March of Innovation

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March of Innovation
Business, Law, and Innovation

• Lecture 1
• Spring 2012
• Professor Adam Dell
• The University of Texas School of Law

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Big Themes

• Innovation is ever present in our economy.
• Supportive ecosystem, culture of risk fair
  incentives.
• Tools of innovation in the hands of more people
  than ever.
• Results of innovation are impressive.
• A lot more to come

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Science Doesnt Sleep

• Engineers / Scientists are on an unending march
  to make things faster, smaller, cheaper, cleaner,
  simpler.
• Market conditions do not alter this paradigm.
• May accelerate investment / risk capital in a new
  market (alternative energies, green technologies)
  but they do not dictate its natural progress.
• Engineers (with pocket protectors) had been
  working the plumbing of the Internet long before
  you ever heard of Google and theyll be working
  on improving it longer after you take Google for
  granted.
• Alternative energies (thin film solar, micro
  turbines) may get more attention when oil is 150
  a barrel, but they dont go away when its 50.
• Businesses are the most efficient allocators of
  capital (because they think in terms of ROI).
  They are always chasing the next pile of s. As a
  consequence, you will forever see businesses
  endeavor to make money through innovation.

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Creative Destruction
The notion of creative destruction is found in
the writings of Friedrich Nietzsche and in
Werner Sombart's Krieg und Kapitalismus (War and
Capitalism) (1913, p. 207), where he wrote
"again out of destruction a new spirit of
creativity arises". The economist Joseph
Schumpeter popularized and used the term to
describe the process of transformation that
accompanies radical innovation. In Schumpeter's
vision of capitalism, innovative entry by
entrepreneurs was the force that sustained
long-term economic growth, even as it destroyed
the value of established companies that enjoyed
some degree of monopoly power.
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Creative Destruction
Companies that once revolutionized and dominated
new industries for example, Xerox in copiers or
Polaroid in instant photography have seen their
profits fall and their dominance vanish as rivals
launched improved designs or cut manufacturing
costs. Wal-Mart is a recent example of a
company that has achieved a strong position in
many markets, through its use of new
inventory-management, marketing, and
personnel-management techniques, using its
resulting lower prices to compete with older or
smaller companies in the offering of retail
consumer products. Just as older behemoths
perceived to be juggernauts by their
contemporaries (e.g., Montgomery Ward, Kmart,
Sears) were eventually undone by nimbler and more
innovative competitors, Wal-Mart faces the same
threat. Just as the cassette tape replaced the
8-track, only to be replaced in turn by the
compact disc, itself being undercut by MP3
players, the seemingly dominant Wal-Mart may well
find itself an antiquated company of the past.
This is the process of creative destruction.
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Creative Destruction
In fact, successful innovation is normally a
source of temporary market power, eroding the
profits and position of old firms, yet ultimately
succumbing to the pressure of new inventions
commercialized by competing entrants. Creative
destruction is a powerful economic concept
because it can explain many of the dynamics of
industrial change the transition from a
competitive to a monopolistic market, and back
again. It has been the inspiration of endogenous
growth theory and also of evolutionary
economics.2 Creative destruction can hurt.
Layoffs of workers with obsolete working skills
can be one price of new innovations valued by
consumers. Though a continually innovating
economy generates new opportunities for workers
to participate in more creative and productive
enterprises (provided they can acquire the
necessary skills), creative destruction can cause
severe hardship in the short term, and in the
long term for those who cannot acquire the skills
and work experience.
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Creative Destruction
There are numerous types of innovation-generating
creative destruction in an industry New
markets or products New equipment New sources
of labor and raw materials New methods of
organization or management New methods of
inventory management New methods of
transportation New methods of communication
(Internet) New methods of advertising and
marketing New financial instruments
Who Wins? Who Looses? Who Cares?
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Ecosystem Supportive of Innovation

• Government Education Support
• ARPANET (Thank the US Gov. for the Internet)
• You have Stanford to thank (in part) for Google
• Technology Transfer Programs (Silicon Valley /
  Stanford ? / UT)
• US Patent Trademark office protectors of an
  innovators idea.
• Entrepreneurs, Venture Capitalists, Lawyers,
  Engineers
• Clear understanding of the steps / process
  associated with turning a technology into a
  viable business.
• Regional Advantage (AnnaLee Saxenian)
• Cultural Acceptance of Risk / Failure
• Regional advantage
• Fair Incentives
• Big spoils to those whose innovations change
  industries.

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Tools of Innovation in the Hands of All

• Parallelism
• Definition the independent development of a
  similar trait in related species or lineages
  following divergence from a common ancestor.
• Many examples (radio, nuclear bomb) of innovation
  which were developed roughly at the same time by
  different people in completely separate
  locations.
• We stand on the shoulders of those whose
  innovations came before.
• Collaboration / Open Innovation
• Today we have virtually instant access to all
  information.
• Powerful PCs have made it possible for an
  individual in a single room in Katy, Tx to work
  on problems that the engineers at Research Park
  in Palo Alto are working on.

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Ex. Organized Around Open Innovation

• Innocentive
• Reward based problem solving.
• Deep technical problems defined by a corporation.
• Published in an open marketplace, solved globally
• Solve any of our Challenges to win awards from
  5,000 to 1,000,000. Challenges are posted by
  Seekers (corporations, government agencies, and
  nonprofit organizations) who are looking for your
  help with product development and other business
  and science problems.

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Results
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Results
Technological Forecast, in Economy Energy
(http//www.ecen.com), nº 30, fev.2002.
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More to ComeFaster

• Because innovation is now a global collaborative
  prospect.
• Because innovation is not limited to just those
  employees in your company.
• Because the sheer of people working on science
  engineering problems in much larger.
• Because the size of the market for IT science
  innovations is now much larger
• Because innovation is a solution to
  environmental, energy and food source issues.
• Innovation will happen faster and be even more
  important in our economy.

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