Small Innovation - Massive Transformation

Sometimes it's the small or almost invisible innovations that can effect the most change. In 2009, few people driving around the modern American suburb would attribute this massive change of landscape from a hundred years ago to a single financial instrument. And yet, were it not for change in how banks lend money, most of the suburbs we have today would still be farmland and forest.

Before the 1930’s less than 40% of the population owned their home – as few could manage a loan with a large down payment and a balloon payment at the end of a short term. It was accepted wisdom that most of the middle class would never be able to acquire enough capital to purchase a home and therefore the more experienced banker would focus on lending to their wealthy customers. The Great Depression, however, prompted the government to make a change to the very nature of home ownership.

To help relieve unemployment and stimulate the economy, the US government passed the National Housing Act of 1934 and the Federal Housing Administration (FHA). Though criticized by many bankers, this act actually helped create an astonishing amount of new business for them. The FHA, through its mortgage insurance programs, made possible the amortization of mortgage loans with regular monthly payments and smaller down payments.

The self-amortized home mortgage, established in the 1930’s, then expanded through the use of securitization in the last decades of the 20^th century to grow the amount of home owners from 40% to 70% of the population. Although there have been abuses of the home mortgage system, most notably in the last several years – this innovation forever changed home ownership – and in the process helped create the modern suburbs, a massive home building industry, an expansion of automobile use, and many other innovations that are now accepted as normal.

A small innovation led to a massive transformation of the American landscape, industry, and culture. Now that we face another large economic crisis, the "Great Recession", will we create another small innovation that can transform our world? It seems very likely.

The Trojan Horse

Most people hate to change - and will do anything they can to avoid it. Even when they claim they want a "change of pace", or complain that "not enough changes around here", in their heart of hearts, most don't want anything to really change.

Especially now. Despite the calls for innovation to combat the recession, most companies are doing anything but changing. Instead, they take the relatively easier route of laying off workers, closing lines of business, selling assets, and praying that the economy will change before they run out of money. Why avoid innovation? Because the unknown is even more frightening than layoffs.

Sometimes, the greatest mistake an innovator can make is to tell someone that they are innovating.

So - how do you persuade a company, a market, a community...yourself...to innovate when it is all so frightening?

Use a Trojan Horse.

In Virgil's The Aeneid, the Greek armies, after 10 years of trying to defeat the city of Troy, built a huge statue of a horse out of wood. The Trojans took the seemingly harmless but massive statue into their city. At night, soldiers from the Greek army snuck out of their hiding places inside the statue in order to take over the city.

Successful innovations often use a Trojan Horse approach. They present something new as if it were merely a slightly modified version of something old. The iPod is really just a digital version of a Walkman. A personal computer is really just a typewriter with a screen. A car is really just a horseless carriage. A television is really just a radio with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. I can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. No one buying a computer in 1990 was buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had every shared before, would they have started creating Internet sites? If we knew then what we know now, I doubt many would have ever bought a computer - all that change is far to scary.

What are the Trojan Horses of today? What seemingly harmless idea, toy or tool has the potential to completely change our world?