CLAYTON CHRISTENSEN: There are really three types of innovation, and each poses different levels of risk: Empowering innovations can transform products that historically were so complicated and expensive that only the rich had access to them. The Model T was one of those. The personal computer was one of those. The smart phone is this again. These kinds of innovations create jobs. The second type, which we call sustaining innovations, make good products better. They don’t create new jobs. The third, which I’m calling efficiency innovations, help us make the same products cheaper, and they reduce jobs in the economy.
Over the last 20 years, executives and investors have stopped investing in empowering innovations, because they pay off in five to eight years, and instead invest in efficiency innovations, which pay off in one or two years. We are awash in cash, and yet we continue to invest as if capital was scarce. And so we’re not investing in the kind of innovations that would create growth. Does it demand courage on the part of executives? Absolutely.
Read more: http://business.time.com/2013/01/25/the-time-at-davos-debate-the-rewards-of-mastering-risk/#ixzz2KQYkjEFr
