Blog for the Strategic Innovation MBA Course at Vanderbilt University
I believe some of the most core industries are the least innovative. I don't see innovation coming from oil companies. I think this is due to the fact that little innovation is required by the markets which allows these companies to continue business as usual for the most part (other than growing with the markets for increased demand).
The commercial airline industry. Sure, there have been some technological advances with wi-fi, entertainment selections, etc, but you are still flying in essentially the same aircraft, at the same speed as you were 30-40 years ago. The basis of air transportation is to get passengers from point A to B quickly, and this has not improved much. It's almost 2012 - shouldn't we be flying personal vehicles by now?
The healthcare industry has failed to innovate its way to better outcomes and lower costs, and that is due largely to its opaque pricing structure, where consumers are completely disconnected from the cost of what they're consuming through our insurance programs. One area where we have seen innovation (ie incremental product improvement and corresponding price decreases) is for LASIK eye surgery, one of the rare procedures that is paid for out of pocket.
Industries that are affected by many regulations, or traditional industries such as department stores, normally lack of innovation. Industry highly regulated generally have many constrains when wanting to try new processes or ways to do things more efficiently. In the case of department stores, I don’t think there is much room for innovation other than perhaps, marketing strategies to attract new customers. Innovation depends in big part in the environment. Some companies (or industries) encourage employees to be creative to come up with more original and efficient ways to obtain better results. These companies are normally leaders. Others, just wait until companies create a new product so they can copy it and market it, these companies are followers. Being clear on what strategy a company wants to follow is key to implement innovation.
The least innovative industries are those protected from competitive pressures.. usually this is done by the government, but sometimes it's related to the nature of the industry itself. A classic example is that of cable television... which only recently has been forced to innovate after their protected territory was invaded by TiVo, Internet, and iPhones... Innovation is the pre-req to survrive/compete in a capitalistic system.
I think the auto industry is weak on innovation - especially the U.S. industry. I remember when the Prius was huge, and going to a special car show for GM that was introducing their new fleet and their innovation was flex fuel. The cars were getting the same MPG as before, but the benefit was that you had the option of using ethanol. I agree with Andy on government too, but I don't know if that counts. Coffee shops are not very innovative. It all just seems to be coffee, sugar, and cream.
I'm going to disagree with everyone who is saying that the least innovative companies are in heavily regulated industries. Sure, innovation is *very difficult* within that space (and not as sexy as something like GroupOn) - but that doesn't mean it isn't taking place. If anything, innovation within that space helps set a company apart. Those constraints can often help the company innovate because as we've learned in class - that blank slate can be pretty tough to overcome. If you don't believe me, Google most innovative companies, click on the Fast Company link, scroll down for "most innovative companies by industry" and you'll see plenty of awesome examples in heavily regulated industries like finance (uh, Mint.com?), energy (SolarCity), health care (Cleveland Clinic), and so forth. If you want an industry that isn't innovative - try something like furniture. How much has the table and chair really changed over the last hundred years?
This comment has been removed by the author.
I agree that healthcare is one of the least innovative industries. To Dan's point above, Cleveland Clinic is innovative only when compared with other healthcare companies. The high regulation, coupled with the fact that the government is the largest payer, slows down the process of innovation. Also, companies in health care do not like change. The Athena Health CEO, mocking his own industry, pointed to his companies customer turnover ratio of 3%.
I feel oil industry should be one of the least innovative ones. They are talking about new energy, new equipment and etc. But when reading through their strategy reports and investment reports, all you can see is oil, oil, oil. They forecast in the following 50 years that oil is still major energy we have to use.
I would argue that the music industry is on the least innovative industries in that record companies are still reacting to the early 2000s and haven't figured out how to continue to add value. Because of that, the quality of music being recorded and distributed has gone down (in my opinion).
I completely agree with Erin on the oil industry. I believe in the energy sector you have two extremes: either companies that try to jump on the regenerative energies train and aim to find the most efficient and scalable alternatives to oil, or companies that try to stick to oil as long as they can and that harm innovations in that field by initiating subsidies for oil to keep prices low and so on. An industry that comes to my mind - if you can call it industry at all - is apartment buildings or the way we live in cities. There have been some attempts in big (Asian) cities to create almost little cities out of huge apartment towers with shopping centers, parks etc. But in the majority of cities in the world it's usually the regular offering: a bunch of people lives in tower with a couple of apartments.
The entertainment industry. Television has an overabundance of reality TV shows with wives, doctor shows, and cop shows. Also, the movie industry is over-saturated with movie remakes. They're making another Spiderman franchise? Oh wait, they just released a remake of Footloose? I just don't understand why there isn't better and more original content being produced.
If Government / Public administration can be considered an Industry, I would say that Government is the least innovative industry. It is unbelievable that in the digital era in many public administrations the only way of communication is written letters or physical presence. While it is easy to think about the public administration / government adopting an innovation (most of the times late) it is hard for me to think about a case where public administration has come up with an innovation.Perhaps an explanation to this phenomena can be found in the well known lack of incentives that some of the public employees experience.
When thinking of industries that have failed to innovate, brick and mortar book stores come to mind. Like Kodak, they clearly failed to anticipate the swift adoption of technology (electronic books in this case), which led to bankruptcies – Borders included. While technology is not a core competency of a traditional bookstore, one would have hoped that innovative leadership would have better foreseen this transition and looked for acquisitions/joint ventures to facilitate entry into electronic books.
The bar soap industry has failed to innovate. When you consider the high degree of market saturation, and the low consumer switching costs, it is surprising that there has not been more attempts to differentiate the products over time. Irish Spring is still Irish Spring, Dial is still Dial.
I would say the exercise machine equipment industry has been slow to innovate if you look over the past 30 to 40 years (excluding ab machines). Sure machines in gyms have a few more bells and whistles than they used to (i.e. ergonomic seats and fancier designs) but they are still using the same ranges of motion/resistance to train muscles with. Most machines have done little to allow for free range of motion which has been shown to enhance a workout because of the stabilizing muscles used. It appears that they have got caught following the mentality of "don't fix what isn't broken" when designing their next version of machines.
I will add that the road construction industry is one of the slowest to innovate. It seams like building / maintaining roads should be a fully automated process with a lower cost today. Why the enormous work crew? It also seems like "big" innovations like round-a-bouts make sense to reduce waiting times and the energy needed to run stop lights. I'm guessing its driven by government bureaucracy to approve & fund such infrastructure upgrades. Yet transportation infrastructure seems like a low hanging fruit to improve the nations GDP and create jobs simultaneously.
I think the department store retail clothing industry overall lacks innovation. They have new designs that come out, but those are toned down versions of someone else’s ideas. A few compete on customer service or try to sign deals with household “designer” names. I would argue that if I walked into one of the anchor stores at the mall 20 years ago and today, excluding the clothing styles, you would be hard pressed to find a difference; tons of clothes, lots of racks, lots of departments, checkout desks and the overwhelming cosmetics isle. I think they only reason they remained solvent is because buying clothes is still hard to do efficiently online.
The healthcare industry. The industry spent many years putting systems in hospitals and doctors' offices that are useful in billing insurance companies but not in managing patient. Because of poor incentives, the industry has had no reason to create a patient record system that actually increases value for the consumer and reduces unnecessary care.
Education, as an industry, has been relatively slow to innovate in certain respects. While more schools are now using different technologies to improve the classroom experience, the way in which teachers and the education system as a whole evaluates students has remained largely unchanged for far too long. There has been a lot of talk recently about whether or not standardized tests like the SATs are the most effective means of evaluating intelligence. By and large though, we still look to these types of examinations to quantify how smart a student is or how much they've learned, even though there is substantial evidence indicating that students learn, process information, and take tests very differently.
The tobacco industry - aside from the the great Menthol introduction of '45 (year estimated), they havent really done anything other than slight product modifications (for example, introducing long cut dip for people who dont like the fine cut). Their advertising options are heavily restricted by regulation and the process for growing, harvesting and manufacturing tobacco has been virtually the same, with improvements coming mostly from increased efficiency in the machines.
I agree with Sergi. The government systems is definitely the least innovative field since it is always way too big with the complicate hierachy and there is not a lot of incentive for people to change. Normally, if there is a huge change in the government only when there is an revolution.
Retail banking / finance industry. Products and services are relatively the same across different companies, and have changed very little over the years. This could be due in part to government regulation, and consumer fear of change regarding any product that touches personal finances.
Casino gaming industry might be one of the least innovative industry. On one side, there are lots of regulation and legal issues which force them to follow the rules which have been set up a long time ago. On the other side, as the gaming licenses are scarce resources, there are limited license holders in the industry. It is an oligopoly market that the players do not have incentive to change and be innovative. However, I see some changes now in this industry now because of the economy downturn. Gaming companies need to be innovative to cut costs and improve their profit margin. In the meantime, I think the industry still is reluctant to innovate unless it has to do so to survive.
I agree with a couple of posts that if you can consider government services an industry it is by far the least innovative. From run-down buildings to long lines and lack of internet services, it is clear that they are stuck in the past and are still not meeting customers needs.
I agree with Colin that Education is an un innovative industry. There have been many studies regarding the best way for children to learn and retain new information, however, the same techniques that were used when we were children are still being used today. The industry could benefit greatly from a little innovation both on the course work and the techniques used. I think the problem stems from the fact that most schools are public and the funding to implement innovation is just not there. Without having enough money to support it, it can't exist.
I would also agree with Sergi that government or government driven organizations are the least innovative. Incentives are not aligned to have innovation in place. Meanwhile, it is more about increasing the level of centralized decision making and bureaucracy. Once the government takes upon a private company, innovation potential and innovation itself is killed.
I believe that the industry of legal practice is the least innovative because they focus on history more than the future. Something innovative happens when it is brought to the Supreme Court which would ultimately modify or create a new law. Legal entities do not have the freedom to be very innovative because of strict regulations. HOWEVER, with that being said there are probably several firm who try to be creative by twisting the rules.
Comics retail. Comics publishers and stores have continued their terrible, terrible model in the face of digital comics. They're basically begging people to visit their local shop every Wednesday when new issues are out, but if you go they're notoriously unhelpful if you don't know what you're looking for (me), not to mention they're out of anything good by Friday. There's no reason not to go digital or just order through Amazon. The publishers themselves seem reluctant themselves, dragging their feet wherever digital publishing is concerned. In five or ten years your local comics shop will be gone. Not that anyone cares.
I would agree with a lot of posts above regarding the government services being the least innovative. Coming from a developing country, it is easy to compare and contrast the rapid difference that has been brought about by innovative companies in the private sector. Unfortunately, the government continues to be plagued with political egos, bureaucracy and other constraints that prevent its progress.
The energy/utilities industry leaves much to be desired when it comes to innovating services to the general public. Much of the innovation advances in this industry are provided to the highest dollar and the government. As such a vital part of life and important component to environmental welfare, I would like to see more innovations for cleaner, more efficient energy use and consumption for the masses. The alternative/innovation needs to be affordable, just as efficacious, and just as simple to use.
I see the residential developer industry as totally unconcerned with innovation. They just clear-cut trees and then build cookie cutter houses out of cheap material, or 4000 square foot mcmansions, all without charm, backyards, or landscaping. I would argue that the main concern driving (and limiting innovation for) design and construction is the narrow focus on low cost, basic adherence to code, and maximizing the number of homes in a development. Little attention is paid to sustainable or energy efficient building practices, quality of community life, or aesthetics.
After thinking about industries for a while, I feel the publishing industry has done little to innovate. Yes, they are switching to a more digital platform but textbook publishing companies, for example, still make students buy enormous books that are extremely expensive. Why not consider the idea of making digital textbooks AND making students alot happier?
Video game industry. Overwhelmed by app stores, on-line games, and web games. They seem not to innovate any more. It is hard to find new innovational product such as Playstation and Wii.
I agree with Chris H. I would say that the retail shopping industry, specifically brick and mortar department stores, have not been very innovative. Stores like Sears, Filenes, Macys, JcPenney, etc. look very much the same now as they did 20 years ago. More recently they have tried the store within a store concept such as Sears having Lands’ End inside them. However, this seems like just an attempt to share rental costs rather than true innovation. I think that they are maintained by an older demographic that has always shopped at these type of stores, and they are just changing their clothing to match these people’s tastes as they age. Eventually these stores will go under when younger generations, who do most of their shopping online or in other venues, have most of the spending power.
Movie industry is the least innovative and I don't think anyone could argue any other way. In effort to further predict earning and reduce risk, Hollywood has turned from the land of fame into the land of the rehashed and retried. I personally blame the movie going public because with their share of dollar they've reinforced their need to be reaffirmed rather than challenges.
I suggest spectator sports as an industry with little innovation. Only minor adjustments to game rules and fan interaction are made. Technology has made some changes to how we are able to enjoy sports, but little about the the actual games have changed.
The life insurance industry is not particularly innovative with respect products offered. It is a mature industry that has not needed to be innovative. As far as I know, there are still only two broadly available options: whole life and term life. Instead of focusing on insurance products, many have shifted focus to other parts of the diversified financial services sector, like mutual funds.
I agree with all of the above industries, especially with Sergi’s comment about the government (if we are allowed to call it an industry) but to be add some other industry with little innovation, let’s talk about the transportation industry. How much have the airplanes, ships, trains, buses and cars changed in the last 20 years? It’s true that new technology has helped in matters of fuel consumption and conformability, but the way transportation is done hasn’t change at all in a long time.
Telecom is an industry lacking in innovation due not only to intense government regulations, but also - in many cases - to the lack of options customers have to choose another service. For example, I lived in a building in Chicago that used a RCN as their cable and telephone provider and therefore, was prevented from the option to use another service (whether I liked it or not). Often, these companies will market specific services through various forms of advertising, making their specific company seem differentiated, but this is more of a gimmick than an innovation.
It is very hard to argue with governmental services as the least innovative. Anyone who walks into the post office or tries to renew their passport can see that the process is antiquated and that there are obvious ways in which to improve many of the processes. The bureaucracy surrounding many of these services, however, breeds a lack of incentive to make improvements to the system, ultimately hindering the citizens that the services are intended to help.
The railroad industry in the US has not keep up and the air transportation took over. This is not the case in other countries or continents like Europe and Asia where the industry is characterized to be innovative and develop new faster more efficient trains remaining competitive
The wood industry in the US has not seen much innovation especially in production, chemical treatment, recycling, and structural designs. This is certainly not the case for metal, steel, iron industries where you see constant innovations in technologies and R&D in stronger alloys. The reason could be that (1) wood industry is a low paying industry and (2) they focus on cost cutting as a means to stay cost competitive.
I like what Bo was saying about the gaming industry. They do constantly update slot machines, but basically they update them to just newer and sparklier versions. There really isn't much innovation on the games. And the rest of the casino (table games) they haven't changed anything here. I feel like they think they have a great thing going and have no desire to mess with it.
I agree with education as the one of the least innovative industries. I think that nowadays the world is working so fast and access to information is so easy that spending so much time in a room listening to theory and expecting all people to write down particular ideas to prove they learned could not be the best way to take advantage of information. There should be a more practical way to teach.