Amid mounting concern over the loss of jobs to low-wage economies, one fact is clear: America's prosperity hinges on the ability of its businesses to continually introduce new products and services. But what makes for a creative economy? How can the remarkable surge of innovation that fueled the boom of the 1990s be sustained?

For an answer, Richard K. Lester and Michael J. Piore examine innovation strategies in some of the economy's most dynamic sectors. Through eye-opening case studies of new product development in fields such as cell phones, medical devices, and blue jeans, two fundamental processes emerge.

One of these processes, analysis--rational problem solving--dominates management and engineering practice. The other, interpretation, is not widely understood, or even recognized--although, as the authors make clear, it is absolutely crucial to innovation. Unlike problem solving, interpretation embraces and exploits ambiguity, the wellspring of creativity in the economy. By emphasizing interpretation, and showing how these two radically different processes can be combined, Lester and Piore's book gives managers and designers the concepts and tools to keep new products flowing.

But the authors also offer an unsettling critique of national policy. By ignoring the role of interpretation, economic policymakers are drawing the wrong lessons from the 1990s boom. The current emphasis on expanding the reach of market competition will help the analytical processes needed to implement innovation. But if unchecked it risks choking off the economy's vital interpretive spaces. Unless a more balanced policy approach is adopted, warn Lester and Piore, America's capacity to innovate--its greatest economic asset--will erode.

Review

From 1994 to 2002, almost in parallel with the Internet-led boom in the U.S. economy, researchers at the Industrial Performance Center at MIT developed a series of case studies of technology-oriented companies. These studies allowed the authors of the current book to identify common patterns in the innovation process. What the authors found was startlingly simple: innovation was a function of two basic processes--analysis and interpretation. While there are numerous books on the topic of innovation, this volume's real value is its exposition of the two processes and the illustration of these processes through exhaustive case studies...Innovation is absolutely critical to the economic well-being of the U.S. and is the only bulwark against the migration of jobs overseas. The authors make these points tellingly, using persuasive arguments that illustrate the innovation processes in organizations.--R. Subramanian"Choice" (03/01/2005)

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