Innovation: the next step

J.P.CONTZENInstituto Superior Técnico

Lisbon, February 6th, 2004

The next step (1)

MIT’s Magazine of Innovation “Technology Review” in its issue of February 2004 has identified the 10 emerging technologies “that will change the world”

The next step (2)

They are: Distributed storage Personal genomics T-rays Power grid control Universal translation Synthetic biology Nanowires RNA drugs Bayesian learning Microfluidic optics

The next step (3)

Where are the real opportunities for Innovation for these 10 technologies?

Knowledge push or demand pull?

Reaping the benefits of Innovation (2)

More recently, financial markets attracted by the so-called High Tech created economical excesses leading in several cases to subsequent collapse. The recent “ICT Bubble” constitutes such a case.

According to a renowned economic expert – Geert Noels, Chief Economist at Petercam – the booms last for about 20 years, with rapid collapse, followed by a recovery time of about 10 years.

Reaping the benefits of Innovation (3)

Economic bubbles are more likely to happen in technological areas where substantial infrastructures are required. This assumption should explain why biotechnologies were spared excessive ups and downs in recent years. On the contrary, optical fibers’ operators, mobile phones’ companies, telecommunications satellites operators were in trouble.

Geert Noels has attempted to formulate a recipe for avoiding such troubles. Don’t be a pioneer!

Reaping the benefits of Innovation (4)

Noels identifies three phases in the “boom bust”: The Pioneer phase: hundreds of pioneers create a new

capacity in services. They find easy financing by investors eager to enter into a new High Tech area. This leads to an infrastructure largely exceeding the demand. The pressure on prices leads to default

The Opportunist phase: investors looking for a good buy acquire at low cost the activities of the pioneers. They still arrive too early: even if the users are accustomed to the service, there is still over-capacity. The financial losses continue and further default occurs. The number of actors diminishes

Reaping the benefits of Innovation (5)

The Consolidation phase: the market is eventually ripe; the capacity has been brought down to a reasonable match with demand. The few actors who remain make finally money. They are the ones who reap the benefits of innovation.

The Gospel is right “Les premiers seront les derniers”

1 2 3

Le Cycle typique des surinvestissements

«Boom/bust» et redressement

NECESSAIRE

DISPONIBLE

Capacité

Temps

• Leçons des anciennes “New Economies” - Vainqueurs ▪ 3e vague ▪ Services - Perdants ▪ Pionniers ▪ Constructeurs d’infrastructures ▪ Prêteurs

1. Pionniers

2. Opportunistes

3. Consolidateurs

Reaping the benefits of Innovation (6)

The lessons to be learned: When dealing with innovation that require

investments in infrastructures, remain close to the demand

Being a pioneer is not necessarily the best situation in financing terms

Keep in mind this lesson when the next infrastructural boom will occur in 20 years