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Innovation or R&D
Xavier Sala-i-Martin
Columbia University
June 2011

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Innovation
—NEW WAY TO SATISFY A (perhaps new) DEMAND (sometimes, a demand that customers don’t even know they
have)!
—Is this achieved through R&D?
—Should ONLY developed countries worry about innovation?

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Which brings me to…
—PIZZA!!!

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History of Pizza: From Phoenicians to Tomatoes
20215262 fat%20tomato flora-strt-nightshade PhoeniciansTributeSolomon
Belladona o
Uvas del Diablo
Arameic word
for bred:
PITTA

Romans or fenicians: stuff on top of bread
Tomato arrives in XVIth century. Since people are afraid of tomatoes (it was believed by many
Europeans to be poisonous (as are some other fruits of the nightshade family – Belladona o Uvas del
Diablo), only the poor use it.

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Early Pizza: From Marinara to Napolitana
seamen pizza1 164b-Seamen-in-great-distress-eat-one-another-q75-500x440
1st Pizzeria in the World:
Antica  Pizzeria Port d’Alba in Naples

However, by the late 18th century it was common for the poor of the area around Naples to add
tomato to their yeast-based flat bread and so the pizza was born.
The Marinara is the oldest and has a topping of tomato, oregano, garlic, extra virgin olive oil,
and basil (Alhabaca).
It was named “Marinara” not, as many believe, because it has seafood on it (it hasn't) but because
it was the food the fishermen ate when they returned home from fishing trips in the Bay of Naples.
The world’s first true pizzeria, Antica Pizzeria Port’Alba, opened in Naples in 1830 and still
serves pizza from the same premises today.
Alexandre Dumas explains that people in Naples ate pizza with tomato, cheese, anchovies and olives.
Pizza Napolitana is born

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Pizza Margarita
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The Margherita introduced cheese to the pizza and is attributed to baker Raffaele Esposito.
Esposito worked at the pizzeria "Pietro... e basta così" (literally "Peter... and that's enough“).
In 1889, for the visit of King Umberto I and Queen Margherita of Savoy he baked a pizza evoking the
colors of the Italian flag – green (basil leaves -Albahaca), white (mozzarella), and red
(tomatoes).
This combination was named Pizza Margherita in her honor
The Port D’Alba people say that Margherita is NOT a true pizza

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New York Pizza
5402 2004_07_15_LSLombardis02-thumb pizza-2
Lombardi’s employee (Tonono Pero)
and Coal Oven

Italian immigrants go to the US.
The first "official" pizzeria in America is founded by Gennaro Lombardi in Little Italy, Manhattan.
Gennaro Lombardi opened a grocery store in 1897.
An employee of his, Antonio Totonno Pero, began making pizza for the store to sell that same year.
He uses “coal” rather than “wood”. The pie is softer than the napolitan pie.
New York Pizza is invented.
The success of the “pizza department” of the grocery store is so large that he decides to start the
pizzeria in 1905 (casualitat!)
Mostly used in Italian neighborhoods.
Old Italians from Naples say this “soft” New York thing is NOT PIZZA

Overlay-ContentSlides.png calories, cheese, cholesterol, crust, diet, dinner, eat, fast food, fat,
food, isolated on white, italian, italian food, junk food, lunch, meal, mozzarella, nutrition,
obese, pepperoni, pepperoni, pepperoni pizza, pizza, pizza, pizza pie, slice, slice, snack,
triangle
The Pizza Slice: Harlem, NY
Harlem pizzasm

In Haarlem, they were poor and could not afford the 5cents that an entire pie cost. So started
selling pizza by the slice: you say how much money you have and we give you a proportion of the
pie.
Great marketing campaign (the person who eats a slize in the street makes the other people go
hungry)
Allows the poor to buy pizza
The traditional pizza people from Little Italy (Lombardis’ et al) say this is NOT PIZZA (pizza
should be sold with an entire pie).

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Chicago Pizza
Image:Ginoseastdeepdish.jpg 444710 The logo of Uno Chicago Grill. spenserandsewell geneoq4
franchisecontactpic
Ric Riccardo and Ike Sewell

In 1943 Ric Riccardo and Ike Sewell, a Texan businessman in Chicago set up Pizzeria UNO.
Sewell wants to put lots of BIG things like sausages and so on (he’s texan) in the pizza. He needs
a thicker pie.
He invents the “deep dish pizza” or Chicago Pizza.
The traditional pizza people from New York (Lombardis’ et al) say this is not pizza.

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Pizza Delivery: Domino’s
declan_driver dominocar Dominos%20Logo Pizza%20House%20dinner pizza-delivery
monaghan-from-ave-maria-u-c
Tom Monaghan

Key is “delivery”. To deliver pizza the key is the BOX (previous boxes were flimsy to so the top
would fall and get all the cheeses). He used the corrugated box cardboard of top of “tall hats”
which was sturdy and had insulating properties. Great success.
Key is speed in production: Monaghan uses a “meat grinder” that he had seen in a food fair to grind
cheese 4 times faster
Marketing genius: “pizza in 30 minutes or it is free”. It is an amazing success
As expand the number of stores, key is same quality pizza everywhere: For this you need
conveyer heat (not coal or wood) which is a uniform way to send heat,
the same ingredients
and a central place where the dough is produced
Although the cardboard was partly insulating, 15 minutes in the car wouold get t he pizza cold. He
needed the pizzas to remain hot.
R&D: A woman who worked at a steel company invented the Insulated bag and sold bags to Dominos.
These bags are generally vinyl, with cotton insulation. They generally keep a hot pizza hot for
about 15 minutes. They are both very light, and very cheap,
R&D: Domino’s own R&D in search of a heated bag. They come up with the “HeatWave," a portable
electrical bag system that uses patented magnetic induction technology to keep the pizza hot during
delivery.
Italians, New Yorkers, and Chicagoans now say this fast produced thing is NOT PIZZA.

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Pizza Hut: McDonald’s in Pizza
Pizza%20Hut _MG_5743_edited-1 pizza_hut_big Pizza Hut- Frostburg

Explain the Success of Ray Kroc and McDonalds in hamburger world
Pizza people want to replicate the success of McDonalds in pizza
PIZZA HUT was born: same quality, same efficiency, even same look (a hut) to be recognized

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DiGiorno Frozen Pizza: Di Giorno Rising Crust Technology
digiorno-frozen-pizza DiGiornoDeepDishPizzaSuprem DiGSupremePizza

Next step is to take the pizza home: frozen pizza that can be produced at home.
Technical problem is that the moist in the dough gets frozen into water. And when you warm it back,
it soggies the dough and the ingredients.
Di Giorno: they find a particular kind of though that, if partly baked, can expand and finish up
baking at home (“DiGiorno Rising Crust technology“).
Automated process: machines that can produce millions of pizzas by the minute.
Italians, NYC, Chicago, Domino’s, and Pizza Hut say this is NOT PIZZA

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Gourmet or California-style pizza
OscarsPuckcourtesyAcademyArtsSciences HollywoodSign2 204_HollywoodWalk 2005 los-angeles

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Lessons from History of Pizza for Innovation
—IT IS NEEDED IN EVERY SECTOR
—SMALL STEPS
—MOST IDEAS ARE NOT R&D:
—Chance/Employees (Tonono Pero at Lombardi’s)
—But when R&D is needed, it is DRIVEN BY NEEDS, NOT BY TAX INCENTIVES!!
—Innovation is done by individuals (workers) or SMALL BUSINESSES
—Some times “copying what works elsewhere” is a way to succeed (Pizza Hut)
—But some times, in order to succeed you need to innovate by adapting to your own specific
circumstances
—to the tastes of your customers –Chicago
—to the environment –there is lot of cheap coal in NYC
—to the income of your customers –slices in Haarlem
—to the desires of customers –fast delivery in college
—

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Where do Business Ideas Come From?
— Amar Bhidé ( “Origin and Evolution of New Businesses”)
—500 growth businesses in USA
—Results
—71% of enterprises “saw” an idea while working for someone else: WORKERS!
—21% found an idea “by chance”
—Only 8% through formal R&D...
—But usually “PULLED” by a firm (not pushed by the government)

71% of enterprises “saw” an idea while working for someone else: WORKERS!
Ray Krock of McDonalds
Chad Hurley, Steve Chen, and Jawed Karim of Youtube
21% found an idea “by chance”
Mark Zuckeberg of Facebook
Nokia
Bill and Paul
Only 8% through formal R&D...

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Innovation “Policy”
—WHAT IS NOT:
—It is NOT R&D subsidies (you would not target the right people or the right sector)
—It is NOT industrial policies or PLANS directed by clever bureaucrats
—It is NOT the promotion of “CLUSTERS” and “Technology Parks”
—everyone wants to be Silicon Valley 2!!!. Latest one is Skolkovo in Russia, which is meant to
fail.
—What IS:
—Creation of an environment conducive to
—(A) creation of ideas and
—(B) implementation into real products, services and processes

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Innovation “Policy” (2): A Business-Friendly Environment
—IDEAS HAVE TO BE IMPLEMENTED
—Infrastructures:
—Physical and virtual (technological adoption!)
—Not enough to have infrastructures, they have to be run efficiently!
—Institutional Quality
—Trust in law and order
—Tax system that works and is efficient
—Policy Certainty (opposite of Policy Reversals):
—Crime
—Private Corporations Scandals (Enron, Maddof, Banking, …)
—Regulation “barriers” :
—Bureaucracy (World Bank Rankings of Doing Business)
—Competition in Goods Market:
—DANGER OF PROTECTIONISM (Post-Recession Neo-Nationalism: E-on, France Suez, Danone, ...).
—

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Innovation “Policy” (2, Cont.): A Business-Friendly Environment
—Competition in Labor Markets
—Legal.
—Spain (worst-hit country in Europe as far as unemployment is concerned)
—Mental (regional mobility)
—Meritocracy (Football again)
—Female Discrimination (Did Affirmative Action work?)
—Financial Markets
—Need to finance entrepreneurs and innovators (not so much real estate): capital risk
—Careful with demonization of banking system after the current financial crisis: no ideas can be
implemented without banks
—Firms need to set up mechanisms to LISTEN and SCREEN their WORKERS’ IDEAS
—

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Innovation “Policy” Part 1:
Creation of Ideas=Education
—The world is changing and the education system is not!
—World is moving so fast that, FOR THE FIRST TIME IN HISTORY:
—Kids know more than parents and teachers
—Kids already live in the new world:
—Newspapers? Books?
—Wearing watches?
—Reading (Remember “Don Quijote”), TV, Playstation, and ARES
—

Kids already live in the new world:
Newspapers? Books?: mention that neither books nor news papers have hiperlinks so the current
generation correctly thinks they are old fashioned
Wearing watches? : single-function devices that are not understood by children today (useless if
you cannot download apps, games, etc)

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ARES: (Assembling Reconfigurable Endoluminal Surgical System)
ARES.jpg ARES-2.jpg cylindrical_robot.jpg ares_pieces.png
Da-Vinci-Surgical-Robot-Surgical-practice-493x299.jpg

Ares: Assembling Reconfigurable Endoluminal Surgical System

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Education: Change HOW we teach
(1) Are we sure we still want to divide classes by age?
(2)Are we sure we use the best available tools to teach?
(3)Are we sure we can speak our student’s language?
(4)Are we sure we teach the “right” things?
(1)Are we teaching the right math? Statistics or Calculus?
(2)Are we teaching “critical thinking”?
(3)Are we teaching “creativity”
(4)Are we teaching to solve real problems?
(5)Are we teaching to learn from mistakes?
(6)Are we teaching to “not give up”?
(7)Are we teaching to ask for help?
(8)Are we teaching to be entrepreneur?
(9)Are we teaching to lead or to obey?
—

Manufacturing is moving away from Henry Ford (and MacDonald’s) into indivudualized products (Dell
computers, Nike shoes, BMW cars, …)
Education is not! Linear education. Teacher (and parents) define success: lawyer from Harvard Law

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Education outside school
—Parents:
—Weekly allowance?
—Reading or story telling?
—Public Speaking
—Save/invest=teach risk
—Sell toys

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THE END