Innovating Innovation. David Morey
trillion dollars of value.
For super achievers like Airbnb and the rest, innovation is happening earlier and faster than ever before. Our age of exponential change is an era of exponential opportunity. For example, companies such as Apple, Google, Amazon, Facebook, and Microsoft are, at their best, driving innovation at an exponential pace. And Airbnb and the other digital enterprises that control much but own little or nothing are known as “platform businesses,” digital (or digitized) business models that create connected ecosystems of producers and consumers, or, as the authors of Platform Revolution explain, the sheer innovative force of a platform is empirically impossible to ignore today. When it comes to disruptive innovation, platform beats pipeline, just as exponential thinking beats linear thinking. The elimination of gatekeepers atop platforms, just like the rejection of status quo thinking inside the world’s most innovative companies, almost magically unlocks new sources of value creation. The proof is in the numbers, which are staggering. Today, more than half of US startups are platform businesses.
Take, for example, just four US companies—Apple, Amazon, Facebook, and Google. Together, as of 2018, these companies have created $2.3 trillion—that’s trillion—in wealth (in terms of stock ownership) and have entwined themselves in the daily lives of billions of people. More specifically:
• Amazon in some ways has eliminated the consumer pain of shopping for things that are not fun. (Think toothpaste vs. Porsches) It is heading for a market capitalization perhaps twice that of its incumbent archrival, Walmart.
• Apple represents something of a religious offering to its loyalists and displays nearly unprecedented profit margins by offering low-cost products at premium pricing. At this writing, it is history’s most profitable company.
• Facebook is, by the numbers, perhaps the world’s most influential company—notwithstanding current privacy and security challenges. At present, one-sixth of the global population—about 1.2 billion people—sign in daily and spend an average of 50 minutes a day on the company’s platform.
• Google has become the modern world’s transcendent navigator—earning the trust of over 2 billion people, more than any other institution in terms of search and guidance. It is the Benjamin Button of companies, aging in reverse to become more relevant and valuable the more it is used, since it is through use that its associative database grows.
To put into context the ongoing platform-driven and disruptive innovation revolution, consider that the average employee at General Motors today creates $231,000 in economic value. Impressive—until you compare it to the $20.5 million in economic value created by Facebook employees today.
Separately and together, this new “Big Four” of mega-companies is driving the most exciting and disruptive technological wave ever seen. Moreover, imagine the coming rounds of future breakthroughs in, for example, machine learning, artificial intelligence, mixed reality, quantum computing, green energy and, even more fundamentally, the future of our human minds. Or just consider the extent of change already wrought by the power of platform. Founded in 1768, Encyclopedia Britannica defined the future of accumulated knowledge until 2012, when it ceased print publication and even shriveled into relative irrelevance as a paywall website thereafter. Back in 1999, Microsoft was sufficiently innovative to spend $450 million to develop an online encyclopedia. But even that was eclipsed just two years later when Jimmy Wales and Larry Sanger started Wikipedia, offering their web-based encyclopedia for free and today managing the fifth most-visited internet site in the world—one that is still maintained exclusively by volunteers.
Wikipedia and its ilk have prompted Wharton professor Jeremy Rifkin to forecast a paradigm shift from market capitalization to what he calls the “Collaborative Commons.” Rifkin writes, “the Collaborative Commons is ascendant and, by 2050, it will likely settle in as the primary arbiter of economic life in most of the world.”
Those who hate today’s modern monopolies can find a crumb of comfort in the fact that all this exponential change will not necessarily save even the biggest mega platform businesses from destruction. Consider that 88 percent of Fortune 500 companies from the 1950s are not just missing from today’s list, they are gone, bankrupt, or out of business. In the 1970s, IBM defined the business marketplace and was unstoppable. In the 1990s, Microsoft could do no wrong inside the electronics industry. And, in the 2000s, Enron looked to be the best or even only company ready to successfully ride the e-commerce wave of the future. Each of these companies either failed, went backward, or went bankrupt.
Today, the great majority of companies will fail to innovate and break through or they will move across a life cycle that takes them into thinking more like a status quo incumbent than a forward-looking insurgent.
And, in the meantime, outside, along some marketplace periphery, a wild-card company will be imagining a fresh-eyed innovation breakthrough that will someday turn the business world upside down. This is what the transistor did to the world of 1947, the integrated circuit to the world of 1958, the personal computer to the world of the 1990s, and the smartphone to the world of the 2000s. Perhaps here, out along this marketplace periphery, at a Starbucks table or garage or dorm room, will begin the gestation of the world’s next trillion-dollar company.
How Do I Cash In?
Creating or reinventing the next breakthrough mega-company almost certainly means putting to work some form of the insurgent innovation framework.
Driving innovation breakthrough means continually asking a version of the five fundamental questions that, in 1997, the newly appointed Apple CEO, Steve Jobs, asked his top executives when he began a well-nigh Shakespearian return to the company he himself created, the same company that, in 1985, had fired him. These questions formed the nucleus of the greatest corporate turnaround in the history of business:
1. What do you (really) do?
2. Why did you begin doing this originally—and now?
3. Who are you—and who do you need to be to win?
4. Where are you? (and where are your chokeholds?)
5. What’s next? (What keeps you up at night?)
Fundamental to answering these five strategically loaded questions is a commitment to thinking and acting anew. This entails not a single magical moment or dramatic epiphany, but rather a step-by-step journey. And it means taking a first step and walking toward a commitment—a decision—to begin the battle to innovate. This is our next subject.
CHAPTER TWO
Subdivide Light
And yet it moves.
—Attributed to Galileo Galilei
Over the course of some four centuries, the telescope, in its various technological iterations, has transformed the way we see both the universe and ourselves. The transformation became most dramatic since 1990 when the Hubble Space Telescope was launched and has since probed the very frontier of the universe, showing us reality as it existed some 13.82 billion years ago. This transformation has only multiplied as NASA launched its other “Great Observatories”—the Compton Gamma Ray Observatory in 1991, the Chandra X-ray Observatory in 1999, and the Spitzer Space Telescope in 2003.
Before these events, the most powerful perceptual and intellectual transformation wrought by the telescope came at the very beginning of its first years of use. In 1608, Galileo Galilei heard news of a Dutch spectacle-maker, Hans Lippershey, and the patent he filed for a device that could see beyond the sky. Within a day, Galileo got busy making his own version of this new, magical instrument. As with many inventions, the inventor and the innovator are not necessarily one and the same person. Lippershey deserves credit for inventing the telescope, but it was Galileo who made it an instrument of profound innovation.
Through this transformational lens—which in its first year allowed humankind to understand more of the universe than had been known over the preceding two thousand years—Galileo could see the mountains and craters of the moon and the daylit side of Venus. This revealed to him two earth-shaking facts. First, our universe was far bigger—and our place in it therefore far smaller—than previously