On innovation and ragged trousers… just a thought!

Robert Tressell described the “Great Money Trick” of capitalism, in his book “The Ragged Trousered Philanthropists, first published in 1914. This was admirably summarised by Gary Day, in his 1997 introduction to the Harper Perennial edition of the book – and I paraphrase slightly:

“There are those who own the means of production, and there are those who own nothing except their labour power, which they sell in order to survive. What the workers earn is always less than the value of what they produce. Hence the owners, by selling back to the workers what they produce, continue to increase their wealth while the condition of the workers progressively deteriorates.”

Now, heading towards 2014, and one hundred years on from the fictional, small bunch of painters and decorators sat around in the Cave, listening to Marxist philosophy, we may have cause to echo their sentiments.

There is a growing concern that, as a culture, we are not innovative enough: a lack of innovation is often proffered as a cause for low productivity. Increasingly then, a common innovation strategy involves companies seeing their customers, not merely as passive consumers of innovations, but rather as contributors to the innovation process itself. This is where the ideas and insights of consumers can provide the starting point for new directions, creating new markets, products and services. Take, for example, Lego, the Danish toy manufacturer. Lego set up the Lego Factory website. Here, users can design their own model online, and have the ready-to-assemble model sent to them. The site has given Lego an effective way to capture ideas from its customer base, which are then built into mainstream products, and (re)sold in quantity. In the extreme, is this a sustainable strategy?

I think, without a doubt, there is a place for this type of thinking and strategy, but as a basis for policy making to generally improve inclusive economic development, we could draw an interesting insight from those Ragged Trousered Philanthropists. And I will paraphrase again:

Taken to the extreme, “Lego owns the means of production… then there are others, their customers, who own nothing except their knowledge power, which, under open innovation, they no longer sell in order to survive – they give away in a globally networked, knowledge exchange process. What the knowledge workers now earn is far, far less than the value of their ideas. Hence Lego, by selling back to the knowledge workers innovations based on their own ideas, continue to increase Lego’s wealth while, relatively, the condition of the knowledge workers progressively deteriorates.”

Culture is about the people; and it is at the level of the people that creativity takes place. In the SME community of my own experience, the focus should be about people, not so much about process. There is a place for process of course, but in fostering innovation, and its root of creativity, knowledge workers should be engaged and encouraged to participate in a general, innovative culture. This will require principles better aligned to fair trade ideals, than some ideological notion of a global network for the free exchange of ideas.

I have based this post on a short essay. If there is any interest, I will consider making the full essay available.