Gordon MooreIn 1965 Gordon Moore (Co-founder of Intel) estimated that the number of transistors that can inexpensively be placed on a single wafer would double approximately every 2 years. The computing industry has lived up to Moore’s prediction (appropriately named Moore’s Law) for over 40 years by delivering faster, smaller and less expensive chips. While at first looks, it’s all about efficiency - digging deeper will show that continuous innovation is the critical element driving long term success.

A good example for studying efficiency is how the advent of IT has effected big business.

Information Technology effecting big business.

As computers became cheaper and more readily available they allowed companies to gather and process large amounts of information. As companies made initial investments into IT they saw large gains by becoming more efficient. These gains directly translated to a strong competitive edge and drove business results. The cost/benefit ratio was soaring.

While IT was beneficial to early adopters, its effects did not last long. As IT became more of a commodity service, the cost/benefit curve started to level out. Not soon after, companies stopped investing additional funds into IT since it was no longer driving business results.

When an industry reaches this point the arms race slows and focus shifts away from efficiency and back to the core fundamentals of the business. The companies that make this shift towards new innovation will remain on the path to becoming industry leaders. Those who cannot innovate, at this point, will fall behind and fail.

Gordon Moore, Intel and the computer industry.

The technology trend is to double efficiency every 2 years. While keeping to this trend for a short term may be straightforward (by increasing clock speeds and adding more hardware) it is not sustainable. Eventually clock speeds peak and wafer space fills up. The cost/benefit curve has then leveled off and it is time again to focus on the core business and new innovation. Typically this is when Intel releases a new way of thinking about the microprocessor. It could be with a new chipset or the move to multi-core processors. Sometimes, its about changing requirements and focusing on energy efficiency and being green.

Increasing a clock speed creates marginal business value when compared to an innovative new approach. This is the reason why mature companies like Intel invest millions of dollars into remaining innovative year after year.

While Gordon Moore’s industry requires constant innovation to remain competitive, many industries are simply not that mature. The most intriguing part of this discussion is looking forward at industries that are starting to shift from efficiency to innovation.

Looking forward.

Below are my three favorite industries to read about their recent and ongoing innovation attempts:

  • The healthcare industry is now being asked to innovate by President Bush’s Electronic Medical Record (EMR) requirement
  • The energy industry is being forced to innovate because of the Keyoto Protocol in addition to the ongoing environmental crisis and societal shift
  • And let’s not forget about our friends in the finance industry who started innovating with their investments into morgage-backed securities. Although not positive in the short term (RIP Bear Stearns), this created awareness to a larger problem that needed attention.