Union Square Ventures - Latest Comments in Why The Flow Of Innovation Has Reversed

Re: Why The Flow Of Innovation Has Reversed

PP — Sun, 02 Nov 2008 23:53:45 -0000

i struggle with some of the commentary and assumptions here. I agree that how the user "interacts" with the system is paramount. H/w Craigs is amazing because the interface is simple but also because 90% of what's there is incredibly informative, entertaining and what we can't get anywhere else--it's great because it created a new paradigm (sorry, to use that word. We fell back last night and I'm still adjusting) but not because it's simple and pretty.

My worry is that a fixation on the interface discounts the need to have mice running on the treadmill behind the scenes. Is it me or are there a lot of sites that bought into "interface is everything" but only deliver a narrow slice of value?

Re: Why The Flow Of Innovation Has Reversed

Tampa Condos Specialist — Tue, 21 Oct 2008 16:55:29 -0000

Simplicity is still what's important. I disagree with some of your point but overall you are right on the money.

Re: Why The Flow Of Innovation Has Reversed

Matthew — Fri, 10 Oct 2008 08:10:40 -0000

thank u r information

it very useful

u r blog Is very nice

Re: Why The Flow Of Innovation Has Reversed

dmreinke — Tue, 07 Oct 2008 17:14:10 -0000

Brad - great post.

It's a hard pill to swallow for some but I agree with you - the marketers are going to be running the show for a while. There are just too many fantastic, amazing tools out there to interact, connect, solicit, and engage consumers. There is an enormous amount of integration work (5 years worth, I'd say) necessary to make the consumer interaction model seemless and successfully parse out the actionable data for industry. But my intuition tells me this is a catch-up, cyclical type of issue. Once the marketers figure out how to package all this technology, the engineers will get their shot again as we'll be ready to digest something new.

Re: Why The Flow Of Innovation Has Reversed

bradburnham — Wed, 01 Oct 2008 13:16:15 -0000

You are absolutely right. Consumption is a one way process. What is going on here is clearly two way.

Re: Why The Flow Of Innovation Has Reversed

bradburnham — Wed, 01 Oct 2008 13:14:24 -0000

I agree that architecture is a better word. It also captures the idea of leverage in a way that engineering does not. An engineered system is designed to do something specific, flexibility is seen in some ways as a failure. Architecture on the on the other hand is a framework. It is not deterministic. A well designed social architecture invites participation in a way that multiplies the impact that the original architect acting alone could have had.

Re: Why The Flow Of Innovation Has Reversed

GT — Wed, 01 Oct 2008 07:50:36 -0000

Further to the comment above - "Meanwhile, use of Cisco’s C Vision, an internal YouTube-like video sharing site, has risen ten-fold in the last seven months"
http://www.businessweek.com...
That's an example of the enterprise converting "social engineering" (conversations) into real product - using the electrical engineer for the real Innovation.

Re: Why The Flow Of Innovation Has Reversed

Michae F. Martin — Tue, 30 Sep 2008 12:49:31 -0000

On the other hand, there is absolutely validity to the notion that company management has to move from push to pull based methods of product development and accounting. And if that's what you mean by reversal in the flow of innovation, fine. "Innovation" is kind of a loaded word.

Re: Why The Flow Of Innovation Has Reversed

Michae F. Martin — Tue, 30 Sep 2008 12:46:56 -0000

I'm not completely convinced. Sure, the consumer internet has demonstrated that social networks could be valuable for coordinating activities inside large companies. But most of the technology under the hood was developed and implemented by engineers who had to solve new problems in order to get the thing to work. And those skills, in turn, were developed by working on the cutting edge science and engineering that is taught and researched at universities.

Has the flow of technology development reversed? Or does it just seem that way to the VCs that are trying to expand the market of consumer internet technology? I remember during the dot-com bubble, there was a moment when all of sudden, it was B2B that was where the money was, not consumer.

...and that came right before the bottom hit.

Re: Why The Flow Of Innovation Has Reversed

qwang — Tue, 30 Sep 2008 10:50:23 -0000

Great thoughts. I wouldn't say *the* flow has reversed, but that a new flow in the reverse direction has emerged and is slowly validating its power. I for one still think the traditional flow has huge potential with its accidental discoveries, such as that the military-commissioned internet has great consumer/commercial use =)

Re: Why The Flow Of Innovation Has Reversed

Ted Murphy — Tue, 30 Sep 2008 08:45:13 -0000

Fred,

Thanks! I will keep working the problem. Thanks to Brad Burnham for a
great article,

Ted

Re: Why The Flow Of Innovation Has Reversed

fredwilson — Tue, 30 Sep 2008 08:29:29 -0000

i loved this comment so much i reblogged it on fredwilson.vc

nothing like making the mistake to teach a lesson

i've done that so many times myself

Re: Why The Flow Of Innovation Has Reversed

Engago team — Tue, 30 Sep 2008 03:59:49 -0000

Where ever the innovation drive comes from ("top" or "bottom"), only the best will take benefit from it.
in non-mature industries, innovation is no longer limited to a restricted number of people and companies. Almost anywhere in the industrialized world people and companies can bring innovation as the price to enter the arena in non-mature industry segments has been lowered (especially in web services).
Just don't try to bring innovation in car design or manufacturing (mature industries), as there the price to enter is higher than ever before.

Re: Why The Flow Of Innovation Has Reversed

Michael Lewkowitz — Mon, 29 Sep 2008 23:27:14 -0000

Brad - great post and discussion. The idea of 'social engineering' vs. 'electrical engineering' is showing up also in open source and social innovation. What is seems to be pointing to is the prioritization of building the systems/structures for products to emerge vs. focusing on the building the products themselves. Much like you pointed to in Craigslist.

This is essential as organizations become increasingly dependent on people outside there organization to create the things that create the organization. Clearly important in web2 cos where the user generated content is the thing the company is actually about.

Another example at the convergence of social innovation and open sources is OpenMRS (http://openmrs.org) which is developing an open-source medical records system that is spreading like wildfire around Africa now. They are finding more and more that what's needed to keep up the growth and success is the competencies of community management - the lightweight governance model you mentioned.

Great stuff - we still need things that are built by conventional organizations that will do it in conventional ways. But the more that the venture is dealing with changing systems (either they are trying or it's happening around them) the more what you talk about is going to be essential for survival and success.

Thanks for posting and prompting the discussion.

Re: Why The Flow Of Innovation Has Reversed

Ted Murphy — Mon, 29 Sep 2008 22:23:19 -0000

This is a very important idea, not least because I f@cked it up in my recent launch. This is the key insight:

"The burden is on the designer of the system to meet a need, entertain, or inform their users. They also have to seduce those users, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with power and the pleasures of the service."

Once the insight has been made, the solution is obvious. Not sure if I have the jets to get it done, I'm a product guy rather a social engineer. But, they ain't lowering the hoop just because I'm 5' 10". We'll see.

Re: Why The Flow Of Innovation Has Reversed

Simit Patel — Mon, 29 Sep 2008 20:56:10 -0000

My business colleague and I revisit a discussion similar to this one every few months. our conversations center around how this reversal of innovation will affect how firms are financed. Our key conclusions:

1. microfinance is the first, simplest, and most obvious step. techstars, ycombinator get props.
2. social capital, rather than a rapidly devaluing US dollar, is what is primarily being invested. we can define social capital as knowledge, trust, experience, one's social network, and other such intangibles that are NOT of a monetary nature. put another way, stuff that cannot be traded.
3. amortization of social capital is critical. in other words, what are your social assets, and how can you spread them across the widest number of investments?
4. lots of small bets. consistent with this is making the small bets simple ("just fill out a form to get started!") and liquid, so that people can get out quickly. in other words, private market investing is about to become a lot more like public market investing.
5. what's needed? private markets that enable liquidity in these transactions. a new stock market, so to speak, so that these small bets can be traded and easily liquidated.
6. the real issue: creating the governance system that will enable this.

in sum, my colleague and I view the reversal in the flow of innovation as being deeply connected to the pending disruption of the venture capital industry. however, the pending disruption of the venture capital industry is related to the monetary crisis we now have in the united states (and by extension, the rest of the world). greenspan's inflation of the money supply led to the nasdaq bubble; every bubble has malinvestments, which we saw. greenspan's fed then overexpanded the money supply again to create the housing bubble -- but this also gave VCs too much cash, which is resulting in a new round of malinvestments (though as housing was the primary culprit this time around the VC malinvestment is not nearly as bad....though we will look back upon stuff like electronic hamburgers on facebook and the facebook app craze in general as stuff that should've been created by some kid in a basement, not venture backed firms).

the ashes need to settle on the collapse of the old system -- the military industrial complex/nasa source of innovation. once that's done, that's when the real reversal of innovation will occur (the game hasn't even begun yet, this is just batting practice). it will not take as long as many suspect; i say 4 years. but oh boy, the collapse that will occur over the next four years is going to be one for the books, no doubt about that one. it's going to wipe out silicon valley and most VC firms as we know it (as silicon valley is a child of the military industrial complex, and that whole tree is getting chopped). the good news is that what arises after the ashes settle will be something unlike anything we've ever seen before. pursuing this disruption to its fullest is, in my opinion, the road to creating "the next google."

the government issue is the big obstacle. in the united states, anyone who is honest with themselves and aware of the basic facts should be able to agree that government is owned by major corporations (aka military industrial complex), and these corporations control monetary policy and corporate finance -- aka wall street. they are not going to sit by and watch their industry get disrupted by the creation of new private market governance systems. but that old system is in the process of self-destruction, and out of this darkness comes a very bright light.

Re: Why The Flow Of Innovation Has Reversed

Theo Kuechel — Mon, 29 Sep 2008 19:57:11 -0000

I think we should be talking about participants - not - consumers

Re: Why The Flow Of Innovation Has Reversed

Theo Kuechel — Mon, 29 Sep 2008 19:54:56 -0000

I think we should be talking about participants - not - consumers

Re: Why The Flow Of Innovation Has Reversed

Christopher Herot — Mon, 29 Sep 2008 19:25:08 -0000

This trend has been going on since the early days of the personal computer when employees would smuggle a machine into the office to run VisiCalc. The corporate IT managers have throttled that channel but they will never completely shut it down. Innovations that have achieved some traction with consumers will still make it into the enterprise, whether by stealth (cell phones) or influence (all those social media consultants.)

At the same time, the reduced cost of implementation (Ruby, APIs, Moore's Law) makes it possible to build and launch a consumer service in the interval that an enterprise would still be studying the problem and arguing the "business case." Most of these will fail but out of this Darwinian process some will get big enough to attract the attention of government and business users.

In all cases, it still takes engineers to build these things but, as you point out, attracting voluntary users puts a premium on building engaging applications. I think it is fair to say that there is plenty of innovation taking place in building those apps,even if not all of them make money until they are adopted by businesses.

Re: Why The Flow Of Innovation Has Reversed

Dalka — Mon, 29 Sep 2008 18:41:58 -0000

Yeah, I'd agree, the technology is the easy part. I advise companies on the hard change management issues facing enterprises today...most are nowhere close to using social media for what it is best used for, creating customer innovation via feedback loops.

Re: Why The Flow Of Innovation Has Reversed

GT — Mon, 29 Sep 2008 18:02:12 -0000

Brad:

You tell a good story - but disagree with your thesis -

-So called Innovation from the edge is often technology tinkering for the sake of technology - lacks business case and most times will never find one.
-Design by social engineering is conversation and brainstorming of the masses, and takes much longer to synthesize into novel and inventive concepts leading to "real" products (Innovation).
-The past few years Innovation been confused for thinking out loud. Rather Innovation is about transposing those conversations it into a real product (make no mistake - you need the electrical engineer). And it is not happening from the edge as you have extrapolated.

The flow of Innovation seems to have shifted - but that’s the view of a select few in the VC world. Show me how much of this VC funded Innovation from the other direction has created a real economy (and please don't call ad serving a real economy) - and if there is such a thing - Google innovated in that space and owns the product – till the next set of innovations perhaps displace them.

I have been through these cycles and lived life on both the money side and the innovation side. Of late people seem to use the word Innovation and Conversation interchangeably. That's pretty much most of what has happened from the edge – Conversations (which you call social engineering).

The romanticism of the Facebook anecdote is quite frankly laughable. Sorry to be harsh - but you seem think of the audience as peasants when you talk about your social engineering (it is just another conversation).

Here are a few examples - you should be no stranger to them…. Has YouTube, Twitter, Meebo, Ning, and hundreds of others figured out how to monetize yet.... NO they have started a conversation. That's it. It will change the how Innovation happens in an enterprise because the conversations at the edge push them to do what they had been thinking about for a long time. OS, Web Services, XML, APIs all these things were there long before most at the edge knew there was such a thing. BEA, IBM, MSFT and others in that league pioneered these areas long before some these VCs got a driver’s license. If anything Conversations (innovation in your terms), are really catalyst for further Innovation – but not Innovation in itself.

Re: Why The Flow Of Innovation Has Reversed

Tony Bain — Mon, 29 Sep 2008 17:38:10 -0000

I agree that there is now a flow of innovation that starts with the consumer and is by nature more interesting and appealing to the consumer. But I don’t think that this means the flow of innovation has reversed. Instead I believe there are two streams bringing their own benefits to the other, for example bringing community and collaboration into enterprise software, but also bringing the infrastructure, scalability and availability to the consumer web services. The enterprise-down flow is much slower when compared to the consumer-up but it is still very much there.

Re: Why The Flow Of Innovation Has Reversed

Jose — Mon, 29 Sep 2008 16:45:34 -0000

Yeah,
The future is for "social engineers"
and let me guess:
YOU are a social engineer.

Re: Why The Flow Of Innovation Has Reversed

Doug Belshaw — Mon, 29 Sep 2008 16:37:37 -0000

You say there are no employer-sponsored training sessions on the use of del.icio.us, etc. Well, there are at my school! I run them in my capacity as E-Learning Staff Tutor. Other than that, great, insightful post. :-)

Re: Why The Flow Of Innovation Has Reversed

Mark Ury — Mon, 29 Sep 2008 16:29:18 -0000

“Many of the most interesting web services are like Craigslist, at their core, lightweight governance systems.”

Elegant observation Brad. We could probably update Don Norman’s canon The Design of Everyday Objects to The Design of Everyday Relationships.

Today, we’re not just designing the bazaars of conversation—we’re designing the conversation itself, specifying often intangible and implicit nuances of how people interact and create value together.