How Consumers Drive American Innovation

A recent Economist magazine includes a special report on entrepreneurship which recites the customary litany of reasons why America spawns so many entrepreneurs. There is barely an acknowledgment of what Amar Bhide has appealingly termed "the venturesome consumer." Yet this willingness to adopt new products, new processes and new services more rapidly than consumers in other countries may be the most important of all enablers of entrepreneurship and innovation in America.

Why is the American consumer more venturesome? Six factors come to mind.

Wealth. The average American consumer has more disposable income than his counterparts in most other countries. There is therefore money available, with easy credit historically fueling the fire, to risk on new things and new experiences. And the secondary market, from the flea auction to eBay, is well developed so the consumer does not necessarily lose everything if disappointed.

Mobility. American consumers relocate more than most. What they own, how they dress, what they do. In other words their consumption behavior, becomes an important signaling device to attract efficiently the right set of new friends and acquaintances. It's not so much a matter of keeping up with the Jones's; it's a matter of quickly identifying the Jones's like you.

Immigration. The prevalence of immigrants among America's successful entrepreneurs is well-documented. But the same curiosity and openness to new things also characterizes consumer demand in the American melting pot.

Independence. The American frontier tradition and the sheer number of Americans promotes an attention to individual differentiation that is less prevalent in more conformist and homogeneous societies. Among 300 million curious consumers, it is possible for almost any innovation to find a viable niche market.

Recognition. Americans are not overly concerned or burdened by history. Many live for today or for the next new thing. Early adopters and lead users of new products are listened to and applauded. Their opinions are sought on the Internet. They can accelerate adoption of a new product or kill it. The American maverick commands more influence than the European eccentric.

Technology. Americans understand that innovation is the key to growth and wealth in a global economy where knowledge travels at lightspeed over the Internet. America's economic strength is based on innovation. Proud parents take their children to science fairs, new electronic gizmos dominate Christmas gift sales, and senior citizens find renewed connectivity with far-flung families by going on line. Americans know technology adds value to daily life.

These traits apply equally to consumers and entrepreneurs. They are of course the same people. Consumers can become problem-solving entrepreneurs and successful entrepreneurs such as Gates and Dell become well-respected role models for younger people.

Marketing, a distinctly American expertise, has of course encouraged consumers to be venturesome and to welcome innovation. Marketers research customer needs, design new products to solve customer problems and motivate purchase through attractive pricing and heavy advertising, with the occasional dose of built-in obsolescence. An example is Intel's remarkably effective pull advertising campaign that had consumers clamoring to OEMs for PCs with the latest, fastest microprocessor.

Politicians, like marketers, understand the importance of the venturesome consumer. President Obama's campaign slogan, "change we can believe in." captures perfectly the spirit of the venturesome American consumer, looking forward, ever-hopeful and prepared to take a chance on something new.

Watch a video of Professor Quelch discussing his recent Harvard Business Review article, "How to Market in a Downturn."

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