Futures-Diagnosis

Diagnosing the future of the Internet and innovation and their social impact

April 17, 2012 • 10:39 pm 0

Instagram, Kodak and the end of innovation

  (This is an article I wrote for Spiked)

The contrasting fates of two photo companies shows there’s more money in navel-gazing than transformative tech.

The acquisition of the social mobile photo-sharing application Instagram for $1bn by Facebook, reveals two fundamental realities: first, that despite being the darling child of the media who keep trumpeting its youthful uniqueness, Facebook is simply another large enterprise which is slow to innovate and is driven by the inexorable logic of age-old capitalist economics; and second, that it truly marks the end of the age of innovation symbolically contrasted to the fact that Kodak, the company that pioneered photography from the end of the Nineteenth Century, went into receivership earlier this year. The contrasting fates of two photographic-based companies speak volumes about the world we now live in.

It is a remarkable phenomenon and an expression of the ahistorial, ego-centric media world we now occupy, but whenever any of today’s digital or Internet-related companies in Silicon Valley make a headline grabbing acquisition or announcement, the world’s media, closely followed by the blogosphere and twitterati, go into speculative meltdown. What will this mean for the users of Instagram who have not signed up to Facebook?  What about their privacy? Will Facebook destroy Instagram’s unique application? (More on this below). What is Facebook’s founder Mark Zuckerberg really thinking? Etc etc. In other words, a lot of hot air, emotion and a proliferation of tweets, blog posts and comments, but little analysis.

Its economics stupid

There are two fundamental reasons why Facebook paid $1bn to a start up with 13 employees and 30m customers and both centre upon the inexorable logic of their business model and the laws of competition.

First, the acquisition is less about better integrating Instagram’s services into the world’s biggest social network (which Facebook already does quite nicely) and more about becoming a publicly traded behemoth. Facebook’s pending Initial Public Offering means that it needs to grow to keep investors happy and if they can’t do so by adding new users or boosting revenue streams, they will do it by eating their rivals. The youthful Mark Zuckerberg, yes the one that couldn’t get laid at Harvard and started Facebook, has revealed that in reality he has a very old head on his shoulders and is acting according to the laws of market economics identified by Adam Smith and later exposed by Karl Marx in his seminal Das Kapital. Facebook, like any publicly traded company will have to accumulate through the concentration and centralisation of capital. Digital media like hardware, steel or coal, follows the same laws as the rest of the economy. This acquisition reveals that Facebook has already changed into what everyone is speculating it might become – a giant that needs to grow revenues driven by its quarterly results and making moves that feed the ever ravenous monkey.

This brings us to the second reason for the acquisition which also reveals how Facebook itself has lost any innovating momentum it once boasted of. Photo-sharing has always been a core part of Facebook. Remember, the site was founded to rank the attractiveness of Harvard students. Last summer, Facebook reported that its site held 100 billion photos. Facebook users upload 6 billion photos every two months. This is remarkable. So how did a service like Instagram ever come into existence? This should have been Facebook’s photo-application all along. Facebook has more than 400 million mobile users. But their mobile photo application is subpar. Once Instagram was fully integrated with Facebook, it became even more obvious that Facebook was way behind.

The fact that Facebook could not develop an ‘Instagram’ internally despite the centrality of photo-sharing to their service, speaks volumes about Facebook’s capacity to innovate. They have ‘failed’ where others have succeeded. The proliferation of new applications centred around images, like Pinterest, Tumblr and Instagram shows how important self-expression through images has become. Acquiring Instagram was a smart strategic move. While customer acquisition is a motivating force for Facebook (Instagram attracted 30m users with its iOS apps alone while a million joined on the day of their Android application launch), it is the deeper functionality and data acquisition of Instagram that feeds Facebook’s business model, which is the key.

Instagram adds some important new pieces of data to Facebook that will help to drive its increasingly targeted advertising revenues. Instagram will allow Facebook to see who its customers like seeing photos from. That gets Facebook a dramatically better photo ‘graph’ and keeps it ahead of Google+, which wooed photographers strongly in its first seven months on the market. Facebook will also know where you are when you shoot the photo. It shows a range of passions that you have. People who post photos reveal their real likes and dislikes. Facebook’s databases need this information to optimise the media it will bring to customers. This data is gold dust which companies wishing to sell their products will pay handsomely for. More fundamental, Instagram will let Facebook develop a new kind of Open Graph advertising which will enable them to offer mobile developers a lot of money in return for opening their apps up to Open Graph. Venture capitalists in Silicon Valley are salivating over this new potential revenue stream. This could result in huge revenues for Facebook and member companies.

It should be clear then that Facebook’s acquisition of Instagram has been a remarkable strategic move. It shows that it has already begun to act like a trading behemoth despite being the darling child of the ‘digirati’. But is also reveals how Facebook has been flattered rather than subject to any real critical scrutiny. The acquisition reveals that they have failed to innovate in a core area of their business. You may argue that given their large reserves this is not a real problem because they can buy in the innovation they need. But this raises a more fundamental issue of the content of innovation today.

The end of innovation

Part of Instagram’s real appeal, apart from ease of use, which should not be underestimated, is the fact that the application makes a virtue out of nostalgia. The filters at the heart of Instagram’s application allow the user to create pictures that look like early Polaroid pictures, or even older. I have nothing against old pictures. But using digital imaging to create pictures that look like they were taken with your grandfather’s 1930s camera, while technically remarkable, is somewhat worrying. That this is what is driving usage speaks volumes about the current cultural moment – self-obsession and self expression through images that hark back to the technological past.

That a mobile application that allows users to create pictures that look like they were taken in the 1930s, has just received $1bn in investment while Kodak, the pioneering and innovative c0mpany that brought imaging to consumers, businesses, medicine, space exploration and the advancement of human knowledge has gone into receivership sums up the dire innovation state we are really in.

In 1888 George Eastman the creator of Kodak with the slogan ‘you press the button, we do the rest’, put the first simple camera into the hands of a world of consumers. In so doing, he made a cumbersome and complicated process easy to use and accessible to nearly everyone. Since that time, the Eastman Kodak Company has led the way with an abundance of new products and processes to make photography simpler, more useful and more enjoyable. Kodak was much more than photography for consumers though. It pioneered the use of images in a variety of leisure pursuits, commercial, entertainment and scientific applications. Its reach increasingly involved the use of technology to combine images and information–creating the potential to profoundly change how people and businesses communicate.

As early as 1896, Kodak introduced the first capture medium — a photographic paper — designed specifically for x-ray image capture. Further innovative processes improved both the quality and accessibility of x-ray images or radiographs. In 1956, Kodak’s X-Omat processor was able to produce finished radiographs in only six minutes; less than a decade later, that time had been cut to a mere 90 seconds. Through acquisition of Imation’s medical imaging business in 1998, Kodak incorporated dry-processed films into its portfolio. Such dry systems print film images from digital medical imaging sources such as computed tomography (CT) and magnetic resonance imagers (MRI). Microfilm developed in the 1920s transformed the banking industry, insurance records, libraries and government agencies and transportation. Kodak was also a pioneer in printing, scanning and offset media. Kodak teamed with NASA on space science and remote sensing missions for more than 40 years. When John Glenn became the first American to orbit the earth, Kodak film recorded his reactions to travelling through space at 17,400 miles per hour. In the mid-sixties, NASA launched a series of five Lunar Orbiter spacecraft that collectively photographed 99% of the moon’s surface in preparation for an Apollo moon landing. Each carried an ingenious photographic system, designed and built by Kodak. The system took photographs, processed and scanned the film, and converted imagery into a continuous video signal for pickup by Kodak-built receivers on Earth. Kodak technology also went along on Apollo 11, with the first astronauts to walk on the moon. A special stereoscopic colour camera built by Kodak enabled astronauts to photograph extreme close-ups of rocks, dust, and minute features of the Moon’s surface. Photos of the lunar soil taken by Neil Armstrong enabled scientists to see soil particles smaller than two one-thousandths of an inch.

Kodak is now history. Its technology and innovation have played a critical role in making the world more productive, in advancing human knowledge and making daily life more enjoyable. Instagram, on the other hand, can only boast of the latter. That a company with no revenues and that looks to the past and plays upon nostalgia and self-absorbed consumption can attract £1bn while Kodak goes down the pan, is nothing to celebrate.

Facebook’s acquisition of Instagram reveals how conventional Facebook actually is and that it intends to take self-absorbed consumption into new realms. For those concerned about the future of innovation and society, it is Kodak’s demise, not Instagram’s rise that should be toasted and remembered. In this case some nostalgia would be a good thing. Not in terms of trying to create pictures that remind us of our youth, but in trying to remember what an age of innovation was really all about. Kodak was about personal joy. But it was much more than that. It stood for progress and the capturing of images that would help progress society beyond the pictures it could capture. Instagram is about looking backwards, about the present as captured in the past, not the future.

Take a picture using Instagram if you like as you toast Kodak, and post it on Facebook. Who knows, it might spark a comment or two.

Filed under: Economics of Innovation, Innovation, , , ,

November 3, 2011 • 11:35 am 2

GOOGLE PATENTS AND THE DEATH OF INNOVATION

“Motorola has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple and other companies,” Larry Page, CEO of Google told reporters and analysts during a conference call the day Google announced its $12.5bn acquisition of Motorola Mobility.

While Google executives played down the argument that patents were the primary motivation, the cat was out of the bag. Google, like Apple, Microsoft and Research in Motion has fuelled a technology Bull market as the pursuit of patents as a defensive end in themselves has really taken off in recent months – in July a consortium fo these players paid $4.5bn for 6,000 patents from the now liquidated Nortel Networks.

This latest patent hoarding – substantially added to by Google’s acquisition of Motorola’s 17,000 patents – has reaffirmed a point I made in one of the first posts I wrote to this blog in September 2009 titled ‘Patent Pragmatism: A Threat to R&D and Innovation’  which argued that patents had become ends in themselves, rather than as part of the realisation of innovation. Now Google, one of the few companies innovation adherents have pointed to as a beacon of innovation, has joined the bandwagon of accumulating patents as a defensive strategy.

THREATENING THE FOUNDATIONS OF INNOVATION

Although some of the recent patent hoarding activity can be put down to some high-profile court battles (Apple versus Samsung, Oracle versus Google over Android royalties, Microsoft suing Motorola) the secular trend is to treat patents as a short-term defensive hedge against countersuits. Patents are increasingly being seen as a way the legal system can be used to threaten competitive rivals and extract concessions.

The focus on the present is bad enough. But what is worse is that many of these patents include ‘foundational’ technologies – basic innovations that all subsequent similar devices would have to rely upon – which are used to secure market positions. In fact, for the past ten years the large technology vendors have been pursuing this strategy by securing the most patents.

Intellectual property is being used as a legal weapon in the battle to maintain market share and the real loser is the innovation pool. The ease with which patents are being granted has only fuelled this zero-sum game. Patents have truly become an end in themselves rather than a means to innovation.

There has been some recognition of the danger of this. On 8 September, the US Congress passed the America Invents Act which aims to make the patent application process more efficient as well as providing increased funds to the overstretched US Patent and Trademark Office (USPTO). The act which President Obama is expected to sign into law means the US will use a ‘first to file’ system rather than ‘first to invent’ system for registering patent applications.

While this will bring the US into line with other developed countries, the overall defensive pursuits of patents could incentivise an even greater rush to accumulate foundational patent portfolios. David Hsu, a management professor at Wharton asks a key question: ‘Will people have the incentive to innovate if they aren’t given patent protection?’  Kevin Werbach, a legal studies and business ethics professor also at Wharton, building on Hsu’s concerns makes the following key points:

‘If you tweak any complex system, it becomes a design exercise in incentives. You have to start with the question of what incentives the system is designed to create. Obviously you want to promote innovation…the reality is patents operate differently in various contexts…’  (Ref)

The context is precisely the problem: short-term pragmatism where patent hoarding is being used to defend market positions means the incentive is to accumulate foundational patents as an end rather than as the basis of promoting innovation. The new law will only increase the number of patents being applied for while the legal strictures these embody will inevitably narrow the field for innovation even further. As Google’s behaviour already confirms, we are witnessing the institutionalisation of patent instrumentalism and the de-incetivisation of innovation.

Filed under: Economics of Innovation, Innovation, ,

December 8, 2010 • 1:01 pm 2

CHINA TO LEAD WORLD INNOVATION BY 2020…APPARENTLY

According to Reuters News Service, published on the ABC News channel China is now set to become the leader of world innovation by 2020…according to a public opinion poll of 6,000 people in six countries done by drug maker AstraZeneca.

Public perceptions of course are always impressionistic. But the sentiments expressed in the survey are very revealing.

It is still the case today, for example, that the USA remains the world’s most innovative nation followed by Japan. China, which is now third, has reached this place very rapidly and looks set to go further. While there are indications of a significant shift China has some way to go to overtake the USA. For example, the ABC article mentions the study last month from Thomson Reuters which revealed that China was now the second-largest producer of scientific papers, after the United States. But the same study showed that R&D spending by Asian nations as a group in 2008 was $387 billion, compared with $384 billion in the United States and $280 billion in Europe. But this does not equate to being more innovative.

However, the significance of this survey lies in the subjective insight it reveals about perceptions in the West and the East.

R&D spending does not equal innovation – but belief ensures it

As we have discussed in previous posts, the amount spent on R&D is never, in itself, a guarantee of innovation. It is the culture that informs that spending, the context within which that innovation emerges that remains critical. The survey which was taken across Britain, the United States, Sweden, Japan, India and China, found

‘…a strong sense of optimism amongst people living in China and India, in contrast to relative pessimism in the developed Western economies’.

People in the East believe China will become the world’s leading innovator by 2020. But so too do people in the West. The same perception is informed by starkly different moods: optimism and pessimism.

Subjectivity does greatly influence the culture of innovation. Pessimism, will influence an innovation culture that places emphasis upon incremental changes. It will foster a conservative and cautious approach which can only lower expectations about the goals and objectives of innovation and its outcomes. Optimism, on the other hand, underpins an innovation culture that is more at ease with uncertainty and thus encourages a willingness to experiment and to take risks. This raises expectations about what innovation can achieve. It was not pessimism that drove America to put a man on the moon.

As a co-author of Big Potatoes, you can guess where I’d put my money.

Filed under: R&D and Innovation, ,

November 9, 2010 • 1:37 pm 0

CORPORATE R&D SPENDING IN DECLINE IN 2009

According to Booz & Company Global Innovation 1000 Study, corporate R&D spending declined during the 2009 downturn. The report also shows how vacuous the concept of innovation has become and its separation from R&D.

The report, the sixth annual study of corporate innovation, notes that total research and development (R&D) spending among the world’s top spenders on innovation dropped in 2009 for the first time in 13 years: the 1,000 companies that spent the most on research and development decreased their total R&D spending by 3.5 per cent to $503 billion in 2009. This followed a relatively strong 2008 during in which R&D spending continued to grow despite the recession.

Probably the most important finding is how the recession has hit corporate earnings:

  • Revenues for the Innovation 1000 plunged 11% from $15.1 trillion in 2008 to $13.4 trillion in 2009 — nearly three times the rate of decline in R&D spending:
  • R&D intensity, or R&D spending as a percentage of revenue, actually increased — from 3.46% in 2008 to 3.75% in 2009.

Surprisingly, in the face of these revenue reductions, the 3.5% reduction in R&D spending by the 1,000 top R&D spenders was less severe than the cuts they made into both sales, general and administrative expenses (a 5.4% reduction), and capital expenditures (a 17.5% drop).

The big question this nevertheless reveals is what these corporations will do with R&D spending once corporate earnings rebound in 2010?

Interesting insights

More than half of all companies Booz & Company tracked cut their R&D spending in 2009 and nearly all the cuts came in just three industries:

  • Auto, computing and electronics, and industrials.
  • The other seven industries examined — health, software and Internet, telecom, chemicals and energy, aerospace and defense, consumer and industrials — all increased spending to some degree.
  • The auto industry alone accounted for fully two-thirds of the $18 billion contraction in R&D spending;
  • The computing and electronics industry reported similar, but less drastic, R&D spending reductions with no change in the industry’s R&D intensity:
  • Despite a decline in R&D spending, computing and electronics retained its top spot as the industry that spent the most on innovation, while auto remained at number three. Healthcare took the number two spot, increasing R&D by 1.5%, much slower than the industry’s revenue growth rate of 6.0%.
  • Japan saw the largest percentage drop in spending by region in which a company was headquartered – 10.8%,  North American spending declined by 2.8%, while Europe’s declined by just 0.2%.

In contrast, companies headquartered in China and India boosted R&D spending by 41.8%, although from a small base, as they account for only 1% of total Global Innovation 1000 corporate R&D spending.

The vacuous concept of ‘Innovation’

To underline how vacuous the concept of innovation  has become, the report reveals some depressingly stereotypical insights. The survey asked innovation leaders to name three companies they consider to be most innovative in the world.

Apple far and away led the Top 10, named by 79 percent of those surveyed, followed by Google with 49 percent. 3M followed next with 20 percent. Only three of the companies on the “ten most innovative” list also appear on this year’s top spenders list: Toyota, Microsoft and Samsung.

While this reiterates the lack of correlation between the magnitude of R&D spending and innovation results, it highlights the recurrent problem we have been highlighting with innovation today in the Big Potatoes Manifesto: namely, that Apple, a company that essentially puts together other people’s innovations while paying attention to user interfaces, is now held up as the model of  ’innovation’. This raises serious questions about what these ‘innovation leaders’ think R&D is really all about.

What the report fails to question is the relationship between risk taking and the willingness to invest in areas of research where there are no foregone conclusions about commercialisability, but where the source for future innovation might emerge. This would give a more accurate picture of the state of contemporary innovation. Sadly, this report is another missed opportunity to make this the focus of the public debate about the future of innovation.

Filed under: Innovation, R&D and Innovation, ,

October 4, 2010 • 12:37 pm 0

US CONSUMERS SPENT $2BN MORE ON CRISPS THAN THE FEDERAL GOV’T'S TOTAL INVESTMENT ON ENERGY R&D IN 2009

When we published Big Potatoes: the London Manifesto for Innovation last year we never anticipated potatoes would ever  feature literally in headlines about the crisis of innovation facing the West. But the innovation debate works in mysterious ways as witnessed in the startling statistic to emerge from the report issued by the National Academies Press Rising Above the Gathering Storm, Revisited; namely, that American consumers spend more on crisps than the Federal Government invests in energy R&D!

As journalist Janet Raloff correctly points out : ‘There’s something wrong, here, when Americans are more willing to empty their wallets for the junk food that will swell their waistlines than for investments in the engine driving the creation of jobs, economic growth and national security’. What she and this illustrates is that America is facing a crisis in innovation. Rising Above the Gathering Storm, Revisited, paints a damning picture of the decline of US innovation and graphically demonstrates the depth of the crisis it is now facing.

Before listing some examples of this crisis from the report, it is important to point out that this report was written by the same blue -ribbon panel of US research leaders who published a call to arms in 2005 called Rising Above the Gathering Storm. This Committee is chaired by Norman R Augustine, the retired chairman and CEO of Lockheed Martin Corporation and a former Undersecretary of the Army and contains luminaries which include Craig Barrett, retired chairman and CEO of Intel, Richard Levin, president of Yale University and the Frederick William Beinecke Professor of Economics, Lee R Raymond, the retired chairman of the Board and CEO of Exxon Mobil Corporation and other CEOs and leading academics.

Thus, this is no lightweight report, and nor are its conclusions hysterical. Its conclusions however, could be drawn from the Big Potatoes Manifesto.

Knowledge, technology and unexpected outcomes

The original Gathering Storm competitiveness report published in 2005 focused on the ability of America to compete for jobs in the evolving global economy. The new report attempts to assess what has changed in the years since the first report on American competitiveness was written. It paints a daunting outlook for America if it continues on the ‘perilous path it has been following in recent decades with regard to sustained competitiveness’.

The fundamental point the Gathering Storm report made in 2005 was the connection between knowledge, particularly technology knowledge, productivity, competitiveness and employment.

The report drew upon Nobel Laureate Robert Solow’s economic work that showed, in part, that well over half of the growth in United States output per hour during the first half of the twentieth century could be attributed to advancements in knowledge, particularly technology. This period was, of course, before the technology explosion that has been witnessed in recent decades. The National Academies Gathering Storm committee concluded in 2005 that a primary driver of the future economy and concomitant creation of jobs would be innovation, largely derived from advances in science and engineering. As the report points out,

‘While only four percent of the nation’s work force is composed of scientists and engineers, this group disproportionately creates jobs for the other 96 percent.’

In the new report, the authors draw out the intimate connection between the discovery of new knowledge through science and how this impacts upon the creation of new industries, jobs and thus economic growth.

This connection is at the core of the Big Potatoes Manifesto.

The report is so elegant in its prose that its worth quoting this section at some length:

‘When scientists discovered how to decipher the human genome it opened entire new opportunities in many fields including medicine. Similarly, when scientists and engineers discovered how to increase the capacity of integrated circuits by a factor of one million as they have in the past forty years, it enabled entrepreneurs to replace tape recorders with iPods, maps with GPS, pay phones with cell phones, two-dimensional X-rays with three-dimensional CT scans, paperbacks with electronic books, slide rules with computers, and much, much more. Further, the pace of creation of new knowledge appears by almost all measures to be accelerating. Further, the pace of creation of new knowledge appears by almost all measures to be accelerating.

‘Importantly, leverage is at work here. It is not simply the scientist, engineer and entrepreneur who benefit from progress in the laboratory or design center; it is also the factory worker who builds items such as those cited above, the advertiser who promotes them, the truck driver who delivers them, the salesperson who sells them, and the maintenance person who repairs them—not to mention the benefits realized by the user. Further, each job directly created in the chain of manufacturing activity generates, on average, another 2.5 jobs in such unrelated endeavors as operating restaurants, grocery stores, barber shops, filling stations and banks. Progress enabling products such as those mentioned above in the information fields is built upon the work of a few individuals who decades ago were investigating something called solid state physics—none of whom probably ever thought about CT scans, GPS or iPods—the latter of which can enable one to hold 160,000 books in one’s pocket—any more than one today can predict the breakthroughs a half century hence.’

Five years a go the Gathering Storm report noted four very disturbing trends underpinning America’s position with respect to each of the principal ingredients of innovation and competitiveness—Knowledge Capital, Human Capital and the existence of a creative “Ecosystem”:

  • With regard to Knowledge Capital it was noted that federal government funding of R&D as a fraction of GDP has declined by 60 percent in 40 years;
  • With regard to Human Capital, it was observed that over two-thirds of the engineers who receive PhD’s from United States universities are not United States citizens;
  • With regard to the Creative Ecosystem it was found that United States firms spend over twice as much on litigation as on research;
  • With regard to United States K-12 education,the US on average was a laggard among industrial economies—while costing more per student than any other OECD country.

So what’s changed since The Gathering Storm?

The unanimous view of the committee members participating in the preparation of the latest report is that the US’s outlook has worsened. While progress has been made in certain areas—for example, launching the Advanced Research Projects Agency-Energy—the rise of national debt (from $8 trillion to $13 trillion) means there is now less latitude to fix the problems. Moreover, in spite of sometimes heroic efforts and occasional very bright spots, the overall public school system—or more accurately 14,000 systems—has shown little sign of improvement, particularly in mathematics and science. Finally, and perhaps most worrying for the Report’s authors, ‘many other nations have been markedly progressing, thereby affecting America’s relative ability to compete effectively for new factories, research laboratories, administrative centers—and jobs’.

Their conclusion?

Innovate, and in order to foster innovation, strengthen the public school system and invest in basic scientific research.

And the need for this is now compelling. Since 2005 the US’s position has deteriorated as the following examples quoted from the report illustrate:

  • Thirty years ago, ten percent of California’s general fund went to higher education and three percent to prisons. Today, nearly eleven percent goes to prisons and eight percent to higher education;
  • China is now second in the world in its publication of biomedical research articles, having recently surpassed Japan, the United Kingdom, Germany, Italy, France, Canada and Spain;
  • The United States now ranks 22nd among the world’s nations in the density of broadband Internet penetration and 72nd in the density of mobile telephony subscriptions;
  • In 2009, 51 percent of United States patents were awarded to non-United States companies;
  • The World Economic Forum ranks the United States 48th in quality of mathematics and science education;
  • Of Wal-Mart’s 6,000 suppliers, 5,000 are in China;
  • There are sixteen energy companies in the world with larger reserves than the largest United States company;
  • IBM’s once promising PC business is now owned by a Chinese company;
  • The legendary Bell Laboratories is now owned by a French company;

Hon Hai Precision Industry Co. (computer manufacturing) employs more people than the worldwide employment of Apple, Dell, Microsoft, Intel and Sony combined;

  • No new nuclear plants and no new petroleum refineries have been built in the United States in a third of a century, a period characterized by intermittent energy-related crises;
  • Only four of the top ten companies receiving United States patents last year were United States companies;
  • The world’s largest airport is now in China;
  • In 2000 the number of foreign students studying the physical sciences and engineering in United States graduate schools for the first time surpassed the number of United States students;
  • Federal funding of research in the physical sciences as a fraction of GDP fell by 54 percent in the 25 years after 1970. The decline in engineering funding was 51 percent;
  • GE has now located the majority of its R&D personnel outside the United States;
  • Manufacturing employment in the U.S. computer industry is now lower than when the first personal computer was built in 1975;
  • In the 2009 rankings of the Information Technology and Innovation Foundation the U.S. was in sixth place in global innovation-based competitiveness, but ranked 40th in the rate of change over the past decade;
  • China has now replaced the United States as the world’s number one high-technology exporter;
  • Eight of the ten global companies with the largest R&D budgets have established R&D facilities in China, India or both;
  • During a recent period during which two high-rise buildings were constructed in Los Angeles, over 5,000 were built in Shanghai;
  • In a survey of global firms planning to build new R&D facilities, 77 per cent say they will build in China or India;
  • Sixty-nine percent of United States public school students in fifth through eighth grade are taught mathematics by a teacher without a degree or certificate in mathematics;
  • Ninety-three percent of United States public school students in fifth through eighth grade are taught the physical sciences by a teacher without a degree or certificate in the physical sciences;
  • The United States ranks 27th among developed nations in the proportion of college students receiving undergraduate degrees in science or engineering;
  • The United States graduates more visual arts and performing arts majors than engineers;
  • The total annual federal investment in research in mathematics, the physical sciences and engineering is now equal to the increase in United States healthcare costs every nine weeks;
  • In less than 15 years, China has moved from 14th place to second place in published research articles (behind the United States);
  • For the next 5-7 years the United States, due to budget limitations, will only be able to send astronauts to the Space Station by purchasing rides on Russian rockets;
  • China’s Tsinghua and Peking Universities are the two largest suppliers of students who receive PhD’s—in the United States;
  • Since 1995 the United States share of world shipments of photovoltaics has fallen from over 40 percent to well under 10 percent—while the overall market has grown by nearly a factor of one hundred;
  • By 2008, public spending in the United States on energy R&D had declined to less than half what it was three decades ago in real purchasing power. By 2005, private investment had declined to less than one-third of the total;
  • A single Japanese automobile model constitutes about half of the U.S. hybrid market;
  • Japan has 1524 miles of high-speed rail; France has 1163; and China just passed 742 miles. The United States has 225. China has 5612 miles now under construction and one plant produces 200 trains each year capable of operating at 217 mph. The United States has none under construction;
  • Roughly half of America’s outstanding public debt is now foreign owned—with China the largest holder;
  • There are 60 new nuclear power plants currently being built in the world. One of these is in the United States;
  • Between 1996 and 1999, 157 new drugs were approved in the United States. In a corresponding period ten years later the number dropped to 74.57;
  • Youths between the ages of 8 and 18 average seven-and-a-half hours a day in front of video games, television and computers—often multi-tasking;
  • In 2007 China became second only to the United States in the estimated number of people engaged in scientific and engineering research and development;
  • In January 2010, China’s BGI made the biggest purchase of genome sequencing equipment ever;
  • In May 2010, a supercomputer produced in China was ranked the world’s second-fastest;
  • According to the ACT College Readiness report, 78 percent of high school graduates did not meet the readiness benchmark levels for one or more entry-level college courses in mathematics, science, reading and English.

It doesn’t bear thinking about what a similar audit of the UK and many other European countries would reveal. For anyone skeptical about the claims made in the Big Potatoes Manifesto, this report should be a wake-up call. It reveals the consequences of a business culture that has become risk-averse and which is driven by short-term pragmatism and instrumentalism.

Filed under: Innovation, R&D and Innovation, , ,

August 1, 2010 • 12:51 pm 1

WHEN RESEARCH MAKES QUANTUM DEVELOPMENT SENSE

The call this week by Lord Browne, the former BP chief executive, for a sweeping review of the UK’s £4bn-a-year science budget to emphasise projects with the potential to bring short-term industrial benefits, has sparked a fury amongst scientists. (See ‘Common room clashes with boardroom on science budget’, Financial Times. This is precisely what we warned against in the Big Potatoes Manifesto where we argue in principle 4 ‘For Useless Research’ that research remains the bedrock upon which the flow of innovation ultimately depends – a bedrock that is increasingly being questioned and undermined in our short-termist recessionary times.

Lord Browne’s instrumentalism certainly makes re-stressing this point timely and urgent. But the correctness of this fundamental research proposition was forcibly driven home to me during my recent holiday when I had the luxury and sheer delight of reading Manjit Kumar’s tour de force Quantum: Einstein, Bohr and the Great Debate About the Nature of Reality .

This is an absolute must for all those supporters of Big Potatoes. It describes in a remarkably entertaining and accessible fashion, the history of science’s fundamental revolution – quantum physics and mechanics – and the remarkable intellectual battle between Albert Einstein and Neils Bohr and other brilliant young scientists who were at the heart of this inspiring story.

More importantly, it reveals some critical insights into the processes and interactions that led to a scientific revolution which gave rise to the innovations we now take for granted: the transistor, the computer, the World Wide Web, the communications revolution.

UNEXPECTED OUTCOMES

Kumar shows that when these great physicists formulated quantum mechanics from 1900 to 1930, they were trying to understand the fundamental laws of the universe, not invent something of great economic importance. Their quest was the sheer beauty of solving some of the most baffling and abstract theoretical questions. The implications of their quest were so far-reaching it impacted almost everything, transforming sister disciplines like chemistry, for example. Today, all chemists and material scientists are trained extensively in quantum mechanics. Biologists like Francis Crick, who won the 1962 Nobel Prize in Medicine for the discovery of DNA, realized many years ago that the laws of physics and quantum mechanics ultimately govern even biology.

Quantum mechanics is necessary to engineer solid-state devices such as transistors, which are the building blocks of electronics and computers. Understanding semiconductors (the building blocks of transistors), or any material cannot be fully grasped with classical physics alone (i.e. physics known before the discoveries of quantum mechanics and relativity). Without quantum mechanics, the “information age” (and much of modern science) would not exist today. The inventions of the computer, the transistor, the World Wide Web and the laser used in fibre optics, (the basis for a global telecommunications industry) owe their existence to quantum mechanics and are worth trillions of dollars.

But to stress this point again, these were unexpected outcomes. The pursuit was science, the quest for purity and the beauty of an unassailable proof – and a closer approximation of reality.

There were three things about the book that really caught my attention, which are so germane to the debate we have started with the Big Potatoes Manifesto:

THE ‘LIMITS’ OF HUMAN KNOWLEDGE

Kumar relates the story about Max Planck, the father of Quantum who at the age of sixteen enrolled at Munich University to study physics because of his burgeoning desire to understand the working of nature. Planck spent three years at Munich which were to have a big impact on him, mainly because he was advised to give up physics as ‘it is hardly worth studying physics anymore’ because there was nothing important left to discover. Planck went on to become the father of quantum mechanics because, as he discovered, there was certainly a lot more to discover about how the world works. Planck reacted against the narrowness and conservatism of his peers. He defied the attitude, which we seem to accept today, that mankind had somehow reached the limits to knowledge. Instead his openness and willingness to question existing orthodoxy unleashed a scientific revolution, the creation of new knowledge and ultimately, the development of remarkable innovations that changed life in the 20th century.

PEERS COMMITTED TO THE GREATER GOOD

The second striking point Kumar brings out in his examination of the interaction of this extraordinary group of scientists was their willingness to engage each other as professionals in a common quest for truth. First, what united them was a belief in objective truth. Second, that despite different opinions (and often bitterly at odds) they were nevertheless united as pioneers committed to something greater than themselves.

This is illustrated by the example of Max Planck’s endorsement of Einstein for membership of the Prussian Academy of Sciences in 1913 despite fundamentally disagreeing with his position on light-quanta. Planck’s proposal contained the following paragraph:

‘In sum, it can be said that among the important problems, which are so abundant in modern physics, there is hardly one in which Einstein did not take a position in a remarkable manner. That he might sometimes have overshot the target in his speculations, as for example in his light-quantum hypothesis, should not be counted against him too much. Because without taking a risk from time to time it is impossible, even in the most exact natural sciences, to introduce real innovations’ (p52)

Not only do we see a remarkable willingness to recommend a fellow scientist despite disagreeing with him but the clear connection between disagreements and risk as critical to scientific advance.

What a stark contrast with today where contestation is regarded as a religious infraction against ‘truth’ (as in the ‘Climategate’ debacle) and where risk is consciously prevented by concentration on what we already know or what Lord Browne thinks can be safely developed. Planck reveals what science is really about in contrast with today’s instrumentalism and manufacture.

THE BEAUTY AND NOBILITY OF SCIENCE

The third and final striking point in the book is the nobility of the young scientists involved in this rich period of scientific discovery. For them, as in the example of Ernest Rutherford, exploiting their research for financial gain was seen as a distraction from the really important goal of making a scientific reputation for themselves. Rutherford who had started working on the detection of ‘wireless’ waves (radio waves) chose instead to pursue his academic passion (in contrast to others working in this field like the Italian Guglielmo Marconi who amassed a fortune).

This is not to suggest that exploiting scientific discoveries were wrong or that the people who did were somehow flawed. Far from it. It highlights how the pursuit of science requires those types of individuals who regard it as a noble calling and are given the freedom to pursue it regardless of measurable outcomes (as we would have it in today’s crude management-speak). Kumar reveals how the young men at the centre of the quantum revolution were driven not only by their own self- belief (and no doubt, huge egos), but also by the pursuit of something greater than material wealth – a belief in scientific and human progress.

Of course that is precisely what is being questioned today, which is why the media concentrates its attention on the exploiters of science rather that present-day pioneers. So the founders of Google are feted for creating Google whereas in the past we would be looking for the scientific contribution they might have made towards humanity’s body of knowledge. Today we celebrate exploitation rather than the wonder of science underpinning these achievements.

The question this raises is how we will ever create a culture that places greater value in the pursuit of knowledge rather than on its results?

As the world discovered through Max Planck, everything had not been explained. Kumar’s book is a great reminder that there is no such thing as natural limits and that the worst dimension of a culture of limits is that it constrains the thing we have an abundance – human ingenuity, perseverance and the noble ability to rise above petty egos, jealousies and parochialism to benefit humanity as a whole.

Kumar’s book is definitely Big Potatoes and should be read widely.

Filed under: R&D and Innovation, Risk and Innovation, Science and Innovation,

May 28, 2010 • 9:34 am 1

OECD’S INNOVATION STRATEGY – SOME BIG BUT PITTED POTATOES AT LAST!

The publication of the OECD’s Innovation Strategy this week provides strong support for the Big Potatoes position that future innovation remains fundamental to resolving the global economic crisis we are facing.

The OECD report is to be welcomed despite the confusion at its heart about the role of R&D. As can be seen from the Wordle text cloud below, the report places great emphasis upon research, science and knowledge, longer-term thinking and perspectives and most welcome of all, an insistence on the enduring importance of R&D.

Before dealing with the key confusion at the heart of the report about the role of R&D, it is worth noting a few key findings which make this a refreshing and welcome contribution to the public debate about innovation:

  • Innovation, productivity and Economic growth: The report’s key finding is that future growth must ‘increasingly come from innovation-induced productivity growth. As it states: ‘Innovation – the introduction of a new or significantly improved product, process or method – holds the key to boosting productivity’;
  • Longer-term thinking vs short-term pragmatism: The report argues for increased investment in future long-term sources of growth, such as education, infrastructure and research. It argues this must remain a continuing priority  as countries seek to move beyond the current crisis. It correctly points out that while cutting back public investment in support of innovation may provide short-term fiscal relief, it will hurt long-term growth;  ’a continuing strong baseline of investment is essential if productivity benefits are to accrue and a return to growth is to be achieved’. Moreover, it highlights that while improving the efficiency of government spending will always be necessary, innovation in the delivery of public services is long overdue;
  • Science remains an essential ingredient of innovation: the investment in research and the development of knowledge is suggested as the cornerstone of future innovation;

Science continues to be an essential ingredient of innovation. Modern innovations, from the transistor to the Internet search engine, have drawn on scientific knowledge. Most basic research is still is done in the public sector, predominantly by higher education establishments or by public research institutions. Data on science-patent linkages show that the role of science in innovation continues to increase, and that sectors such as pharmaceuticals and semiconductors rely heavily on scientific research, which is becoming increasingly multi-disciplinary in nature.

The role of R&D and open innovation – some confusion

While the report highlights the critical role of R&D it nevertheless makes too many concessions to today’s prejudice that  innovation is really about everything apart from R&D. In the spirit of the cult of innovation without R&D they argue:

‘innovation today encompasses much more than research and development (R&D), although R&D remains vitally important. Innovation rarely occurs in isolation, it is a highly interactive process of collaboration across a growing and diverse network of stakeholders, institutions and users. Moreover, the emergence of new and important players has added to the complexity of the multifaceted international landscape of innovation’.

When was innovation not a ‘highly interactive process of collaboration’, for example? Invention and pure research could be based upon isolated and discrete interactions, but innovation has always been a collaborative endeavour. As evidence for this assertion the report argues that while R&D remains vitally important, ‘many highly innovative firms do not engage in R&D at all. (See their Figure 3 reproduced below – apologies about the size – the blue columns represent firms that innovate without spending on R&D, the grey columns those with in-house R&D).They argue that increasingly, firms in services and manufacturing create value through a wide range of complementary technological and non-technological changes and innovations. The final assertion is that as the complexity and costs of engaging in innovation have increased, so has collaboration. Partnerships and crowdsourcing are on the increase to the extent apparently ‘that firms that collaborate on innovation spend more on innovation than those that do not, an indication that collaboration is more a means to extend the scope of a project or complement firms’ competencies than simply a means to save on costs. In most countries, collaboration with foreign partners is at least as important as domestic co-operation, a sign of the formation of global networks of innovation.

This growth of global innovation networks is certainly a phenomenon that is worth deeper analysis. But the main problem with this argument and the evidence provided is that while many innovative firms may not be spending on R&D they are nevertheless living off the gains of past R&D efforts. The report does not provide a breakdown of what sector these non-R&D spending innovative firms are in. But to some extent that does not really matter. As they say themselves recognise (see the set out quote above) the transistor, the Internet were the result of scientific endeavours, in other words, research efforts, that today underpin so much of the global information economy. Everything innovative forms do today rests upon the legacy of past R&D successes and failures.

By stressing the importance of non-R&D led innovation, the OECD report falls into today’s cult of innovation everywhere but in R&D we criticise so centrally in the Big Potatoes Manifesto. While we certainly need to deepen our understanding of what is happening at the level of innovation networks, crowdsourced collaboration and ‘open-innovation’, it remains vital to insist upon returning R&D to poll position if innovation is to do what the report so correctly highlights – get us out of the current economic mess we’re in.

Filed under: Economics of Innovation, Science and Innovation, ,

April 19, 2010 • 12:02 pm 0

BIG POTATOES: INNOVATION, R&D AND THE GENERAL ELECTION

On Tuesday 27 April, the R&D Society and the authors of BIG POTATOES: The London Manifesto for Innovation in association with EPOCH have together organised an eve-of-election event  on innovation and the future of the UK.

Despite its importance to our economic future, innovation has largely been overlooked since the credit crunch and is being largely ignored in the UK General Election.

This debate aims to ask:

  • What are the real barriers to making transformational innovations today?
  • How is innovation best managed?
  • What should business, government and the third sector do to change things?

I will be speaking on behalf of Big Potatoes, but the other speakers are:

  • Eliot Forster, CEO Solace Pharmaceuticals
  • Munira Mirza, advisor for arts and culture to London Mayor
  • Stefan Stern, management columnist, Financial Times
  • James Wilsdon, Director of the Science Policy Centre, The Royal Society

The event is scheduled to start at 18:45 at The Royal Society, 6-9 Carlton House Terrace, London SW1Y 5AG. Please arrive at 18.30 for registration etc. Tickets can be obtained at the door but it is advisable to book in advance through EventBrite. Tickets are as follows:

Corporate £30 / individual £15, (£15 R&D Society members)

Filed under: R&D and Innovation, ,

April 15, 2010 • 3:49 pm 1

THE GREEN PARTY MANIFESTO: A NO INNOVATION DEAL

I couldn’t help but publish a similar text analysis and cloud of the Green Party’s Manifesto launched today titled (and clearly in competition with the Lib Dems) ‘Fair is worth Fighting For’. The New Green Deal apparently represents harmony for the future. But a quick analysis shows that in 18,867 words the following are not regarded as critical to that future:

  • ‘Innovation’ is not mentioned once;
  • ‘Research & Development’ is never mentioned; ‘research’ as in animal research or environmental protection or sustainable development is mentioned four times;
  • ‘Productivity’ is not mentioned at all, ‘productive’ once, while ‘counterproductive’ is mentioned three times; and,
  • ‘Recession’ is mentioned twice.

Never mind the future where there will be no innovation, no R&D, no productivity, the present recession is hardly recognised. The Green Deal vision is the best articulation of today’s culture of limits which every other political party has copied and make core to their Manifestos. Never mind innovation, or growth, or increasing productivity, the future is ‘local’ – mentioned 74 times. Parochial low expectations ‘fairly’ distributed.

Filed under: R&D and Innovation, Science and Innovation, ,

April 14, 2010 • 11:11 am 0

THE LIBERAL DEMOCRAT MANIFESTO: FAIRLY PREDICTABLE

So the Liberal Democrats published their Manifesto today which has no name but has four slogans instead, all prefaced by ‘fair’: taxes, chance, future, deal. Can you guess what it is yet? The text cloud is depressingly similar to the Tories and Labour Party.

The same text analysis is even more depressing. In a manifesto of close to 22,000 words:

  • ‘Innovation’ is mentioned five times;
  • ‘Research & Development’ is mentioned twice while ‘research’ gets a whopping 7 mentions;
  • ‘Productivity’ doesn’t even get a mention, while
  • ‘Recession’ is mentioned only five times.

An interesting observation about the text cloud is the prominence of ‘Liberal’ and ‘Democrats’.  Does this suggest a lack of confidence about the electorates ability to remember who they are?

As mentioned before, I will publish a more substantial analysis of these Manifestos now that they have been published. This will form part of a speech I will be presenting at a public meeting on innovation and the General Election, on Tuesday 27 April, 18:30 at The Royal Society, 6-9 Carlton House Terrace, London SW1Y 5AG. This has been jointly organised by the authors of BIG POTATOES: The London Manifesto for Innovation and the R&D Society.

Filed under: R&D and Innovation, Science and Innovation, ,

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