25 August 2016
I've been a student of innovation during my more than 30-year technology career. I've been a part of the shift away from industrial innovation while at IBM's T.J. Watson Research Center and the shift to innovation through acquisition when I was CTO of Veritas in the early 2000s. Today, a much more open, free-agent-based model is the trend.

While there's as much venture capital as there's ever been, these funds aren't always needed to create game-changing technologies. Today's model has free agents, new barriers to entry and highly networked innovators who collaborate globally.

The Players Are Finally Free
Daniel Pink has explored what motivates people to do great work. He observed that autonomy, mastery and purpose are what matter. Leading innovators, designers, engineers, product managers and the like look for this sort of fulfillment as they pursue opportunities. 

In the new open innovation model, individuals come together outside the corporate framework to develop and realize a new idea. The movie industry embraces this model: independent studios rather than the large movie houses from 50 years ago produce most of today's major films. Actors, directors, cinematographers, set designers, writers and everyone else required to make a movie happen come together to produce a single film. After the final cut, they disband and move on to the next project. None of these people are employees of an actual film studio, but rather they're all independent contractors.

There's also a shift in the workforce toward being more purpose driven. People are interested in working differently, whether it's as a freelancer or as a member of a large organization, with the goal of putting a ding in the universe, to steal from Steve Jobs. Today, workers are more concerned about the impact of the project and what they can learn during the process provided they're surrounded by great people. 
Today's model has free agents, new barriers to entry and highly networked innovators who collaborate globally.
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I've seen first-hand that innovation carries a lower risk in the Bay Area than anywhere else. Silicon Valley innovator John Seely Brown has noted, "... Silicon Valley puts its own spin on risk. Here taking risks around radical innovations is respected and encouraged. Be shrewd, you will be told, and don't be timid: go for it."

The Silicon Valley ecosystem provides the critical support that's needed for new ideas. There are world-class design firms, lawyers, funders and entrepreneurs who are interested and willing to try new things. And if a venture fails, another opportunity is right around the corner. The interlocking relationships between innovators, investors and companies form a strong safety net. The idea that that Silicon Valley celebrates failure is wrong. We celebrate learning -- failure is often the most effective teacher.

Less Need for Capital
Money has been one of the biggest barriers to innovation: in the past, only large companies were able to invest in laboratories and equipment that were used to develop and validate new ideas. As the industrial revolution gathered steam in the 19th century, companies that produced steel or built the railroad infrastructure, for example, required lots of capital and labor to take on ambitious work that sparked economic growth. With the predominant top-down, hierarchical management techniques of the time, large centralized public corporations made sense. While companies were able to use their profits to fund this innovation, they also sold shares in the stock markets -- this provided the necessary capital to expand infrastructures.

Business models have gone through their own innovations in the past few decades as well. There's everything from open source, whereby people contribute free labor to a shared project and monetize that project through alternate means, to the rapidly emerging sharing economy, which leverages at-will employees who also own the means of production for delivery of a service.

Companies like Uber and Airbnb epitomize the on-demand sharing economy. They're software and network companies that function as matchmaking services, whether it's riders to drivers or people looking to rent someone else's space for a few days. The companies don't own the assets, and they don't employ the people within their network. They only employ those who build and maintain that network. 
The sharing economy often provides a better experience than traditional companies that provide a similar service.
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The sharing economy often provides a better experience than traditional companies that provide a similar service. With Uber, for example, the quality, responsiveness and cost are vastly superior to traditional taxi services. I use Uber a lot, and I typically ask the drivers about their experience. Most often, flexibility is the primary reason they're drawn to that job. They aren't employed by the company, and the company has no power over them. They can work when they want. Many Uber drivers have other careers, and they use Uber as an alternate source of income and as a way to acquire a car using the company's financing programs. Since they provide a service though, how well they provide that service matters. As independent contractors, the rating they receive based on the quality of their service determines how many ride requests get routed to them.

The Cloud Innovates
Developing new technologies has become cheaper to do today. A few years ago, a software startup would have had to buy computers, rent office space and build a data center, but today cloud companies are able to provide access to unlimited computing power. Rather than buy, a team can rent what they need and start working on projects without investing significant amounts of capital. Any company that's building innovative physical products benefits from the growth of contract manufacturing, contract testing and cloud-based design tools. These, along with other independent providers of critical services, lower the barriers to entry for new projects. At the same time, there's a lot of available money because of globalization and the growth of venture capital.

The availability of cloud-based services provides affordable access to the infrastructure needed to support innovation. When combined with ubiquitous broadband Internet connectivity, you can unite geographically dispersed teams faster than ever and at a lower cost. Advanced, open source technologies are finally realizing the promise of online collaboration. TechShop, for example, bills itself as America's first nationwide open-access public workshop. With a membership, innovators can use the TechShop tools to prototype ideas, learn new skills and collaborate with other members. 

How will this new innovation model affect innovation? Companies that are quick to capitalize on changing business models will have an advantage. During the latest shift to the startup economy, the most successful companies learned how to leverage startups to drive innovation while growing their businesses. Likewise, the current shift will produce a new generation of leading institutions that give individuals more control over their career paths provided they invest in continuous learning, build their experience, and network. The tension between the individual and the institution may lead to entirely new models that are more dynamic, more fluid and more of a federation than a monolith. This is innovation in how to innovate.
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