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Why Innovation Is Important

        posted by , June 27, 2016

Economists aren't easily excited.

That is to say, dominant economic theories don't change all that often. Once every 200 years is breakneck speed in the field of economics.

The fact that innovation is hot topic amongst leading economists says something. It says that innovation isn't the latest business buzz word. It says that innovation is changing the fundamental physics of the economic universe.

Innovation Economics

Innovation economics is an economic theory that places knowledge and innovation at the center of the model. Innovation is seen as key to productivity (traditional models focus on capital and labor).

So if you accept that innovation is now central to the economy, the big question is: where is innovation headed?

Automation vs Design

The last 100+ years of technology innovation has focused on automation and systemization. We started automating the most repetitive tasks and have worked our way up.

At first factories were automated, humans are no longer involved in putting bolts into little boxes.

With time we began automating higher level tasks. For example, we can now automate a great number of office functions. Technically, we can even automate sales.

Automation has hit a wall. It has become easy and cheap to automate repetitive, mindless tasks.

Automation is now entering areas in which humans have a competitive advantage. For example, you can try to establish relationships with customers with automated tweets or emails. However, humans have little interest in relationships with automations.

A real human can easily beat a robot at customer relationship management. Compare your friendly neighborhood vending machine to the pleasant staff at your local café.

Robots also aren't particularly good at designing things or creating art and music. For the moment, these tasks are safe from automation.

Our automations have freed us from repetitive tasks, we can now focus on tasks that humans enjoy such as creativity and knowledge.

The vast majority of companies alive today haven't adapted to this new freedom. They're still focused on automation and systemization. The problem with this is that automation doesn't add to competitive advantage like it did in the golden olden days.

Automation has become easy, common and throughly commoditized.

Most future competitive advantage lies in design innovation. Designing products that people like to use or designing experiences that people enjoy.

Half the big firms around today will fade into history because they can't shift gears from automation to design innovation.

It's a golden opportunity for the creative.

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