Can Big Tech Regain Its Innovation Mojo?21 August, 2015 / Articles
American technology companies once led the way in developing breakthrough products and services. But today many big tech firms seem to have lost their innovation mojo.
To appreciate just how much things have changed, consider that when I started out at IBM in 1970 the company had only recently released the world’s first interchangeable family of computers, the revolutionary System/360 mainframes. It was a bold bet on innovation that Fortune magazine at the time called “IBM’s $5 billion gamble.”
In today’s money, that’s the equivalent of a $40 billion wager on innovation — one that incidentally required IBM to cannibalize all its existing revenue-producing product lines. But the bet worked. The System/360 line quickly became the dominant mainframe in the market and the de facto industry standard, ensuring IBM’s dominance in the industry for a generation to come.
Back then, it was an axiom of business leadership that today’s investments in R&D lead to tomorrow’s breakthroughs and profits. But today, this ancient wisdom is in danger of being lost. As technology industry analyst Michael S. Malone observed in a provocative Wall Street Journal article last year, “Something fundamental has shifted in Silicon Valley.”
What’s changed is that many big technology firms no longer even try to invent the Next Big Thing. Instead, they buy it, using their multi-billion-dollar cash hoards. The result, noted Malone, is an “innovation slowdown” among the technology industry’s leading companies.
“Look around Silicon Valley and it’s hard to find established companies still devising their next products in-house,” Malone observed. “Seen anything new and big lately from Cisco, Yahoo or even Twitter?” The same might be asked, of course, of Facebook, Oracle, and several others. For these firms, the question is, Why innovate, when you can simply buy?
This slowdown in product innovation is mirrored by a similar decline in basic science research. “American corporate labs used to be the stuff of legend. But those days are long gone,” reported a May 19, 2015 article in the New York Times. “Corporations, constantly pressured to increase the next quarter’s profits in the face of powerful foreign competition, are walking away from basic science, too [and] big companies now more easily buy innovative startups.”
Or, as suggested by Google’s announcement August 11 that it was reorganizing itself as a holding company, some firms opt for organizational change in hopes of staying innovative.