Innovation Capital: How Edison Beat Tesla and Why It’s Relevant To Your Career by Forbes – Entrepreneurs

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Wooden lamp with Edison bulb. Industrial loft design.

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Why do people with great ideas sometimes struggle to win the support for their innovations while others, perhaps with more mediocre insights, do not? Our new book, Innovation Capital:  How to compete—and win—like the world’s most innovative leaders, tries to unpack this question and identifies this critical but underappreciated ingredient for successful innovation: how do innovators win support to turn their ideas into reality.

Although this may sound simple, for the innovators we studied, it was a subtle, multifaceted art that unsuccessful innovators have overlooked.  Why? All aspiring innovators, whether they are working alone or in an organization, must overcome the innovator’s paradox if they want to succeed. What is the innovator’s paradox? Quite simply, the more novel, radical, or risky your idea, the greater the challenge you will face acquiring the resources you need to turn your idea into reality. Although we all say we want more-radical ideas because they are likely to have a greater impact, when it comes to getting the means to pursue radical ideas, the greater the risk and uncertainty, the more skittish potential supporters (investors, bosses, partners, etc.) become. Before jumping in, most supporters want the idea to be proven or at least want the uncertainty reduced in some meaningful way.

But how can you prove that an idea can work if you lack the resources to start developing it? You need resources to make innovative concepts succeed. Even the leanest of the lean startups need some resources to test out their ideas. Most truly big ideas need a lot more.

Your capacity to overcome the innovator’s paradox—to secure the necessary means to turn novel and risky ideas into reality—is key to innovation leadership. We’ve all seen leaders who excel at winning backing for their ideas. But this ability isn’t simply due to charisma, luck, or some other undefinable quality. Their capacity to inspire advocates and benefactors is a science and an art that generates something they have that others do not: innovation capital.

So what convinces people to support a novel idea, whether the support is their time (e.g., joining your project), money, endorsement, or any other backing to help you and your idea? Our research suggests that people and organizations will be influenced primarily by three interrelated innovation-specific factors:

  • Human capital: who you are as a leader of innovation
  • Social capital: who you know with key expertise and resources
  • Reputation capital: what you’ve done to warrant a reputation for innovation

The effect of these three types of capital can be multiplied by impression amplifiers—visible actions you take that help you gain attention and credibility for your ideas.

How exactly are potential supporters influenced by these factors? In academia, we use what we call a simultaneous equation model to describe how these factors work together.  Sponsors are simultaneously weighing all these factors: whether you have the innovation skills as a leader to pull this off (who you are as a leader of innovation), whether you are well connected with others who will need to support your project (who you know with resources or expertise), and whether you have a track record and reputation for innovation success (what you are known for). And potential sponsors look at the things you have done to persuade them (the impression amplifiers).  They consider all of these elements of your innovation capital to decide whether to support you and your ideas.

Edison’s Innovation Capital Propelled Him Past Tesla

The dangers of not understanding, or overlooking, innovation capital are best illustrated by the battle between two great inventors: Thomas Edison and Nikola Tesla.  Both Edison and Tesla were considered great inventors. Edison was known more as a practical inventor who produced inventions largely through trial and error. Lacking sophisticated training in mathematics or engineering, Edison instead applied a famous work ethic to produce new ideas through brute trial and error, arguing that invention (or, to use his word, genius) is “one percent inspiration and ninety-nine percent perspiration.” He is credited with inventing the phonograph, the motion picture camera, the alkaline battery, and, most importantly, the electric light bulb and the accompanying distribution system for electric power.

By contrast, Tesla grew up in Europe and showed early signs of genius. His ability to perform integral calculus in his head led his tutors to think he was cheating. He attended Joanneum Polytechnic in Graz, Austria, one of the world’s best technical institutions. After his studies, Tesla briefly worked with Edison early in his career. In Nigel Cawthorne’s, Tesla vs Edison:  The Life-Long Feud That Electrified the World, we learn that although he admired Edison’s work ethic, Tesla had an opinion about Edison’s approach: “His method was inefficient in the extreme . . . I was almost sorry to witness his doings, knowing that just a little theory and calculation would have saved him ninety percent of the labor. But he had a veritable contempt for book learning and mathematical knowledge, trusting himself entirely to his inventor’s instinct and practical American sense.”

Tesla’s genius and education led him to develop the foundations for electric induction motors, wireless telegraphy, radios, neon lamps, and remote control. In fact, his inventions in three-phase electric power and alternating current eventually enabled the global distribution of electricity as we know it.

However, although Tesla’s ideas arguably were more brilliant, he was unable to commercialize his ideas. He died virtually penniless in a hotel room in New York. In stark contrast, Edison died wealthy in his New Jersey mansion having won the Congressional Medal of Honor and having his birthday, February 11, designated as National Inventor’s Day. If Tesla’s ideas ultimately had more impact, then why was Edison so much more successful?

One part of the answer is certainly the lessons taught by earlier studies of innovation. For example, Edison learned early in life that inventions are only valuable if someone is willing to pay for them. At the age of twenty, he invented a device that counted the votes in the US House of Representatives in only a minute or two—saving both time and money. But no one would buy it. It turns out that legislators didn’t want the voting to be made quicker and more efficient, as the process in place allowed for filibustering and politicking. His first invention taught him an important lesson. “Anything that won’t sell, I don’t want to invent,” he said. “Its sale is proof of utility, and utility is success.”

But another underappreciated factor contributing to differences in Edison’s and Tesla’s success was Edison’s ability to win backers, collaborators, and attention for his ideas—his ability to build and leverage innovation capital to turn his ideas into reality. For example, Edison worked purposefully to fashion an image of himself as a hardworking, hands-on inventor (in addition to his constant reference to hard work, he even once reportedly smeared soot on his hands and face before an interview to bolster that reputation).

He also worked hard to build his social capital with other talented inventors, but also with wealthy families and financiers like J. P. Morgan, the Vanderbilts, and the Rockefellers. As a result, Edison attracted talented associates like Swiss-born machinist John Kruesi and an English master mechanic, Charles Batchelor. Then when Edison developed a commercially viable light bulb, he was able to convince Morgan to advance him $30,000 for the Edison Electric Light Company. When the company began installing electricity in homes, Morgan’s home in New York was one of the first to get electricity. The electrification of the financier’s home generated further attention for Edison’s invention.

But his connections with people and actions to get attention for his ideas weren’t accidents; they were practiced habits that the inventor repeated over and over. For example, Cawthorne reports in his book that the morning that Edison’s lab developed a working phonograph, Edison took it to New York to the office of the editor of the Scientific American. “I said I had something to show him,” Edison said. “He asked what it was. I told him I had a machine that would record and reproduce the human voice. I set up the machine and recited ‘Mary had a little lamb.’ Then I reproduced it so that it could be heard all over the room. They kept me at it until the crowd got so great Mr. Beach [the editor] was afraid the floor would collapse.”

This demonstration led Scientific American staff to take up the cause of his invention, writing about it in newspapers worldwide throughout the next week. He also promoted the phonograph—and all his other inventions—by creating a list of “applications” (what we would call use cases today) for it. Phonograph “applications” included reproducing music, making phonographic books, recording teaching lectures, and taking dictation.

By contrast, although Tesla was a brilliant inventor who developed technologies that have shaped our modern world, he lacked Edison’s skills at building and employing innovation capital. For example, after he developed his ideas for an induction motor that ran on alternating current (AC), Tesla tried unsuccessfully for several years to raise funds to commercialize it. In his book Tesla: Inventor of the Modern, Richard Munson writes how Tesla spoke of his frustration, saying: “The utter failure of my attempts to raise capital for development was a major disappointment.”

During this period, Tesla developed patents for other useful inventions, such as arc lights and dynamos. But he struggled to find the means to commercialize these ideas until B. A. Vail and Robert Lane approached him with the proposal of forming an arc light company. When Tesla agreed, Vail secured a contract for lighting the streets of his hometown, Rahway, New Jersey. The company installed moonlight white arc lamps around the city, and when the electrification of Rahway was completed, Electrical Review featured it on the front page of its August 1886 issue. Tesla was optimistic. He believed that once the lighting of Rahway was complete, his company could get on with the serious business of producing AC induction motors and huge electrical grids. But Vail and Lane had other plans. They maneuvered to dismiss Tesla from the company. And because Tesla lacked the innovation capital to fight them or to restart on his own, he found himself ousted. “It was the hardest blow I ever received,” Tesla said. “I was forced out of the company, losing not only all my interest but my reputation as engineer and inventor.”[viii]

But Tesla didn’t give up. He persisted with his AC induction motor technology and eventually published a groundbreaking paper—“A New System of Alternate Current Motors and Transformers.” This work helped him win the financial backing to start the Tesla Electric Light Company—with an eye toward commercializing his AC induction motor technology. But despite Tesla’s inventive ideas, the company was unable to assemble the resources needed to commercialize the technology.

Tesla was a visionary and was even described by Edison as someone whose “ideas are magnificent.”[ix] But he was simply unable to attract the right talent and financial resources to successfully commercialize his ideas. Some have suggested that his personality traits were a contributing factor. He was reclusive and kept rigid habits (he worked each day from 9 a.m. to 6 p.m., ate dinner at the same restaurant each night, and had to be served by the same waiter). Tesla’s partners eventually sold Tesla Electric Light Company’s patents to George Westinghouse, CEO of the Westinghouse Electric Company. The involvement of Westinghouse is one of the only reasons we know of Tesla today. According to Cawthorne’s Tesla biography, “Tesla was a visionary. But without the backing of the great entrepreneur and gifted engineer George Westinghouse, Tesla’s revolutionary inventions would probably have come to nothing.”

Ultimately, Edison’s commercial victories over Tesla were due not to the superior quality of Edison’s ideas but to differences in the men’s innovation capital. Although Tesla deserved better, his lack of innovation capital hindered his efforts to attract the talent and backing to commercialize his ideas. As a result, he died poor and faded from history until recently, when his invention, the AC motor, and his name became the heart of Tesla Motors.

A Key Lesson from the Edison vs. Tesla Battle

Creative genius is not enough. The Tesla versus Edison comparison illustrates the difference between a great inventor and a great innovative leader. Apple cofounders Steve “Woz” Wozniak and Steve Jobs offer another illustration. Wozniak was a great inventor (and even built solid innovation capital), but Jobs had the ability to lead innovation in a way that Wozniak could not. Edison and Jobs had a broader skill set than did Tesla and Wozniak, and these skills allowed them to recruit talent, secure financial resources, develop desirable products, and gain attention for themselves and their projects. Most importantly, the ability to win support for ideas is not something you are born with; you have to build it up over time. Even the immature Steve Jobs, for all his charisma and bravado, at the beginning of his career struggled to win support for his ideas. But over time he built up his innovation capital to the point where he could truly lead radical changes.

Our research shows that there are a host of things you can do to build up your innovation capital over your career. But, if pushed, we would suggest that the most important thing you can do to start building your innovation capital is to be the founder of some new initiative.

Being a founder doesn’t necessarily mean leaving your job, or risking it all to be an entrepreneur. Being a founder can be taking a leading role in some new initiative, whether it be a new product or service, a new approach to hiring talent, a new process for reducing cost.  It will require that you bring a new idea forward and generate the support needed to turn your idea into reality.   This is an important first step to building a personal reputation as an innovator—and your innovation capital.  Indeed, in our research, we found that the most valuable reputation that any individual or organization can have is that of “innovator.”

You don’t know it yet, but perhaps the most important next step in your career is to build your innovation capital as you become an effective leader of innovation.  Indeed, in today’s world, successful leadership is all about value creation—and true value creation requires being a successful leader of innovation.

June 4, 2019 at 10:29AM
https://www.forbes.com/sites/nathanfurrjeffdyer/2019/06/04/innovation-capital-how-edison-beat-tesla-and-why-its-relevant-to-your-career/
Forbes – Entrepreneurs
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