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Small Businesses and Startups Are Still the Main Drivers of Innovation

It does sound like a political trope but it is worth stating that the small businesses, startups, and universities still drive majority of the innovation in our economy. If you follow the mainstream reporting of technology, you may be misled into thinking that innovation only happens at large conglomerates that also bring you the end products that we all use day to day. That would be a fair conclusion based on what gets the most mindshare, but it would also be far from reality.

As the industrial revolution of 19th century was underway, a very powerful realization has happened – namely, that production and economic benefits can be levered by separating innovation from production. Innovating was delegated to an increasingly smaller part of the work force while the majority was put to work on production lines embodying assembly-line process, where small, specialized tasks are performed repeatedly by individuals who are specialized in that one specific task. That’s still the basis of our economy, as well as the economy of most developed and developing nations. The question remains however whether the large companies, including those that are the behemoths of technology products today, are innovating efficiently. This is a point that can be argued either way, but it is informative to look at some of the most recognized, and largest innovators in the US.

Take a household name such as Google that some argue to be among the innovative large tech companies. Google was founded more than twenty years ago in 1998. Today the company employs more than 100,000 people and yet it is still primarily a search engine advertising business. It generates well over $100 Billion a year revenue but only a fraction of that revenue comes from all of its non-search engine businesses. Arguably, the only innovative businesses Google owns are the Pixel phones and Nest cameras, both of which resulted from large acquisitions, not native Google innovations. As for cloud computing or Google Home, Google is firmly a follower, never led these product categories. Picking on large companies such as Google is easy, but not the main point here. They bring convenience to a large number of consumers and employ a lot of engineers, after all. The main point is that innovation under the umbrella of large companies is not nearly as efficient as innovation undertaken by thousands of startups and small innovators. The reason: Small companies have to innovate to survive, whereas large companies can innovate much less and still remain dominant due to their pricing power and established market position.

The recognition that innovation happens all over our economy and that it is not confined to the ranks of the largest tech companies is the driver of our business at Armada. Each of the largest tech companies employs hundreds of people in their IP department just to manage their patent portfolio. The only way that smaller innovators can even stay in the game is by employing the help of likes of Armada, whereby bringing in expertise and capital to their corner, by employing the same best IP management practices that the largest players employ, and by starting to treat their innovations as their most valuable assets rather than something that can be put off and addressed in the future.

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