Is innovation finished or isn't it?

I just read Bruce Sterling's column in Wired on innovation. Eric von Hippel at MIT/Sloan describes a successful innovation as a combination of high velocity (sales volume x profit) and drag (the cost of adoption). This model predicts that as velocities top out in any field, business models starting turning to increasing drag -making the cost of adopting someone else's innovation too high to bear.

Sterling suggests that the world has changed, and that the velocity and drag sides of the equation are losing their interdependance, becoming, in Sterling's words, mutually exclusive.

"Why? Because the laying field itself is changing: Innovation, once rare and precious, is becoming a commodity."

I dont know if I buy that, and Sterling doesnt offer up any particularly convincing proof that innovation will not itself change as the landscape changes around it. Sure, what was innovation five years ago is now turnkey ODM work. And yes, big companies like P&G and Target are embracing design (the most recent front in innovation) to the point where it is becoming common. This is a good trend, not something to be worried about. This is the rising tide lifting all boats.

If innovation is a velocity, (forgive me as I geek out) , it has both magnitude and direction vector. And just because the velocity is slowing down in against one measure, it doesnt mean the magnitude has dropped, it could be that the direction vector has changed.

Daniel Pink makes the argument that design thinking (the next front in innovation) will be necessary to stay ahead in the next wave, while Tom Kelley wrote that innovation in product design was the key in this wave. They are both right, and the innovation magnitude can be conserved as the direction vector changes from 'the art of innovation' to 'design thinking'.

Companies like IDEO have surely seen their client mix change since the 20th century. But if we manage to react in positive ways to this change, we can bring innovation and design farther up the food chain, growing it into design thinking, without commoditizing it.