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The End of Innovation, The End of IT?

By Andrew White | June 01, 2017 | 1 Comment

ProductivityInternet of EverythingInstrumentationInnovationInformation TechnologyCloudData and Analytics Strategies

I noted a fascinating “Comment” in today’s US print edition of the Financial Times.  It was written by John Gapper, the FT Business writer, and is titled, “Chemicals were the future once but no longer“.  Mr Gapper laments the recent news of the mega-mergers and various consolidations being discussed in the press recently between the chemical behemoths such as a Dow Chemical, DuPont, Evonik and ChemChina.

The piece takes us back a few years when chemicals was a new frontier for commercial enterprise, as firms grew from their own branded beginning and themselves had spun out segments to create new, more profitable offspring.  Warm and fuzzy names were mentioned, that will remind many of us of our childhood: Dow, ICI, or Imperial Chemicals, and Zeneca but there are others less well known too.

The point of the article is that the chemicals industry has gone full circle.  It started out growing several titans that than slowed (profitably speaking) and then each spun out smaller upstarts who then went on to grow themselves faster than their parents, unbound from the parental clutches.  Over time those large islands of (slowing) innovation in newer and stranger chemicals started to consolidate as profits become ever more specialist and smaller.  Now, some years later, the circle is closing, in that the gravity that arises through lack of innovation and profit is now sucking up and hovering up all the children and parents into ever larger but slower conglomerates.

The article suggests that the pieces on the board are basically moving around and consolidating due to lack of real step-change innovation.  It argues there is innovation still, lots of it, but it tends to be incremental.  The lack of “block busters” (a term more used in pharma) has led to a slowing of profits and so the firms that once offered a successful and profitable career for many now offers a duller, more incremental industry.

Of course the cycle that Mr Gapper talks about is well known. We all know it and read about it every day when we look at many industries.  There is much written about the death of innovation and how major inventions of the past, such as electricity, the combustion engine, computers, are no longer being added too with equally new, step-change opportunities.  You will even remember Nicholas Carr suggesting that IT had meted out its last great innovative contribution some years ago.  Of course he was wrong.

So is IT in the same boat as the chemicals industry?  Is SAP, Oracle, SalesForce, Amazon, Google, and others just moving the pieces around on the board, on a board that is not really being expanded with game-changing innovation?  This is an interesting question and one that can’t be easily or quickly answered, or dismissed.

Now speaking less from an official research position and more from a personal opinion, I do believe that some IT innovation is over rated.  For example, I think that “big data” and “cloud” are not the sources we seek as game changers, at least not in their current format.  Firstly big data is not a thing; it is a class of problem.  So the “things” that help address that class of problem often center on Hadoop and a number of other technologies.  Yes, these are useful.  But anecdotally so many organizations are trying to do with Hadoop what they had tried to do with their (yes, legacy) data warehouses.  The class of problems characterized by the big data name remains a challenge and opportunity.

Secondly, and again anecdotally, I think the cloud is totally misunderstood.  I think it is over hyped since the use of cloud computing is so broad.  At its lowest level, cloud computing offers an elastic, scalable, and eminently available computer processing capability.  This can help reduce the cost per cycle of computing.  That certainly can help, for example, with the larger processing needs of some of the big data opportunities that remains unexploited. So in some situations cloud computing can unleash innovation hidden in big data challenges.

But if your ERP system was working well before the cloud, why does moving it to the cloud make a difference?  It does not.  It simply saves the firm, perhaps IT, some money.  Let’s be clear: ERP on-premise versus ERP in the cloud (or in-memory, for that matter), is still ERP.

The real business value hidden away, unrealized and yet to be invented, is not going to be unleashed by moving “as is” solutions from on-premise to cloud.  What needs to take place, what cloud offers up, is a chance to rethink the nature of what can happen to the business processes, the decision making cycles, the analysis, once these things are redesigned assuming unlimited processing power.  In other words, cloud is a catalyst that could yield subsequent innovation of a significant scale; cloud itself is not the innovation that will drive productivity alone.

To put it more bluntly, “shift and lift” (a common task of many IT-shops of current workloads) to the cloud is tactical.  What is needed is a re-think of how businesses operate and behave and new processes, new applications, new decisions, new analysis, is needed to bring real business value from the cloud.

So cloud will have big impacts on our businesses, but not in the current format.  There is another interesting technical innovation I have seen recently that also seems to offer another catalyst-type level of step-change innovation, but not directly from itself.  That is IOT.  The instrumentation of everything offers up wholly new disruptions.  It’s not just that you get more data from the current system, processes, devices and apps.  That is again tactical but that is again what many firms are looking to do.  It’s that you can discover new behaviors and opportunities that you didn’t know existed, and as a result, can now reimage those current (old) processes, old decisions, and old analytics into something different.  And its that difference that will disrupt at a game-changing level.  But it is likely that cloud and IOT will drive short term productivity improvements for IT-centric work; and in later years those technology innovations will then support or spin off significant business innovation and productivity.

So it might be that chemical, pharmaceuticals, and oil and gas, and insurance are all still “out there” looking for a new block buster innovation.  I think IT has a lot to offer.  I happen to think that cloud and IOT will kick off a new spurt of subsequent or dependent innovations in the next few years that will drive significant improvements in productivity across many industries, helping tired old firms involved in chemicals, and spurring other industry specific innovations in healthcare, consumer, pubic sector, and insurance and more.

Innovation is alive and well.  It’s just not well understood.  And IT is not even at the half-way mark.  We have much more fun ahead of us.



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1 Comment

  • Matt Durham says:

    Andrew, I tend to agree with what you’ve written. For the sake of humanity and our single home–Earth–I certainly hope innovation in the chemicals industry is not dead. I suspect it’s not. As you rightly point out, however, innovation is often not well understood. It is an important marketing concept, however. 🙂