Perceiving and pursuing innovation

Information plays a large role in the process of innovation-information that is not sought or available to competitors, or information available to others that is interpreted in new ways. Sometimes it results from sheer investment in market research or R& D. It is striking, though, how often innovators are those firms that are simply looking in the right place, unencumbered by or unconcerned with conventional wisdom.

Often, innovators are " outsiders, " in some way, to the existing industry. Innovation may come from a new company, whose founder has a nontraditional background or was simply not appreciated in an older, established company. Or the capacity for innovation may come into an existing company through senior managers who are new to the industry and thus more able to perceive opportunities and are bolder in pursuing them. Or innovation may occur as a company diversifies, bringing new resources, skills, or perspectives to another industry. Or innovations may come from another nation with different circumstances or ways of competing.

Outsiders may be better able to perceive new opportunities. Or they may possess the different expertise and resources required to compete in a new way. Leaders of innovating companies are frequently also outsiders in a more intangible, social sense. They are not part of the industrial elite nor are they viewed as accepted participants in the industry. This makes such companies less concerned with violating established norms or engaging in unseemly competition.

With few exceptions, innovation is the result of unusual effort. The firm that successfully implements new or improved ways of competing is the one that doggedly pursues its approach, often in the face of obstacles. The strategy is the personal crusade of an individual or group. As a consequence, innovation often results from pressure, necessity, or even adversity. The fear of loss often proves more powerful than the hope of gain.

Companies that innovate are frequently not established leaders, or even large companies, for many of these reasons. Any economies of scale in R& D that would favor large firms are outweighed by the fact that many innovations do not involve complicated technology, and large firms face many barriers to perceiving and acting on discontinuities. In our research, larger companies were often supplanted by smaller ones. Where the innovators were large firms, they were often new entrants to the industry from an established position in another industry.¹³

Why are some companies able to perceive new ways to compete and others are not? Why do some companies do so earlier than others? What makes some companies able to better anticipate the proper directions of change? Why is unusual effort applied? These fascinating questions will prove to be central ones in the chapters that follow. The answers lie in such areas as the directions in which companies' attention is focused, the possession of the proper types of resources and skills, and the pressures faced to change. The national environment plays an important role in all these things. In addition, the degree to which the national environment supports the emergence of " outsiders" from within the nation, preventing the loss of positions in established and new industries to firms from some other nation, will be an important influence on national prosperity.