Watching Judy Estrin at the SIIA Software Summit.

She thinks we’re taking innovation for granted. We’re standing on the shoulders of giants, particularly with the Internet. Breakthroughs like the Internet beget smaller innovations like the web browser; but we’re neglecting disruptive innovation and focusing on incrementals.

In a metrics-driven, measured, KPI-centric world, it’s harder to spawn massive breakthroughs because they’re more speculative and harder to justify with a priori knowledge.

Breakthrough innovation (something completely new)

This tends to be not all that customer friendly. They create industries. Consider the credit card itself, or the transistor. The customer doesn’t know what’s possible. or what they will want. They’re driven by needs not currently known — need different processes.

Incremental innovation tunes the breakthroughs.

This makes them usable, and provides longer-term revenues for the industries (hopefully justifying the breakthrough.) For credit cards, this is the private-label card. For transistors, this is a faster device. Chris Anderson talks about this process in curves of innovation within the transistor market.

Orthogonal innovation is looking at a problem differently.

The iPod is a good example. Happened not because it was cute but because Apple set out to build a new music experience, not a better MP3 player. Reframed the problem.

Betterplace is doing this to reframe the auto industry from cars and fuels separately, to the overall service of driving. This eliminates the issue of battery longevity, which is a major concern.

Five core values

Judy says companies need five core values in order to have the capacity for change:

• Questioning things curiously and in an unbiased way that frames things broadly
• Risk tolerance, with an attitude towards early/often failure as Eric Ries suggests
• Openness to new ideas and new information
• Patience and tenacity
• Trust in oneself and in the social safety net

Judy has harsh words for traditional investors and venture capitalists who are risk-averse and have focused on incremental growth. We’ve favored trade-and-flip mentalities such as patent manipulation, and this is a risk for the US in a global market which is increasingly innovative. In the past, we’ve focused on productivity (particularly through IT) and medicine, but in the future we’ll be focused more on energy and the environment, healthcare (not just medicine, but also wellness, delivery of medical systems, care), and education.

Judy’s point, I think, is that we need to recognize these three types of innovation and build processes suited for each.

• Breakthrough innovation is speculative, and is guided by where society’s biggest problems are. It’s like physics: Smart, detailed, and hard to grasp.
• Incremental research is about crossing the chasm, and is guided by what consumer feedback offers and what the barriers to adoption are. It’s like chemistry: Practical, reproducible, and guided with an end product in mind.
• Orthogonal innovation is about reframing the problems being solved, and integrating things better. It’s like biology, looking at the holistic system.

Achieving good levels of innovation for all three requires a change in attitudes towards innovation, from risk tolerance to the framing of problems to how we view the relationship between science, technology, and the arts. This will require what Ideo called “T-shaped people” (though in this case they’re double-T’s with specialization in two groups) and connectors to share innovation within organizations.

Judy’s book, Closing the innovation gap, was published in 2008. (book site)