Friday, May 29, 2009

Innovation at Big Companies, Google Wave and Microsoft Bing

The announcements (yesterday) of Microsoft Bing and Google Wave (TechCrunch), got me thinking about innovation and a recent article I read at the NYT which makes the argument that innovation belongs to the big:

“These days, more than ever, size matters in the innovation game,” said John Kao, a former professor at the Harvard business school and an innovation consultant to governments and corporations. In its economic recovery package, the Obama administration is financing programs to generate innovation with technology in health care and energy. The government will spend billions to accelerate the adoption of electronic patient records to help improve care and curb costs, and billions more to spur the installation of so-called smart grids that use sensors and computerized meters to reduce electricity consumption.[...]

The pendulum of thinking on innovation does seem to be swinging toward the big guys. In health care, institutions that have done best in improving the health of patients with chronic conditions like heart disease and diabetes have been larger, integrated systems like Kaiser Permanente in California, Intermountain Healthcare in Utah and the Geisinger Health System in Pennsylvania. They have the scale and incentives to invest in things like wellness programs and electronic health records.
That seems a bit of a stretch given that in many cases technology has reduced the transactional/frictional advantages of scale (though given the source of the NYT, I wonder if it's another case of ideological bias creeping in). While my personal view would still be that "innovation comes most naturally from small-scale outsiders," watching the behemoths Microsoft and Google is interesting with views spanning the spectrum on both announcements.

While Google seeks to change the entire way we communicate online, Microsoft seems to be attempting to play catch up to Google by creating another search engine. Gigaom views Google's announcement has hype given the lack of obvious new opportunities for monetization and they also point out that "Google has a long history of launching or buying projects, only to get bored and abandon them months or years later." I'm not smart enough to know whether Bing or Wave will succeed but given that profitability follows innovation, I know which company I'd bet on.

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