Innovation and Value Posted 2024-December

Caution: This post is going to upset some people, especially engineers. Sorry - it needs to be said.

What's the difference between invention and innovation?
An invention is something new; an innovation is something new that someone might pay you for.

Engineers - and I am one of them - love solving problems, sometimes with incredible elegance. But like Fine Art, an elegant solution may require an expert eye to see why it's Fine.  Engineers - again, I am one of them - will therefore tend to spend an inordinate amount of time trying to explain why their solution is elegant to those who lack the training or talent to see it at first glance. As I said in my intro, you will be tempted to pitch in detail how your invention works... and it's a serious mistake to do so.

Story time
In 1990-1, I teamed up with two other systems architects at Bell Labs to solve "the 7 'Self' problem".  How can you make the telecom network self-healing, self-inventorying, self-etc. - completely autonomous? When I used to present this, just describing the list of problems to a technical audience we were trying to solve typically took 1-2 hours. Ultimately, the three of us did indeed solve the 7 Selfs with an elegant architecture. Our groups prototyped it and I, myself, demo'ed it to Arno Penzias. We got two patents too. And none of it ever made it to market. In fact, it was so clear at the time that it would not make it to market that I wrote my business school admission essays to say I wanted to go to business school to understand how such brilliant technical work would never be sold.

Why did my best technical work never see the light of day?  That is a long discussion, but it comes down to a lack of understanding of the market and business dynamics. That is, I did not understand then the two basic questions my Technology Strategy professor taught me once I got to business school. Specifically:

Where's the money?

Who's going to make it?

The first is a question of value creation. Does your invention create an economic benefit to some set of customers? Not "a" benefit; an economic benefit. Your invention may be very cool. It may be very elegant. But is it valuable? A good percentage of ideas are inventive but not valuable. A surprising number of ideas are valuable, but not all that inventive. (An ecommerce site that lets people order just about anything to be delivered to their doorstep? Anyone can think of that, right?) Ultimately, your invention needs to deliver a better, faster, and cheaper solution for your customers. "Better" is very qualitative, especially in Consumer products, but "new" and "improved" are not necessarily "better" without a marketing budget. "Faster" and "cheaper" are easier to quantify.

Making the case that value is created by your invention is much, much easier than answering the second question.  Knowing who's going to get a piece of the pie your invention creates requires a knowledge of (at least):

The competitors and substitutes, including what may be lurking in the wings

The "augmented" product... not the thing you are selling, but the overall package of products, enablement, training, operations, etc. the customer is buying, including how those pieces will compete against each other for bigger pieces of the pie

The channel(s) and how they will extract value from you in order to get to customers

Your delivery mechanism, and how your suppliers will extract value in COGS and delivery terms

The bad news is that you don't know all of this, or even a significant fraction of it, when you start up. The good news is that investors may not know more than you do, but that if they do, they can help you avoid mistakes. The best news is that you can adopt an attitude of learning and agility in your business to adapt and succeed as you learn more.

Conclusion

Invention is not innovation. In fact, as difficult as invention is, bringing an innovation to success requires much more effort across a much broader space. Recognize this in your pitch:

Spend as little time as possible congratulating yourself on the invention

Focus on the basics of "where's the money" and "who's going to make it" (It really helps if you have related experience and/or a solid analog.) including competitve analysis, market sizing based on value, etc.

Be frank about what you don't know yet, and how you will find out

Don't be over-confident. Know that you don't know all the answers

Be confident. Know that you can do this.