When you think of “innovation,” which businesses come to mind?
Surely Apple, Google, and Amazon make your top list. Over the past decade, each has made great strides, not only in their original industries, but those they’ve expanded into. But what has made them so successful?
Certainly some would argue they have great innovators at the helm, but there’s another contributing factor, and it’s largely environmental: they all have close competitors constantly spurring them on.
Think about it. In addition to Microsoft, Apple also battles closely with Amazon in the music streaming industry. Amazon not only battles booksellers like Barnes and Noble but also takes on major retailers and has begun offering web storage services.
Google has no major competition in the search engine business but is constantly breaking into new markets and spawning growth — think Android Phones, Google Fiber, Google Pixel, Chrome, and Google Home. Each of these companies overlap in fields of business and regional location, so even with a great leader at the helm of each, it's no wonder that the sense of local competition and market dominance has spurred these businesses to constantly create newer and better options.
Over the years, economists have measured how competition spurs innovation, and there are many theories as to why.
What do we know for sure? A bit of competition can be great not only for an industry, but for a business’s growth as well.
The Innovation Incentive
Innovation in a competitive market is dependent on the right kind of competition. An overcrowded market can actually hinder innovation because a broad range of choice spreads marketshare and profits, therefore keeping research and development spending low.
Another caveat to competition is monopolies. A market in which a dominant player overpowers marketshare can hinder innovation, as there’s limited room for entry. (A good example of this is pharmaceutical companies). This can either be the result of patent law, in which the concepts are all patented and too protected, or in the sheer costs to maintain a competitive level.
In these situations, the lack of available marketshare leaves companies seeking to maintain the status quo, while larger businesses with higher marketshare maintain their ration of operating costs to profits. For these businesses, there is no incentive to innovate, as there is no competition to force it.
In reality, the incentive to innovate demands just the right level of engagement in the right kind of market with the right amount of competition. These conditions provide reward for innovation, either in increased marketshare, positive reputation, or business growth.
Take a look at the real estate market in the Dallas area. Dallas is experiencing a huge population boom due to the number of major companies relocating to the area. This has created a new need for housing. Enter developers.
New multifamily complexes going up around the city are striving to be competitive in the crowded market. So much so that luxury amenities have become the norm, and property managers are implementing new ideas to interest potential residents. This happens because of the proximity and abundance of complexes, all looking to make a distinct name for themselves and capitalize on the growth in population.
Becoming an Innovation Hub
Think of the northern region of California around Palo Alto and San Francisco. What kind of industry are they known for? Your mind probably went to Silicon Valley immediately, home to companies like Apple, Google and Facebook.
Is there a business that comes to mind when you think of Seattle? Perhaps Amazon, Expedia, Microsoft? Each of these regions are a hub to specific industry types. And new hubs are growing everyday.
Dallas and Austin are quickly being regarded as new tech hubs, North Carolina has been named “the Research Triangle” meant to entice tech startups, and Colorado has developed a reputation as a potential home for computer storage and biotech companies.
Knowing the overcrowding of Silicon Valley, these regions are all designating areas and seeking out businesses to create tech sectors to rival the innovation Silicon Valley has spurred for the past 20+ years. This forward thinking approach has great benefits for surrounding areas, as well.
Here in Midlothian, we’ve put great emphasis on the development of our Midlothian Business Park, designed as a hub for manufacturing. Why? Because we fully support the idea of proximity and competition. With the movement of larger technology companies and other industry, we expect a high demand for manufacturing and suppliers closer to home.
These suppliers will require the large amounts of land and space we offer, and, in being so close together, can offer innovations and grow with their customers. This strive to do better for a more competitive market benefits all involved.
In Texas, growth is imminent. Businesses are moving to the area at record rates, and the-once urban sprawl is becoming increasingly dense.
For businesses seeking their own growth, this means taking an important look at business needs, location, and competition to discover whether their current location is ideal for this process of innovation and growth, or whether they need to move elsewhere.