Innovation seems to be sprinkled into most business and product discussions these days.  It’s expected, particularly in an economy that is driven by global competition, the ability of competitors to duplicate products rapidly, price wars, and trying to get and keep the attention of the 7 billion prospective customers that are roaming the earth.  Another reason it’s hot, is that entire industries and businesses have been wiped out, or have the potential to be wiped out by innovations.  A quick look at the recent history of Borders bookstore, Blockbuster video, or even Eli Lilly’s loss of the patent for Zyprexa, and it’s clear that innovations can change the universe, and effectively crush businesses that are not able to stay ahead of the product curve. 

Amazon.com, iTunes.com and even Netflix.com showed how innovation can change the world, and simultaneously stamp the life out of the incumbent businesses.   Although I have to mention that execution still counts, because Netflix and Bank of America seem to have forgotten that customers are neither stupid nor patient when it comes to how they are treated.  We’ll see how that turns out.  The point is that innovation is important.

Innovation does not just happen in startups, hence the mention of Eli Lilly.  Innovation is what created Zyprexa, their top selling anti-psychotic drug.  Startups do tend to be better at creating new products because they are not caught up in the day to day operations that keep them from thinking more creatively.  That’s why the Eli Lilly’s of the world like to acquire innovations that were created by startups.  These large organizations are embracing it though, and I expect to see a lot more highly structured innovation teams living within their walls.  The benefits, such as owning patents, minimizing costs, and maximizing profits, are too great for them not to at least try.  Patent troll firms like Intellectual Ventures are driving a different type of behavior in the market by buying patents from inventors, and using questionable tactics to extract money from people that use the technologies.  This will undoubtedly drive similar behavior by other businesses just to stay competitive.  My gut tells me that this will benefit very few, and the rest of the market will suffer for it.  That’s a subject for another day.