I read this book as I had come across the author's views that that, in addition to innovative inputs , entrepreurial firms require venturesome and resourceful customers who are willing to take a chance on their products and services. Too often I think innovation is viewed as the result of back room boffins planning and researching, whereas in fact the real world of trial, error and customers who are willing to adapt and suppliers who are willing to change is more real. There is a wonderful Dilbert cartoon where Dilbert proudly shows Dogbert the world's first video phone. Dilbert is ecstatic at his purchase, placing it on his desk saying `and all we have to do now is wait for someone else to buy one and we can talk'. Dogbert ruefully notes that societies material progress relies on people like Dilbert.
Amar Bhidé's an Indian-born, professor of Business at Columbia elegantly begins his discussion of innovation as follows "Just as a devout Hindu might begin a journey with a prayer to the Lord Ganesh, it is obligatory to start a discussion on modern innovation by invoking Joseph Schumpeter" Having nodded towards the master, he then proceeds to deconstruct, if not actually slaughter, the sacred cow that is the Schumpeterian model of innovation. This for me is a major strength of the book,it has become fashionable to take creative destruction - the utter replacement of one technology by another, as the basis for the cycles of prosperity and innovation. Yet the reality is somewhat different - in the 1930's typewriters were predicted to eliminate the need to write by hand, yet in 1990 sixteen billion pencils were sold; and
In most markets, a large majority of people will possess both a landline and a mobile phone, despite the potential of the mobile to replace the landline. While I believe that creative destruction as a model remains important for companies investing in new product research - as in Cristensen;s `innovators dilemma' and Foster's `attacker's advantage', however Bhidé's view that markets remain both more sophisticated and complex than one simple model, is both instructive and refreshing.
Bhidé's core argument is that the US consumer is assertive, adventurous and capable - in short, venturesome - in relation to new products. In what other market would such a significant group of customers exist who would be so open to products such as the iPod, who are willing to pay prices which will justify significant investment and who are open to being `experimented upon' ( ref. Fredrich Hayek). Bhidé reviews the work of a sample of US - based venture capital firms and the ventures they invest in, to draw conclusions about the exceptionalism of the US customer. In a variation of the `coming to America' theme, Bhidé documents how `making it' in the US first is hugely important for success, even for firms whose founders originate elsewhere. Indeed the US customer is blind to the national origins of product, the company or the individuals involved in providing the product/service.
I had three major concerns with this thesis - firstly the sample set, as Bhidé acknowledges ( indeed he has a major sideswipe at econometric analysis) , was not scientifically representative, and perhaps cannot be, but therefore runs the risk of being anecdotal. More importantly the VCs were US-based, I would have felt more comfortable with comparisons between success rates in US versus other VCs (the Israeli VC industry is well developed) and with other developmental paradigms - what about emerging companies in BRIC countries (for example)? Most importantly of all, the US is exceptional in terms of GDP per capita and technological prowess, so it may be easy to fall into the trap of stating that because it is rich, it is exceptional. An alternative may be that because it has been exceptional - no invasions in the 20th Century, opposed by an economic system which imploded - it is now rich. I think it would have been useful to examine markets in technology areas where the US is not the leader (eg. Korea for broadband Access, Europe for mobile phone penetration) to see whether venturesome consumers exist, or whether other parameters are important. I find it difficult to believe that US consumers are so significantly different to other consumers, in their uptake of new products, that this justifies a permanent exceptionalism. Nonetheless the arguments made are thought provoking and useful.
Bhidé remains optimistic about the potential for American industry and competitive enterprise within the global economy, and frequently disparages and disproves proponents of exclusion and economic and/or technological nationalism. Such optimism is refreshing (it should be noted the book was written before the Credit Crunch morphed into the Crisis of Capitalism), and forward looking, nonetheless it remains to be seen if (and it's a huge, world-transforming if) Chinese and Indian GDP per capita approaches US figures, will US firms and society still maintain their competitive edge. This is not to argue for economic nationalism, just to put a dampening comment that it is unlikely that 6% of the worlds population will remain so much a determinant of technological innovation and economic prosperity in a future where another 40% is coming to economic self-determination.
One last point, I was puzzled by the inclusion of chapters on immigration into the US. In so far as I understood it, I think the point being made was that the US society was a welcoming meritocracy, which formed a mutually beneficial relationship with all, suitably qualified and motivated, comers. I did not think this a good fit fit with the general thrust of the argument, though its possible that my reading the book was tilted towards what it had to say about innovation, and that I was not sufficiently connected to the prosperity-generating side of Bhidé's argument.
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