Entrepreneurs, Not Institutions, Drive Big Innovation
Section 2 of “Reinventing Societal Infrastructure with Technology” which will be release end of January. I will be posting a new section daily. Please share your feedback as this is a work in progress.
Just a quick look at things not-imaginable by the institutional view. All you need to do is look back to 1995 and imagine the Internet upending telecom and all that has happened since. AT&T Wireless was sold to Cingular (formed only in 2000) for $40 billion in 2004 (technical details were more complex) and Whatsapp was sold for half the price to Facebook a decade later, because AT&T was slow to adapt to cellular and the Internet (they insisted that TCP/IP, the core protocol of the Internet was not appropriate for public networks and ATM was their technology of choice). The rest of AT&T was purchased during its decline by SBC, the parent company that formed Cingular and the AT&T brand remains as it was adopted by SBC. Amazon upended Walmart with clear vision of changing choice and cost structure that Walmart could not imagine. Now, Amazon, along with Netflix, Youtube, and others are upending Hollywood and television. Over the last decade, Netflix has reinvented TV/entertainment, and Facebook/Youtube/Twitter reinvented media, maybe even elections & politics! And speaking of elections, Trump re-invented political campaigns using Twitter as his hysterical tool against a well-managed proper political campaign. Google upended libraries, media, and many undefined industries.
Google and Facebook’s success, in fact, reduces GDP as it makes previously valuable tasks free! Even institutional measurements of our goals like GDP are being upended. Cellular is dominating over landlines. The iPhone, barely existed ten years ago when the venerable Nokia and Motorola ruled the mobile phone world. Uber reinvented the limousine service and the taxi service, and it will likely drive changes to public transportation. AirBnB is starting to change hotels, or at least a subset of that market. Instagram and Google Photos invented or reinvented the way we take, manage, and share memories in our lives. Why is non-institutional invention so necessary? Most people in business reduce the risk of failure to the point where the consequences of success are inconsequential on society, but they can make money for their shareholders as they are obligated to. My philosophy is different. I’d rather invest in something with a higher probability of failure if the consequences of success are consequential. There is as much profit and increased social impact to be gained here, although with a higher variability. As I like to say, my willingness to fail gives me the ability to succeed. That is the exact opposite of how incentives are usually set up in larger, non-founder led institutions. Structure, processes, key metrics, and compensation incentives at large institutions oftentimes have the opposite effect to the expected one, actually fueling and attracting risk aversion for true innovation. Without risk and its concomitant failure, large innovation is just the matter of luck.
We have incumbents and institutions and pundits predicting more of the same “extrapolation of the past to predict the future” world view. Some are well meaning, while others are driven by personal or institutional self interest. They are authoritative and mostly wrong when it comes to large changes or big innovations. There is a dissonance between them and technology entrepreneurs: The former believe improbable is not important, the latter think similarly of the status quo. Personally, I think only the improbables are important, but we just don’t know which one is.
It is only improbables that are important. We just don’t know which improbable is the next Facebook or Google or Apple or Uber or Twitter or AirBnB or [insert company]. In all cases, however, an entrepreneur-driven vision of the unreasonable possibility is important. Although Amazon, Google, Facebook, and other driver entities are big companies, they are not institutional yet. They still driven by founder vision. They are not sensible as business school professors would have them be, otherwise Amazon would not buy Whole Foods or Google develop driverless cars. These founder-driven companies don’t teach focus, market segments, or classical approaches. Instead, they teach “why not?” and “why not try it?” be it Alexa, AWS, space, driverless cars… We are most limited by our thinking, NOT by what is actually possible, so we must be taught and reinforced to think beyond our normal patterns.
**This is a section from “Reinventing Societal Infrastructure with Technology”. To read the previous section, click here.
