The Spectrum of Innovation and Wealth Creation

If innovation is the fastest means to wealth creation, why is it so few people engage in it?

There are many answers to that question, but two stand out. The first is fear of change – a primal fear that appears to be hard-wired into our psyche. Change to many means something we will have to deal with, usually as a problem. With this mind set, change is to be avoided at all costs.

The second reason people avoid innovation is their internal belief system. Many people confuse innovation with invention and assume that they could never be an inventor like Edison, or Tesla so no attempt is made. Most people also believe they are not the kind of person who has wealth, or a lot of money. This very common internal belief stops a lot of activity that could lead to a wealthy lifestyle.

In actuality, innovation takes place over a wide spectrum, just as the definition implies: Innovation – the act of introducing something new.

Let’s take a look at what this spectrum of innovation looks like. In its most simplistic state you have:

1. A simple change in process or flow that allows you to produce your product or service faster, cheaper, or more efficiently. An example might be if your job is to rotate the widget before its sent to the stamper, perhaps you could rotate and stamp the widget, eliminating the time it takes to go to the stamping station.

2. Adding to an existing service in a way that creates greater values for your client. An example is Bob’s Pest Control Service (a fictitious name). Bob’s clients are local restaurants. His market is highly competitive and plagued with price wars. He knew the freezer and industrial refrigerators had very dirty cooling coils because no one had the job of cleaning them. A little research showed that a simple vacuum cleaning of the coils would extend the life of the equipment by as much as ten years, and lower the electrical bills as well. Bob began to market his service as one that would kill the pests, lower electrical bills and extend the life of the freezers and refrigerators, guaranteed. No other pest control service offered that set of services and now Bob no longer competes on price.

3. The first two examples of innovation are process changes that barely qualify as intellectual property. As we move into more of a design area, we have innovation that can possibly qualify as an invention. The first would be routine design problems solved by methods well known within the specialty. Approximately 32% of all patents fall into this category. An example might be Toyota’s use of Just In Time manufacturing to reduce stock on hand.

4. Another example of innovation that may or may not qualify for a patent is making a minor improvement to an existing system, by methods known within the industry. An example might be found in Las Vegas. In order to get to the front desk, restaurant or even the rest rooms, the layout of the casino requires you to walk through the gaming area. Enough people stop briefly to put some money into a slot machine to make this idea pay off. Approximately 45% of all patents fall into this category

5. A more complex solution to many problems is when you use fundamental improvement to an existing system by methods known outside the industry. This might be an example of inverting a known issue as with the Home Shopping Network, or computer banking. Approximately 18% of all patents fall into this category. Please note that items 3,4, and five constitute 95% of all patents issued. Now it gets more difficult.

6. As the difficulty of innovation increases you begin to look more to science then from industry for ideas. A new generation idea that finds a new principle to perform the primary functions of the system. An example would the development of the proton exchange membrane that allows fuel cells to produce electricity. These ideas only constitute 4% of all patents issued.

7. And least common is a rare scientific discovery or pioneering invention. Examples of this type of invention would the transistor, or the laser. This type of patent is issued less then 1% of the time.

The vast majority of time, innovation is little more then keeping an open mind as to how to do something a little better. It does not have to be revolutionary, or even radical. It simply has to do something a bit better then before. If practiced diligently, wealth accumulation is in your future.