Recently, I got to thinking that there are really are two kinds of innovation, and these two types of innovation were very apparent in the kind of programs I would run for companies. Borrowing a term from physics, I like to call these two types of innovation “theoretical” and “applied” just like theoretical and applied physics.
Theoretical innovation is something you simply just cannot do today. There are factors which keep you from actually implementing the envisioned product or service right now. These can be something as simple as the right kind of technology, say the size of storage space or wireless bandwidth or as complex as the right geopolitical infrastructures. A good example of this is streaming HD virtual reality to wireless phones. Sure, it can be done: but the network is simply not up to the task of allowing it to happen.
Tech factors, strangely enough, are not usually the ones holding back the innovation: it’s more likely the human factor, factions within companies taking credit or laying blame, cultural and political reasons etc. However, the biggest indicator of something being “theoretical innovation” in my view is the ability to monetize. If there is no way to make any money off it, even if all barriers were lowered, then it remains in that realm since most no one, save some independently wealthy, or governments, will step up to take it on. It’s this type of innovation which is ideally suited to go into a patent application process.
Applied Innovation, on the other hand, is leading edge work that not only pushes the envelope, it also has a clear path to monetization. If you ask me, this is pretty easy to come up with: is it a product or service that I would use and pay for? Applied innovation takes what is out there today, and rebuilds or mashes it up to create something new, useful and valuable. Applied innovation is the kind of thing that can be taken from idea to launch in days or weeks with a few guys in a garage. And it’s applied innovation which is probably what most people think about, at least in the business world, as innovation.
That’s not to say that theoretical innovation doesn’t have its place, and many ideas began in the theoretical innovation space, but as these ideas have much longer paths, or in some cases no path to monetization at all, now may not be the best time to pursue theoretical innovation. In boom times, with the wind at our backs, of course, but today, in this climate, a focus on applied innovation is essential.
Its not directly about monetization – there’s often a long lead time between invention and moneymaking. Google for example had a tech innovation, page rank, and yet it wasn’t that that made them money, it was improving the GoTo.com business model that did that. The other factor you miss, and I think is crucially the issue, is whether the innovation is EFFICIENT. You can easily have a innovation that is EFFICIENT yet doesnt have direct monetization as a result. Again Google’s use of commodity PCs massively reduced the costs of serving up results (like a factor of 10), while Page Rank increased human efficiency of searches. End result, a cheap good product – that required little underwriting (thus cheap ads could fund it).