Flashpoint

By Jim Euchner, VP, Global Innovation, Goodyear, and RTM Editor-in-Chief

Barriers to innovation are declining. It is easier today for an innovator to get into business than it has been at any time in history. There are many reasons for this, but most are driven by some aspect of the digital revolution. Today’s digital tools help the entrepreneur on every step of his or her journey, from funding to marketing to product delivery.

Crowdfunding, from sites like Kickstarter and Indiegogo, provides seed capital to turn ideas into products. Online communities let people with common interests combine their expertise and share needs. Open source hardware and software act as platforms for bootstrapping new innovations. Low-cost 3D printers and object printing services let entrepreneurs create custom physical products at low cost. Cloud computing platforms permit software companies to scale on a pay-per-use basis, without upfront capital. Online storefronts from Amazon or eBay create instant marketing and distribution channels. The list goes on.

Michael Porter, who defined the notion of barriers to entry, identified seven key barriers (1, 2). Four of those are being at least partially eroded by these forces:

• The benefits of economies of scale are eroded by cloud computing infrastructure and on-demand, small-scale manufacturing capabilities.
• Access to capital is eased both by crowdfunding and by the reduced need for upfront infrastructure investments with the availability of cloud-based tools.
• Access to distribution is improved in an age of online stores, search engine marketing, and insight on customer interest and willingness to pay from Kickstarter campaigns, which can help support a campaign for bricks-and-mortar shelf space.
• Incumbency advantages (other than scale) are eroded when even small entrepreneurs can leverage communities, open source tools, and social media to spread the word and attract supporters.

Network effects and switching costs still remain potent forces, as are the potentially innovation-inhibiting effects of some government policy, but many things are a lot easier for would-be innovators.

In one sense, this is good news for entrepreneurs—it makes it easier to get started—but it is bad news in another. As Michael Porter has said, “If there are no barriers to entry, if customers have all the power, and if rivalry is based on price, then the Net doesn’t matter—you won’t be very profitable.”

This issue [of Research-Technology Management] explores many of these trends, looking at how technological forces are reshaping the way innovators conceptualize, produce, and sell. One of the primary disruptive factors, particularly in manufacturing, is the advent of 3D printing. As that technology matures, more and more people have access to the tools to make their ideas real.

. . .

Still, the walls are falling and disruption is coming. Where will this democratization of innovation end up? Do declining barriers to innovation doom the producer-innovator model? Carliss Baldwin and Eric von Hippel (3) argue that, in the end, the locus of innovation will depend on the balance of two things important to innovation: the costs of design and the costs of communication. When design costs are low, single-user innovation is viable (at any level of communication costs); when design costs are high, open collaborative innovation is viable, as long as communications costs are low and problems can be broken into modular pieces (as, for example, with open source software). There is still a range of complexity and costs for which producers will continue to be the primary innovators.

But that range is shrinking.

In This Issue of RTM (Vol. 58, No. 6):

Research Universities, Innovation, and Growth
IRI Medal. In a paper adapted from his IRI Medal address, Subra Suresh, president of Carnegie Mellon University, describes how universities power innovation and spur economic growth.

The Birth of 3D Printing
IRI Achievement Award. In a paper adapted from his IRI Achievement Award Address, Charles W. Hull, co-founder and CTO of 3D Systems, describes his journey in inventing and commercializing 3D printing.

Democratization and Disintermediation: Disruptive Technologies and the Future of Making Things
Steve Hoover, CEO of PARC, and Lawrence Lee, Sr. Director of Strategy for PARC, argue that the forces that have remade other industries are now disrupting manufacturing.

Reinventing Supplier Innovation Relationships
Research-on-Research. Gene Slowinski (Rutgers), Matthew Sagal (Alliance Management Group), Kimberly Williams (PepsiCo), and Timothy Stanton (Sherwin-Williams) offer nine “better practices” for strengthening relationships with suppliers.

Additionally, Jonathan Kuniholm, President of Open Prosthetics, talks about his organization in this issue’s “Innovation C-Scape,” and Jim Euchner interviews Joe Weinman, author of Cloudonomics: the Business Value of Cloud Computing, about Digital Technologies and Competitive Advantage.

Citations:

1) Porter, M. 1979. How competitive forces shape strategy. Harvard Business Review 57(2): 137–145.

2) Porter, M. 1998. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.

3) Baldwin, C., and von Hippel, E. 2011. Modeling a paradigm shift: From producer innovation to user and open collaborative innovation. Organization Science 22(6): 1399–1417.