Innovation is Slowing Down—and Big Tech is to Blame
upstart writes:
Innovation is slowing down-and Big Tech is to blame:
[...] This greater industry dominance by top firms is accompanied by a corresponding decline in the risk that they will be disrupted, a prospect that has obsessed corporate managers ever since Clayton Christensen's The Innovator's Dilemma came out in 1997. At the time Christensen wrote his book, disruption was on the rise. But since about 2000-when top firms started their investment spree in proprietary systems-this trend has declined sharply. In a given industry, the chance that a high-ranking firm (as measured by sales) will drop out of one of the top four spots within four years has fallen from over 20% to around 10%. Here, too, investments by dominant firms in their internal systems largely account for the change. While some new technologies disrupt entire industries-think of what the internet did to newspapers or DVDs-others are now suppressing the disruption of dominant firms.
How does this happen, and why does it apparently affect so much of the economy? It is because these business systems address a major shortcoming of modern capitalism. Beginning in the late 19th century, innovative firms found that they could often achieve dramatic cost savings by producing at a large scale. The shift dramatically reduced consumer prices, but there was a trade-off: in order for companies to achieve those large volumes, products and services needed to be standardized. Henry Ford famously declared that car buyers could have "any color so long as it is black." Retail chains achieved their efficiencies by providing a limited set of products to their thousands of stores. Finance companies offered standard mortgages and loans. As a result, products had limited feature sets; stores had limited selection and were slow to respond to changing demand; and many consumers could not get credit or obtained it only on terms that were costly and not suited for their needs.
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