Professor Clayton M. Christensen of the Harvard Business School changed the way we think about innovation in technology ten years ago with his now classic study, The Innovator’s Dilemma. Christensen recognized that few technologies are intrinsically disruptive; rather, it is the business model or the strategy which the technology enables that is disruptive. This insight provides a clue to understanding why innovation is lagging in Germany.
The innovation problem in Germany stems not so much from a lack of resources or creativity: German firms are among the leaders in R&D expenditures, and Germany files more patents each year than any of its EU rivals. Genuine technology breakthroughs, such as the MP3 format for downloading music or the hybrid engine for automobiles, were developed in Germany, but these have generated billions of dollars in profits for groups outside of Germany—Apple, for its iTunes product, and Toyota for its Prius. Earlier this year the Institute for Applied Innovation Studies at the Ruhr University in Bochum released a study on the innovation weakness of German industry. The researchers found that only 13% of new product ideas were ever brought to market; the process in deciding to green-light a project was needlessly lengthy and cumbersome, and those products which eventually did make it to market were often over-engineered and thus too costly to be viable. Also, the study found that there was considerable resistance to innovation in the companies surveyed, so it was necessary for innovators to engage in a “resistance to the resistance” (Widerstand gegen den Widerstand) to push through their ideas.
To be sure, German companies are not alone in their slowness or resistance to adopting new innovations, but in the US we have a dynamic start-up culture which promotes innovation and disruptive change. This start-up culture is fueled by a confluence of synergistic forces and institutions—venture capital, research universities, and risk-taking innovators. Of the latter, an astonishing number are non-native Americans, often from India or China. A few years ago I met Min Zhu, who arrived in the US from mainland China barely able to speak English in the 1970s, but who eventually founded a company in Silicon Valley that pioneered conferencing over the Web. In March of this year WebEx Communications announced that it will be acquired by Cisco Systems for over $3 billion. Would Zhu have been able to build his company in Germany? Or is there still an insular suspicion of “foreign brains?”
The barriers to creating a start-up culture in Germany are both institutional and cultural. Germany lacks the critical mass of independent venture capital groups required to support a significant number of start-ups, and the German research universities lag behind US powerhouses Stanford and MIT. But perhaps the biggest impediment is fear: fear to risk failure. For every WebEx there are ten start-ups that never make it. In the US failure can be a badge of honor and entrepreneurs will try again, while in Germany failure is often stigmatized. By avoiding the risk of failure in innovation, Germany risks long-term economic failure, as innovation is increasingly the key driver of sustainable growth.
David Vickrey is the editor of Dialog International, a blog about German-American relations, politics and culture.
Institute for Applied Innovation Studies, Research Report, 2006-7 (in German, 16MB PDF)
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