How Do We Define “innovation”?
Silicon Valley and Israel, Breznitz argues, made the mistake of conflating “innovation” with “invention”. Billionaire Peter Thiel coined the term "zero to one" to describe technologies that disrupt industries, driving new markets and technologies from nothing. However, this guiding mantra kept them blind to the pitfalls of such disruption and the missed opportunities that were right under their noses.
Economists largely agree that innovation and improvements in productivity are the key to growth and prosperity, but few of us take the time to define exactly what qualifies as “innovation”, and what the larger goals of innovation ought to be. This has left us in a place where “innovation” and “invention” are often seen as synonymous when, in fact, they are distinct. To invent something is to discover a new thing. In contrast, innovation refers to the introduction of something new to the market, the modification of existing inventions into something useful. When Apple invented the iPhone, it created a significantly innovative tool that changed the way we worked, played, and communicated. By contrast, the inventors of the latest social media platform may have “invented” a new app, but can we say they’ve conceived anything truly innovative to the playing field? Silicon Valley investors may think so, but to others, the jury is still out.
In an essay entitled “How to Make Prosperity Local” by Dan Breznitz, Professor at the University of Toronto’s Munk School of Public Policy, Breznitz argues against the glamorous, disruptive growth characteristic of Silicon Valley and other start-up centric innovation programs that governments promoted for decades.
“Many failed efforts at local growth have foundered on myths about innovation”, Breznitz writes in his introduction. Breznits also claims that “Those who profit by selling the Silicon Valley dream to local policy makers around the world either do not know or do not mention that high-tech start-ups backed by venture capital (VC), and aiming at financial exit, now tend to widen rather than close the gulf between rich and poor.”
Breznitz laments that other countries have tried to build their own Silicon Valleys. In Israel, following a severe financial crisis in the late 1980s, the government ignited a push to attract foreign investors and bolster the Israeli tech sector. By some metrics, the program was a huge success. Israel is now a global VC hub and has generated many unicorn-level companies. However, this shift has come with costs. In the mid-twentieth century, Israel was the second most egalitarian country in the West. Today, Israel has the highest percentage of its population living in relative poverty, with 20% of households earning less than half the median income. Israel wanted to be Silicon Valley, and that’s exactly what it became.
Silicon Valley and Israel, Breznitz argues, made the mistake of conflating “innovation” with “invention”. Billionaire Peter Thiel coined the term "zero to one" to describe technologies that disrupt industries, driving new markets and technologies from nothing. However, this guiding mantra kept them blind to the pitfalls of such disruption and the missed opportunities that were right under their noses. Perhaps a better mantra, Breznitz writes, would be to adopt a goal of “one to n”, which advocates for a building and scaling of existing companies and technologies with a focus on improvement and expansion of access for all people.
“Tech teens", writes Breznitz, "are underrepresented in markets, policies, and media reporting" to our detriment. These “tech teens”, five to fifteen-year-old tech startups with excellent economic foundations but undervalued often hire locally, participate actively in their communities, and have demonstrated the ability to sustain annual growth rates between 20% and 60%. “Zero to one” policies that focus solely on invention miss these growth opportunities.
Ultimately, Breznitz asks us to reconceptualize innovation as something beyond the glitz and glamour of Series A rounds and Palo Alto campuses and to focus instead on the steady creation of real value, where improvement and efficiency are valued above novelty.
In Canada, the innovation issue carries serious implications for the balance of peace and federalism in our democracy. Some regions, such as Ontario’s Toronto-Waterloo corridor, are far better poised to take advantage of the tech-fuelled zero-to-one wave of growth that occurred in California. Others, like Saskatchewan and Alberta, are far more dependent on resource-driven economies and may not be able to turn to tech giants in the transition. “Invention” in the traditional sense, however, may be the wrong goalpost for these economies. This is not to say countries should write off the opportunities of funding early-stage technologies - quite the opposite. But, expanding our conception of “innovation” might just open us up to faster paths toward success.
Written by Sara Chiarotto O’Brien