Wednesday, August 24, 2005

Innovation often takes a long to becomes economically viable

Innovation often takes a long while before it becomes popular or economically viable. The immensely popular email first came into being more than 20 years ago. For most of the 20 years or so of its existence, the email was popular mostly amongst the educational institutions and research centers. Its popularity in the recent years has grown not just on the back of improvements in technology but also as a result of faster geographical spreading of businesses and the resulting increase in mobility of people. The need to stay connected at low costs was as much responsible for the growth of the email as was the need to exchange information speedily. Look at the solar power; decades after it was identified as a limitless and nearly free source of energy it has gotten nowhere. It's strange that sun's energy, responsible for fueling almost all of life on earth, does not even contribute to a percent of the worlds energy needs.

For Innovation to succeed, a lot of things have to fall in place before an innovation becomes a big business. Improvements in technology, change in demography and needs of the people, the service infrastructure, the cost of the product service, change in perception etc. Sometimes an innovation is pushed into the mainstream by force of regulation and circumstances. E.g. the resolve of the United States after 9/11 to accelerate the research and adoption of alternative sources of energy will push alternative energy sources faster into the main stream. The world finally seems keen on reducing its dependency on hydrocarbons for it's energy needs. Or e.g. the Indian supreme courts directive on clean fuel has suddenly pushed up the demand of CNG kits in Delhi. But these are rare and lucky events for the involved businesses and an innovation may have to wait for a longtime for such events to come by. Even after 20 years of work artificial intelligence is still of interest mostly to in academic circles.
The years 2000 and 2001 were littered with the deaths of on-line business ideas and technologies. The WAP has come and perhaps gone. E-publishing, banner ads and a hundred things in between that were slated to rake in billion of dollars have all but faded away. People found the WebTV and the Network Computer too elementary for their needs. Perhaps it was that Mobile phones and hand held devices that caught their fancy (what with the falling airtime charges). Now those few that bought the WebTV are probably looking at replacing it with the more exciting Playstations or an Xboxs. Needs and desires have been shifting. And e-books will probably take-off once the PC-Pad becomes popular.
With the accelerating pace of change, most entrepreneurs find themselves becoming victims of the race to be first to the market. In recent times that logic has driven most new businesses too far forward. Sometimes putting in place a supply capacity way in excess of the demand. Most innovators and entrepreneurs wish for a fast adoption from the market. Unfortunately in most cases the adoption happen over a long, slow and often painful period. 'People usually overestimate the change that will happen in two years time and underestimate the change that will happen in over period of 5 years' - Says Bill Gates the richest entrepreneur of them all. Entrepreneurs usually find themselves caught between the need to scale down their expectations (to survive) and being the first to the market (to avoid being run-over).

Irrespective of the end result, the innovator-entrepreneur takes a huge personal and professional risk and must be respected for that. The progress of technology and indeed the resilience of the economy is greatly dependent on the enterprise of these people. For proof look at the rising use of the mobile phones and SMS and the growing number of people visiting the newly open coffee shops. Entrepreneurs will need to learn to live through changes impacted by slowdowns, shakeouts, disruptions, demographics and god-knows-what to see their innovation through to success.

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