Why Companies Don’t Innovate

The short answer is that “the market” is so focused on very-short-term results and completely oblivious to long-term results that executives are pressured into ignoring research & development, instead focusing on sales, marketing, and worst of all, support, of their existing, inadequate technology.

The most absurd version of this extremely dangerous short-term vision that I’ve seen is Kevin O’Leary, prominent venture capitalist, who’s frequently said sentences like “Every day, I want to go to bed richer than when I woke up” (forgive me if that’s not a perfect quotation), and on Squeeze Play (a show on BNN) tried to argue that all U.S. bailout money should have gone directly to tax cuts for the biggest corporate executives.  Why?  Because in the short term, he’d make more money.  Never mind that in the long term, the consumers would be broke, businesses would then be dropping like flies, and he’d be sunk, blaming it on everyone but himself.  It’s this kind of short-sighted attitude that makes me want to never give him any control in Code Cortex or any other business I might start.

Anyway, that’s of course not the entire story.  The key realization that many executives seem to have had (if only subconciously) is that it’s cheaper to just market what already exists than to make something new and market it.  There are three main reasons that this is technically true: 1) developing something new costs money, whereas not developing anything new doesn’t; 2) it’s generally easier to market something that already exists than something new, because the customers already partly understand it, even if the something new is a significant improvement over what’s already there; and 3) trying something new might not work, whereas doing the same thing that worked before will probably continue to work for long enough to make more money from it.

This is clearly the approach that Visual Studio, or more specifically, Visual C++ is taking, i.e. put out the same product for 12 years, only updating the version number and a few icons.  Quite frankly, they have no excuse, because a 3rd-party company, Whole Tomato, has made a plugin called Visual Assist X that fixes many of the design flaws of Visual C++, and includes a few critical features that Visual C++ just neglected to bother including.  It’s this kind of negligence that has led to a big chunk of Microsoft not using Visual Studio, their own product, for development, instead using 3rd-party programs like Source Insight.  For the record, I find that Source Insight is only marginally better than Visual C++, partly because their default UI is analogous to puking text of all sizes and styles all over the screen… if you replace “is analogous to” with “looks exactly like”.  Their UI was actually a big wakeup call for me as far as what NOT to include in Inventor IDE.  Some people also swear by Eclipse CDT, but I’ve never been able to get it to find either GCC or the Microsoft C compiler in order to compile.  Anyway, enough ranting about my discontent with existing IDEs and back to the topic at hand.

The case of Visual C++ at least shows that if you choose not to innovate for long enough, your customers will eventually leave you.  However, there’s another side to pushing marketing & sales instead of innovation, and its perhaps best exemplified by the housing and auto industries as of late.  The focus is so much on that of short-term sales that they’ve completely saturated the market.  Everyone who wanted a car had a car, and everyone who wanted a house had a house, so sales plummet to much less than the steady-state sales (e.g. sales from new home buyers plus sales from people whose houses are being destroyed).  Why would they try to push sales beyond the maximum steady-state sales?  It’s fairly obvious that doing this will cause sales to plummet as soon as the market comes anywhere close to saturation, but their concern is that steady-state sales don’t increase (or at least not much faster than the rate of population increase).  The market has brainwashed them to think that it’s a failure if sales stay constant, so they push sales as much as possible until they explode.

Notice that there’s no mention of innovation in this scheme.  Many have said that the reason that the car companies have failed is that they haven’t researched or developed any environmentally friendly vehicles, and I partly agree, but think that the problem is more fundamental then that.  The vehicles available from major manufacturers are effectively identical to those from 30 years ago.  Maybe a few minor changes have occurred, such as different “decoration” on the outside and inclusion of computer systems in some vehicles, but there’s nothing innovative about them whatsoever.  The manufacturers are so blinded by pushing sales of things we don’t want down are throats, that they just never realized that we didn’t want what they’re making.  To put it bluntly, the last time I wanted a “tough truck” was when I was a 4-year-old, because I didn’t realize that I didn’t have a practical use for one; somehow I don’t think that they’re trying to target the 4-year-old child market.  For Ford’s sake!  Stop trying to sell us “tough trucks”!

This brings me to a related lack of innovation, and its one that really hits home for me.  In the fall, I took the Distributed Operating Systems course at Carleton, and one of the first papers we read was on the Xerox Alto computer built between 1973 and 1979.  The most shocking thing about this paper is that if you changed just the numbers in the paper, the computer it describes could, for the most part, describe a modern-day computer.  They had full graphical displays, keyboard & mouse, 3Mbps Ethernet, tablet devices, printers & scanners.  Heck, I can’t even get a real 3Mbps from my ISP on a modern computer.  In terms of software, they describe anti-aliasing, font rasterization, even using the computers to make an “internetwork” system, joining networks of computers using some of the same protocols we use today.  It’s amazing that they were able to do so much back in the 1970’s, but it’s equally amazing that we haven’t got anything better 30 years later (apart from pumping up the numbers and technology becoming more mobile).  It’s not for that there haven’t been good ideas, it’s that they’ve all been shot down as not marketable enough in the short term, and for that, we’re all stuck with what we’ve got.  All along the way, there’ve been big companies promising big innovations, and then quietly never delivering.  Remember back in the year 2000, when several big companies were announcing that they had paper-thin, flexible displays already in development?  They keep hoping that you don’t remember, because its cheaper for them if the consumers want less, and they’ll do anything to keep it that way.

I’ll finish by saying that even though I’m incorporating Code Cortex shortly, I honestly don’t give a crap about making a company.  I care about changing the world for the better, and if I can’t do that as a company, I’ll do it some other way.  So, to all those out there who say that I’m an idiot because I don’t have a solid enough business model to get rich quick, I say that you don’t have a solid enough vision of the future of computation, let alone the future of humanity.

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~ by Neil Dickson on May 8, 2009.

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