Celebrate Innovation, No Matter Where It Occurs

What if the United States loses its unrivaled edge in invention? The country’s innovation capabilities have long been central to its competitive advantage. But the rate of innovative activity is increasing sharply in other countries, and some may worry that this is the greatest threat to America’s economic leadership. I’m not convinced that the threat is real. Can you think of a single big innovation that has hit global markets recently that didn’t come from the United States or Europe? I asked that question at a panel discussion not long ago, as I’ve done a few times before. Usually no one comes up with a response. Last time, though, the moderator replied: “Yoga!” That got a laugh, because yoga doesn’t strike people as belonging in the same discussion as silicon chips and the human genome. But I had to concede the point. It is a hot business area, and it didn’t emanate from the West. Does it matter where an invention arises if an economy is world-class at harvesting its value? Then I considered the issue further. Perhaps the more important (and reassuring) question is this: Does it matter where an invention arises if an economy is world-class at harvesting its value? Let’s think about yoga. The practice originated in ancient India, but today this global craze supports a huge industrial complex: instructors, studios, companies that sell DVDs and apps, incense producers, retreat operators, physical therapists for yoga-related injuries. What company is reaping the greatest yoga-related revenue worldwide? That would be lululemon athletica, based in Vancouver, which designs and sells yoga clothing and accessories. Founded in 1998, it now has annual revenues of more than $700 million and a market cap in excess of $9 billion. Lululemon is engaged not in the core business of yoga—instruction—but in a related and nearby opportunity, which strategists call an adjacency. Inventions often create profit pools so large that their inventors can’t exploit them alone. And sometimes, as with yoga clothing, the most profitable opportunities lie in the adjacencies. In the past, inventions and their adjacencies tended to be bound together in a region. In the new global economy, however, local actors don’t have much of a jump on the rest of the world. When we think about innovation as a driver of economies, this is an important point. Sometimes societies are too anxious about the provenance of innovation. Name any big invention, and there’s a good chance that adjacencies are creating equally big profit opportunities for other players. No matter who is first to develop the mass consumer electric vehicle, for example, firms in other countries will have a chance to develop advanced batteries, charging stations, and so on. A blockbuster drug for cancer, wherever it was discovered, would create many economic possibilities for health care providers in America. Companies with superior marketing and distribution capabilities and leaders who quickly recognize opportunities will be the ones that capture value from innovations. Many American firms have these advantages. And in the face of a jobs crisis and a stagnant economy, we as a planet should pray for the appearance of more breakthrough innovations, regardless of where they arise. Ultimately, the creation of jobs and wealth has more to do with harvesting the value of an innovation than with inventing it.

Celebrate Innovation, No Matter Where It Occurs

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