Innovations Come in Networks

Economist Leonard Read once used an ordinary wooden pencil to make a fundamental argument about the nature of technology and innovation. As simple as a pencil is, he said, “not a single person on the face of this earth” actually knows how to make one from scratch!

You’d have to start by harvesting wood for the pencil with saws, axes, ropes and other gear, which means you’d also have to mine and smelt the ore to make these tools, raise the food to feed the lumberjacks, and build the hydroelectric dam to power the sawmill. You’d need to mine the graphite in Sri Lanka, mix it with ammonium hydroxide and sulfonated tallow, then bake it at 2,000 degrees Fahrenheit before treating the mixture with candelilla wax, paraffin, and hydrogenated natural fats.

Read’s argument is not just that no single person could ever do all these things, but that no single person even knows how to do all these things. Absolutely no one. (Quick: Do you even know what candelilla wax is, or sulfonated tallow?)

But even though no one knows how to make a pencil, pencils still arrive in stores, in roughly the same way beehives appear in fields: pencils emerge from the collective actions of different people doing different things. In fact, all products of human technology, from pencils and pastries to airplanes and iPads, have been “invented” by combining previously developed technologies. And today, just as no single bee knows how to make a hive, no individual human knows how to make a pencil.

Every innovation is really just the result of combining two or more previous innovations. As Matt Ridley, the English commentator colorfully put it, ideas get together and “have sex,” giving birth to even more ideas.

So each new innovation is, in effect, just one additional node within an increasingly intricate network of innovations. Or I should say “network of networks.”

This network perspective on innovation has several implications. For one thing, the rate at which new innovations appear will inevitably accelerate because of

1. The increasing "inventory" of previous innovations that can now be combined,
2. The growing number of creative minds that can be deployed,
3. The greater speed and efficiency of interaction among people, and
4. The higher level of trust people share (i.e., how much more “efficiently” they interact with each other).

The rate of US patent applications has in fact grown more than 600% in just the last five decades. And as a business competitor, from time to time you probably experience this jarring acceleration in the rate of change as a faster and more intense kind of business competition. In effect, competition’s “game clock” appears to be speeding up.

A second implication, as Alistair Davidson suggests in his new book Innovation Zeitgeist, is that innovations themselves are increasingly connected to each other, as all these different technologies are intermingled. "To take a simple and well known example," he suggests, "a music player without an MP3 store is less valuable than a value chain that consists of hardware, software, e-commerce...and content." Each of the elements in this value chain represents a separate, but very closely related, potential for innovation.

Third, because of the networked structure of innovation, it can be extremely fruitful to explore the "weak ties" that one innovative idea has with others. In a previous post I wrote about why the weak ties in your social network will often generate better opportunities, whether you’re looking for a new job or trying to land a new account. This same “weak ties” argument has a direct application to innovation and progress, as well. The most disruptive innovations – i.e., those innovations likely to create the most value – almost always result from the combination of more distant kinds of technologies, business models, or ideas.

"Thinking outside the box" just means "exploring an idea's weak ties."

And one additional thought about this rapidly growing network of new technologies is worth pondering. In some domains today, the pace of innovation is so fast that it’s more costly and difficult to make any substantial profit from a patented idea before it becomes outdated. So in an increasing number of situations it makes more sense simply to let anyone use your brilliant new idea, even your competitors, because the pace of change is so fast that more value can be created for your own business if others can combine your new idea with theirs. Android's open-source approach is now generating faster innovation than iOS's "walled garden," so Apple is starting to open itself up, as well.

But this push toward more openness extends even beyond platform plays like Google's and Apple's. In 2011, for instance, Facebook voluntarily revealed the formerly proprietary details behind its highly efficient server installation in Prineville, Oregon, even though the efficient use of power and technology had become an important problem for all technology companies to solve, including Facebook’s own direct competitors. According to CEO Mark Zuckerberg, “By sharing this, we will make it more efficient for this ecosystem to grow.” Facebook itself, of course, is one of the primary beneficiaries of that ecosystem.

It's a networked world of innovation out there. And, as Martha Rogers and I documented extensively in our own book Extreme Trust, in a more networked world, it's inevitable that people will demand more trust from the companies and other people they interact with.