Innovation in 2011 – the end of the Dark Ages

Every year around this time, I write about 4 or 5 things I think will happen in the next. But this year, I only have one thing to say.

I think 2011 is going to be the year when people finally realize the pointlessness of what I call dark ages competitive advantage.

Competitive advantage from the dark ages is anything you do which denies access to resources to competitors.

Denying access to resources is dark ages because it hurts not only competitors but customers as well.

Copyright and patents are a dark ages response to protecting competitive advantage. If you’re the creator of something, you get to tell people when they can use it, usually in exchange for a fee. You get to tell competitors they can’t use it at all.

But in both cases, all you’re really doing is setting up a situation where everyone you constrain is highly motivated to break your constraints. I mean, you only have to look at the music industry to see this. That’s an industry that trained a whole generation that breaking the law is OK, entirely because of the constraints it attempted to impose.

How dark ages.

Trade secrets are just as silly. You deny access to knowledge by keeping it a secret. This is dark ages because the observation that something can be done, encourages others to do it too.  As soon as they work out how, maybe by reverse engineering, maybe by espionage, or by some jedi mind trick perhaps, that’s any advantage gone.

On the internet, everyone has the capability to observe everything.

Anyway, I think  2011 is the year when people cotton onto the fact that this stuff doesn’t drive value at all. At least, not value that’s long term enough to make all the effort of denying resources to competitors that worthwhile.

There are, however, new sources of competitive advantage available now which are just as potent as the old strategy of denying access. The primary source of this value is relationships that are enabled by products and services, rather than the products and services themselves.

In this new world,  you get more value from a product or service the more you use it. You aren’t penalized for doing so, unlike the traditional model which imposes a tax for use.  That’s what a price is, by the way.

Is there really anything in Facebook that’s all that valuable from a technology perspective? Not really, but it does help practically everyone manage their relationships with each other. The fact that my friends are all on Facebook makes it valuable to me, and the more I use it the more valuable it is.

Why is the iPhone and AppStore such a hit? Not because there’s anything very special in the iPhone, clearly. What is special is iPhone is about managing relationships between customers and providers of Apps. Apps let customers do things that Apple never dreamed of.  The more Apps there are, the more valuable the phone is to me.

There are so many examples of this now. Examples where the product itself isn’t really all that exciting, but where all kinds of relationships are made that create value.

Where the product creates a relationship between customers, or between suppliers and the customer, or between the customer and the product.

Why is this so much better than dark ages stuff?

Because relationships aren’t portable. Once they’re there, embedded in whatever platform they formed on, they’re fixed. Competitors can only win if they can make more powerful relationships than you can.

Relationships are better because they don’t have taxes every time you use them.

And, relationships are better because they’re based on giving things to customers, not taking them away. They’re formed on an ethic of sharing, not of denying access.

So I do think this is the year people will give up on the dark ages stuff they’ve been doing.  Otherwise, I think it’s the year they’ll be going out of business.

4 Responses to“Innovation in 2011 – the end of the Dark Ages”

  1. Steve Burrows
    December 30, 2010 at 7:35 am #

    Thoughtful post James, I enjoyed it.
    Why should we spend millions developing and realising new ideas if the chap next door can just copy the end result, making it more cheaply without the overhead of invention?
    Will we survive?
    Is information valueless?
    If we can't protect our ideas what incentive does the chap next door have to do better, to create an alternative?
    Don't disagree with the value of relationships, but the concept of having something that the other chap doesn't drives much corporate innovation. Without protection will we invest in innovation? Without protection innovation may be a luxury that we can't afford.
    Yes, the system is unbalanced. Protection of innovation is often disproportional to its value. Protection can institutionalise inertia and stifle innovation – vis. the music industry which is living in the "dark ages". But for all its failings protection has value, why bother creating innovation if we don't get the reward of exploiting it?
    Innovation does have a "sell by" date, its usefulness is finite, within that timeframe there should be protection sufficient to allow the innovator to reap their reward. But yes, the current system is broken.

  2. December 30, 2010 at 7:43 am #

    Steve,

    Thanks for your comment.

    Your comments go directly to the argument I'm making in my next

    book: innovation for the purposes of creating genuinely new things

    actually doesn't pay for the reasons you describe. Sometimes it does

    cost millions to do really new stuff, and that stuff is often easily

    copied regardless of dark ages IP protections. Protecting ideas and

    knowledge seems backward when the thing that can't actually be

    copied is people's investment in any platform that you *create* with

    the knowledge. After people have invested themselves in your stuff,

    they don't move very often regardless of how good the competition

    is.

    That's why noone ever moves their bank accounts even if someone has

    something better.

    I guess my point is there's a shift happening. In the old world, it

    was the accumulation of knowledge that drove value, and you

    protected the knowledge to ensure your stuff didn't commoditise.

    Now, it is what you do with knowledge that counts, and *sharing* it

    drives the value.

    The old-guard doesn't see it that way yet, I know. But they will, I

    think.

  3. January 21, 2011 at 4:49 am #

    James, all good points that resonate with “Burning the Ships” by Phelps and Kline – an inside story of how Microsoft re-balanced the Intellectual Property balanced the tensions found in “open-innovation.”

    I’m sure your new book will address the challenge of mind -set change. It needs exceptional leaders to support that and a new form of leadership is needed to balance “command and control” and “co-ordinate and cultivate.” I’m no expert but have been more provocative than many in pushing the boundaries of possibility. Try “Discovery Management and Leadership” for size. Ref: http://tinyurl.com/y8cbd6p

  4. Jonathan Fielder-White
    January 21, 2011 at 6:18 am #

    A spot on article there young James. Kevin Rose, the founder of Digg, has some interesting points to say on this topic (Diggnation Episode 289 (last weeks) – found on Revision3.net). He talks about Zuckerberg Worth $14B After Goldman Sachs’ Cash Injection for Facebook and then talks about its future (some interesting points on where its financial value is coming from) and why he wasn’t worried about people copying Digg; followers will never be better than you so don’t stay awake at night worrying about them, it is those who take what you do and make it better that you have to worry about. Which is exactly what Zuckerberg did with Facebook vs Myspace/Friendster/Harvard.Edu

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