Today, I want to tell you about a seldom-understood fact, and that is that the business world is in a constant state of flux, as companies are merging, acquiring, downsizing, expanding, moving, outsourcing and spinning off their various assets.
And as we have witnessed during this last recession, no company, indeed no industry, is too big to fail. And, while such change may be challenging and disconcerting, it is a natural progression that former Harvard economist Joseph Schumpeter called “creative destruction” – something that occurs whenever innovation makes old technologies obsolete while concurrently producing new opportunities.
Of course, the emerging opportunities seem to be harder to see and that is why newspapers and politicians only complain about job losses when they also should celebrate the new opportunities being created as the economy evolves. Indeed, expanding economies add new jobs at the leading edge at the same time that they destroy old jobs at the trailing edge.
In his book The Nature of Technology, Brian Arthur refers to that effect as “collapses in backward succession.” He illustrates the concept by examining the inception of the automobile industry: “The death of horse transportation eliminated the needs for blacksmithing and carriage making. The collapse of blacksmithing in turn eliminated the need for anvil making (and so on and so forth). Collapses caused further collapses…” 1
Conversely, innovation gives rise to new businesses in forward succession. The advent of the automobile created many new technologies. For an example, we need look no further than the tire industry, which enabled Akron to evolve into the rubber capital of the world and now the polymer capital of the world.
The fact is that as technologies evolve, the business landscape changes and jobs change with it, because that is the natural course in any economy . . . creative destruction.
Now, let us examine the roles of invention and innovation within the cycle of creative destruction.
To begin with, let us remember that the "stone age did not end because we ran out of stones." 2
The Stone Age, the Iron Age and many other “eras” in history ended because humanity invented new and better ways of doing things. Faced with challenges and opportunities, human beings responded innovatively and thus have taken us from the Stone Tablet to the Tablet PC.
Please note that I said that human beings invented and responded innovatively. Those two words, invention and innovation, are similar but have a significant difference.
While the origins of both “innovation” and “invention” imply the creation of something new, the word “innovation” actually originates from the Latin “Innovatus,” which means to renew, and can be seen as a process that modernizes what already exists. 3
The two terms have become increasingly distinct, as was outlined in an article by a professor at the University of Oslo, Dr. Fagerberg. He tells us that “Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice.” 4
Or as many are beginning to realize: “Invention is the conversion of (money) into ideas, while innovation is the conversion of ideas into (profits for reinvestment).” For an invention to become an innovation, it must add value. 5
In a few moments, we will honor Mr. Tim Timken, who is chairman of the Board of the Timken Company. You will learn more about him later, but I will tell you that the Timken Company is on the leading edge of innovation. His company, located just a few miles south in Canton, Ohio, is among the world’s leading producers of highly engineered bearings, alloy steels, components and services, while exploring new opportunities in the fields of friction management and power transmission.
Indeed, innovative companies, like Timken, continue to build America and the world.
Medicine, communications, transportation and business - every segment of society and culture - has been shaped by discovery and the innovative ability to apply it in meaningful ways.
Not all innovation has been good. Reality TV and the leisure suit come to mind. But on the whole, innovation has been an astoundingly good thing. And America has benefited greatly from its leadership role in research and technological innovation.
Americans invented the airplane, the airbag and aspartame . . .
Bar codes, credit cards, and corrugated cardboard . . .
Kevlar, Morse code, and the light bulb.
America also is admired for finding ways to make better the things that we did not invent.
For example: Americans did not discover penicillin – a Frenchman did, and the Brits led the clinical trials.
But when mass quantities of penicillin were needed during World War II, Americans figured out how to produce it fast enough and cheap enough to make it available worldwide.
Americans didn’t invent the internal combustion engine, or the automobile, but we did perfect the assembly line, making mass production possible and allowing ordinary working people to purchase a car…travel to where the good jobs are …and return home at the end of the day. Our increased mobility made work more profitable…commerce more economical…information more accessible. And the result was nation-changing; indeed, world-changing.
Average incomes and homeownership skyrocketed. More efficient and cheaper transport of goods led to a stronger economy. Space and time collapsed, as people around the world traveled farther, faster and more comfortably.
By leading the way, Americans carved out a competitive position that has been the envy of the world for more than a century.
That, ladies and gentlemen, was and is the power of innovation.
In the course of innovation, good ideas are limited only by the speed with which existing knowledge can combine to form new ideas.
Mr. Arthur says that innovation is a collective enterprise. “…new technologies (are) not inventions that came from nowhere (rather)…they arose as combinations of…existing technologies or ones that were created from technologies that already exist. “ 6
That same thought is expressed in Steven Johnson’s latest book, Where Good Ideas Come From, in which he talks about creating innovation by rapidly banging diverse ideas against one another.
“If there is a single maxim (in Mr. Johnson’s book)…it is that… environments that build walls around good ideas tend to be less innovative in the long run than more open-ended environments. Good ideas may not want to be free, but they do want to connect, (to) fuse, (to) recombine. They want to reinvent themselves by crossing conceptual borders. They want to complete each other as much as they want to compete.” 7
Thus, innovation requires interaction among ideas. And that is why, in today’s knowledge economy, education is society’s infrastructure. Education unleashes the power of innovation by creating human capital that shapes our industries and our society and advances economic competitiveness.
Johnson also points out that densely populated areas, particularly those with urban universities like The University of Akron, tend to attract and retain talent and foster more innovation than do small towns. In fact, according to the Brookings Institution, 80% of America’s population now lives in metropolitan areas. The nation’s top 100 metros, of which Akron is one, generate 75% of the United States’ Gross Domestic Product and are home to 76% of good-paying, knowledge jobs. They also are the source of 94% of its venture capital funding. 8
And thus the urban environment encourages “…entrepreneurs to specialize in fields that would not be sustainable in smaller population centers” and allows ideas to cross-fertilize as workers come together and are more likely to change jobs. 9
During your time at The University of Akron, you too, have learned the importance of innovation, and I hope you have become more entrepreneurial, disciplined and well-rounded thinkers. You also have begun to experience how continuing to expand your knowledge and creativity and testing your mettle will help you expand your worth and that of your community.
Now you need only the willingness to make choices that connect ideas, create new knowledge and new technologies, and translate those discoveries into marketable products and services.
My charge to you as graduates is to re-create yourselves constantly, because the only economic stimulus you truly can count on in life is that which you yourself create. And, wherever life leads you, whatever you do, seek to add value! Seek to innovate!
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