caulfield said that, not only are officials confusing regional development with innovation, “It is a matter of supreme indifference to the market” where innovation occurs.

But what about countries or regions that see themselves are innovation leaders? They are not as sanguine about the prospect of losing their reputation.

Watching the rise of China, India, the BRICS and the advent of reverse innovation, some in the West fear America or Europe may be losing their edge.

Nitin Nohria, dean of the Harvard Business School, thinks that those fears are misplaced — and then adds that it doesn’t really matter, anyway.

Writing in the March issue of the Harvard Business Review, Nohria often asks audiences at lectures to name one, big, recent innovation that did not come from Europe or America.

The audiences are usually stumped, but at a recent talk, the moderator replied, “yoga.” It got a laugh, but Nohria ran with the idea before asking:

Perhaps the more important (and reassuring) question is this: Does it matter where an invention arises if an economy is world-class at harvesting its value?

Using the example of yoga, Nohria said what started in ancient India now “supports a huge industrial complex” from trainers and DVDs to therapists who treat sports injuries. The company with the most success at exploiting the activity is lululemon athletica based in Vancouver, Canada. It has a market cap of $9 billion and revneues of $700 million, he said.

“Inventions often create profit pools so large that their inventors can’t exploit them alone. And sometimes, as with yoga clothing, the most profitable opportunities lie in the adjacencies.”

Engaged in a market adjacency to yoga, the company is one of many that benefit from the exercise’s popularity, Nohria said. The important lesson is that with an increasingly globalized economy, “local actors don’t have much of a jump on the rest of the world,” he said.

The economies that will prosper are the ones best equipped to react to new innovations. Examples include electric cars where battery manufacturers will jockey to produce lighter and longer laster batteries, Nohria said:

“Companies with superior marketing and distribution capabilities and leaders who quickly recognize opportunities will be the ones that capture value from innovations.”

As Western economies face poor job markets and anemic economic prospects, Nohria said they should be praying for innovation regardless of its provenance because “ultimately, the creation of jobs and wealth has more to do with harvesting the value of an innovation than with inventing it.”

Image courtesy of Chuck Coker on Flickr.

4 thoughts on “Innovation is Location Agnostic

  1. Pingback: John P. Muldoon » Entrepreneurs Should Give Patents Another Look

  2. Are there not known patterns to where innovation happens?

    1. Population density. Areas of high density have higher on average GDP indicating they are creating more value.

    2. Youth. Old people don’t innovate. societies with lots of young people do.

    3. Freedom of expression. Authoritarian societies seem not to be very innovative.

    4. Reading. If you compare number of books translated to Hebrew each year with those translated to Arabic the difference in start up and patent numbers between Arabic countries and Israel becomes less surprising.

    If there are correlates between locations, demographics and culture with innovation is the idea of innovation being agnostic not demostrated to be false?

  3. Excellent points, David. If policy makers bore those points in mind, they would have more success building their ‘innovation hubs.’

  4. It is really hard to tell what will be a good idea. Hayek in ‘the use of knowledge in society’ pointed out that no person can hold all the information that the market does.

    Most startups when described in basic form seem like really bad ideas.

    You can set up your society in ways that allow and even encourages the free exchange of ideas and services but coming at it top down and deciding what people should do is really hard.

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