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Innovation and innovators are critical to a dynamic and resilient economy. They are the methods, madness and masterminds behind Joseph Schumpeter’s famous descriptive, ‘creative destruction’. So, author Elliot Parker’s new book, ‘Illusion of Innovation’ should be taken as a serious warning to economists, investors and politicians about the prospects for America’s prosperity in the years ahead. The book serves as a critical and important assessment of the state of innovation in America today.
Elliot Parker brings an excellent pedigree to the subject of innovation. He was a close colleague for many years of the late Clayton Christensen – the Harvard professor and author of the 1997 best-selling masterpiece, ‘The Innovator’s Dilemma.’ It is one of the most read and useful books ever written on innovation. Clayton’s framework on disruption inspired a whole generation of entrepreneurs and start-ups. Now, 28 years later, Parker’s ‘The Illusion of Innovation’ is a good sequel and companion to ‘The Innovator’s Dilemma.’
The book’s subtitle, ‘Escape “Efficiency” and Unleash Radical Progress” is the book’s call to action. Why? The author is concerned with what he calls the sterile state of big business today that puts at risk the long-term vitality of their business and the economy. An obsession with financial metrics like RONA, ROIC and IRR can blind managements to related business opportunities that might expand sales, expertise and profits. Risk aversion could inadvertently become opportunity aversion.
Parker breaks innovation into three categories: 1) Performance improving innovations, 2) Efficiency innovations and last and most importantly 3) Empowering innovations – which is the game changer by “transforming products so radically that they create whole new markets and generate jobs for their originators and the economy.” Think of George Mitchell who transformed natural gas markets with his hydraulic fracking technology. Think of Steve Jobs and Apple and their creation of vast new markets for their iPod, iPad and iPhone. Think of Thomas Edison and his famous prediction, “We are going to make electric light so cheap that only the rich will burn candles.” These are great examples of transformative innovations that created great wealth, raised standards of living and empowered human flourishing. Such breakthroughs don’t come from green-eye shade numbers crunching but rather the result of messy outside the box experimentation with plenty of failures and lessons learned along the way.
Parker worries that big corporations that have the corporate structure and resources to pursue the messy process of breakthrough innovations remain timid and instead focus on incremental improvements in efficiency and performance. An example would be financial engineering such as leverage and share buybacks that may improve company bottom lines and share prices but with little value added to customers or the general economy. It may benefit the CEO’s stock options but it could put the company at risk when good times turn south. That happened in spades to the airlines when the pandemic hit and the government had to rescue them. Resilience matters.
The great guru of business Peter Drucker is famous for his
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