Or consider the dilemma of Amazon, the first truly successful electronic retailer.When Amazon realized it couldn’t earn more than slim profits from selling books, it moved into other areas. But the cost of becoming the Wal-Mart of cyberspace is so great that Amazon won’t earn profits for a long time, if ever. And since the bricks-and-mortar Wal-Mart wants to dominate the Net too, it is only a matter of time before Amazon sells out to the discount retailer-or to one of Wal-Mart’s competitors.
Now you might say that this merely shows that Amazon, like Netscape, isn’t innovative enough. But the predicament of these companies doesn’t stem from lack of innovation but from the mistaken belief that they could earn profits in the first place. It’s a business truism, or ought to be one, that an innovation must create a sustained competitive advantage or else it merely paves the way for rivals. This truism, by the way, explains the success of the Linux operating system. It became attractive as a standard precisely because no one was trying to use it as the basis for a profitable business. Because the Linux standard is free, the problem of wringing profits from this innovation never arises, which is one way of resolving the pioneer’s dilemma.
The realization that innovators don’t earn profits will cause some suffering on Wall Street. This isn’t all bad.America has made a cult out of the entrepreneur and the innovator -so much so that even within the engineering community people feel they are somehow less if they can’t blaze an original trail. This is unfortunate.Not everyone can, or should be, an innovator.As the computer pioneer Vannevar Bush pointed out in a short essay he wrote for this magazine, titled “The Builders,” there are many important roles in the community of research and engineering. The role of innovator is only one, and it is rarer than most realize. This is good, since most innovators lose lots of money and, in the end, leave for others the hard work of turning a path into a highway. Those who come after and turn the innovation into a practical alternative are no less essential than the innovator-and a good deal better at posting profits.