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              62                 THE PRACTICE OF INNOVATION

              a psychiatric diagnostic and referral center; geriatric centers of a simi-
              lar nature; and so on.
                 These new facilities do not substitute for the hospital. What they
              do in effect is to push the American hospital toward the same role the
              British have assigned to their hospitals: as a place for emergencies,
              for  life-threatening  diseases,  and  for  intensive  and  acute  sickness
              care. But these innovations which, as in Britain, are embodied prima-
              rily in profit-making “businesses,” convert the incongruity between
              the economic reality of rising health-care demand and the economic
              reality  of  falling  health-care  performance  into  an  opportunity  for
              innovation.
                 These are “big” examples, taken from major industries and public
              services. It is this fact, however, that makes them accessible, visible,
              and understandable. Above all, these examples show why the incon-
              gruity between economic realities offers such great innovative oppor-
              tunities. The people who work within these industries or public serv-
              ices know that there are basic flaws. But they are almost forced to
              ignore them and to concentrate instead on patching here, improving
              there, fighting this fire or caulking that crack. They are thus unable to
              take the innovation seriously, let alone to try to compete with it. They
              do not, as a rule, even notice it until it has grown so big as to encroach
              on their industry or service, by which time it has become irreversible.
              In the meantime, the innovators have the field to themselves.



                                            II

              THE INCONGRUITY BETWEEN REALITY
              AND THE ASSUMPTIONS ABOUT IT
                 Whenever the people in an industry or a service misconceive real-
              ity, whenever they therefore make erroneous assumptions about it,
              their efforts will be misdirected. They will concentrate on the area
              where results do not exist. Then there is an incongruity between real-
              ity and behavior, an incongruity that once again offers opportunity for
              successful innovation to whoever can perceive and exploit it.
                 A simple example is that old workhorse of world trade, the ocean-
              going general cargo vessel.
                 Thirty-five years ago, in the early 1950s, the ocean-going freighter
              was believed to be dying. The general forecast was that it would be
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