Beyond The Box

It is the infinite leap from 0 to 1, an act of creation ex nihilo. It justifies investment and exponentially grows the economic value of our world. And yet, innovation seems elusive and indefinable. In our exuberant pursuit of progress, we have lost touch with the true definition of innovation. We confuse, corrupt, and misrepresent it. We think that every step forward constitutes innovation and that it manifests in everything from novel shampoo recipes to faster internet speeds. It is in the pitch deck of every new start-up and on the tongue of every new founder.

Properly defining the boundaries of innovation is crucial. A stronger understanding of the elements that create true innovation allows our investors to more effectively analyze emerging markets and more profitably direct investments towards the correct types of developing technologies. Through this understanding, we can better identify the economic factors that contribute to an innovative environment: Why Israel, so aptly named the “Startup Nation,” has the most startups per capita in the world [1]. Whether Brazil’s recent explosion in entrepreneurship will be sustainable [2]. For our innovators, this deconstruction will help guide decisions, focus their objectives, and better allow them to define their role as visionaries. Subsequent articles will expound on these ideas and attempt to apply this framework to analyze various innovative technologies and markets.

At Eden Block, we have worked with dozens of companies across diverse industries in varied markets. We have applied our insights to subdivide innovation into distinct categories with concrete definitions. No single act of innovation falls into a single category. Instead, every act of innovation is a synthesis of each of the categories. By establishing a more fundamental understanding of innovation, we seek to provide a workable framework for innovators and investors alike. Think of it as a toolbox; a new lens through which to assess the factors that produce or impede innovation.

What is Innovation?

Innovation is frequently, and consistently, mischaracterized. Often we categorize any new technology that improves the lives of those around us as innovation. At Eden Block, we want to assert that, in many cases, this is exactly what innovation is not. In fact, the truest forms of innovation, those discussed below, need not even necessarily be driven by any specific technological or scientific breakthroughs. Innovation is defined by a question, not by the ultimate outcome. It is a question formed through a profound ability to see the stitching between the patchwork, the important connections between often unrelated fields. Ultimately, innovation comes when someone sees the patterns that constitute the accepted paradigms of the time. It is not thinking out of the box, but rather seeing the box for what it is and what it is not.

We believe that true innovation is defined by purpose and intent, rather than by outcome. Oftentimes, the true value of the original purpose is not realized until years later. One of the greatest contributions to cellular biology came, not from a scientist, but from a fabric merchant. Antonie van Leeuwenhoek observed the first single-celled organisms through a self-crafted microscope in 1668. His original goal? To observe the fine details in the stitching of his cloth in order to assess its quality. One of the greatest innovative breakthroughs of modern science occurred because someone envisioned an innovative purpose: to see smaller things than anyone had yet observed [3]. The results of this purpose were impossible to predict.

The purpose always comes first and the act of formulating, identifying, or inventing that purpose is the spark that produces innovation. The goal of innovation is not to come up with good answers but with good questions because a good question always contains the eventual path to an answer. Asking a good question often means seeing the world in a truly unique way. This ability to see the world differently, to see truths that no one believes and falsehoods that everyone holds, is what makes original innovation so valuable, and yet so complex.

This process of purpose driving innovation maps interestingly onto the ideas laid forth by the acclaimed philosopher of science, Thomas Kuhn, in his concept of a scientific paradigm shift. This highlights an interesting parallel between scientific and technological innovation. Kuhn noted that scientific research always exists within a widely-accepted conceptual framework that enables the scientific community to share a common language and set common goals. General science is the collective effort of cataloging, applying, documenting, observing, and improving the scope and efficiency of the original scientific paradigm. This slow and steady progress is akin to what we here have defined as streamlining in the realm of technology. However, eventually, a scientist comes along who is able to conceptualize a radically different framework that redefines the very kinds of questions the scientific community attempts to answer. Kuhn called this redefinition a paradigm shift as it refocuses the general streamlining efforts of the scientific community [4]. Both in the case of science and technology, a paradigm shift is what lies at the bottom of all great innovation. It is the refocusing of human progress. Albert Einstein did it when he tore down the existing paradigm of Newtonian physics with his theory of relativity and Steve Jobs did it when he unveiled the very first iPhone to the amazement of all.

Fully defining innovation is challenging because true paradigm shifts oftentimes break the existing frameworks that guide our collective thinking. It is this complication that led best-selling author and entrepreneurial theorist, Steven Johnson, to define innovation simply as “good ideas.” [5] We’re not comfortable with such a simplification. It lacks the structure and definition to give us a functional model for analyzing innovation. We hold that a clearer definition is attainable. To begin, we focus first on what innovation is not. We divide this definition into three separate categories.

What Innovation Is Not

1. Streamlining

Streamlining always follows innovation. Instead of creating a new purpose, streamlining simply extracts more value from an existing one.

Streamlining is easily confused with innovation since it is also a powerful tool of progress. However, the process of incremental improvement is only the path that we take from one great leap of innovation to the next. WhatsApp, for example, while extremely successful, did not invent the idea of digital communication [6]. It merely provided a cleaner and more efficient user experience. The history of digital communication will continue its steady march until the next dramatic paradigm shift.

Sometimes, the process of streamlining takes years before it truly realizes its intended impact. It took 78 years until Edison was able to streamline the originally conceived lightbulb into a form worth manufacturing [7].

2. Organic Progress

At times, new ideas emerge organically out of human society and lack an identifiable point of origin. Developments such as shelter, weaponry, liquid vessels, and use of fire emerged, not at a single moment and from a single driving purpose, but rather as a manifestation of the natural evolution of human advancement. As such, these kinds of ideas cannot be considered innovation given our definition, since they are not produced from a unique purpose, but rather from a much broader direction — survival and prolongation of life at the very basic level.

3. Discovery

Other times, when the right things are present at the right time in the right place, progress emerges out of fortunate happenstance. Penicillin, for example, was discovered when Alexander Fleming, a then-obscure Scottish microbiologist, noticed that a strange mold that had accidentally contaminated his Petri dishes was killing the bacterial colonies he was researching. He then had the insight to investigate this strange phenomenon and realized that the substance the mold was secreting could potentially be used to fight bacterial infections in humans [8]. While the idea itself was extremely revolutionary, it emerged from no clear purpose but rather from a random occurrence. Stumbling upon a useful discovery is not innovation. Rather than the purpose being articulated first and the product materializing as a consequence, the product came first and then the purpose was defined.

The Structure of Innovation

We break down true innovation into two distinct categories which are characterized by their most iconic examples: the printing press and the Internet. It is important to understand that this deconstruction is an analytical tool and not a perfect reflection of real-world innovation. In reality, examples of innovation are always going to contain elements from each category.

The main difference between the Printing Press Paradigm and the Internet Paradigm is the nature of its driving purpose. In the case of the printing press (and its subcategories, which we identify) the purpose is directed at manipulating the physical reality in order to generate value. In other words, the printing press did not give us the written word, but it reimagined how humans use it. This type of innovation begins when some element of the physical world is perceived in a new light. The new perspective generates a concrete goal in the mind of the innovator which spurs them onwards.

In the case of the Internet Paradigm, the purpose is directed at producing a new medium for human interaction. This type of innovation introduces a new mode of interaction between humans and the material world. It is similar to the invention of money. Like the internet, money created a new substrate for human interaction; the internet revolutionized how people exchange information much like how money revolutionized the way people exchange value. This type of innovation starts with the creation of a new set of rules which dictate how humans engage with the material world. The new medium doesn’t define all the potential interactions but provides a platform that incubates future innovation.

1. The Printing Press

This form of innovation begins with the act of identifying an attainable purpose. In the case of the printing press, Gutenberg’s purpose was to enable the mass distribution of the written word. Johannes Gutenberg incorporated a wide variety of different advancements to make the printing press possible. He took the idea of the screw press and modified it to make it functional for paper. However, his biggest innovation was the idea to separate the process of typesetting and printing. He did this by creating a set of predefined type pieces, which could be arranged before printing, making the press an efficient and customizable system [9].

Gutenberg’s ability to see the flaws and potential of his existing world drove him towards a previously inconceivable purpose. His was not an act of streamlining since he conceived of a previously unrealized purpose. Once set towards that purpose, he could not have possibly imagined the impact that his press would have on the world. Eighty-one years later, Martin Luther would use Gutenberg’s technology to successfully challenge the all-powerful Catholic Church by mass distributing his revolutionary ideas [10]. The printing press allowed Martin Luther to reach hundreds of thousands rapidly and efficiently in a way that was never done before.

This type of innovation can be seen throughout history. Classic modern examples include the invention of the airplane and robotic prosthetics. Both were the result of people envisioning a human capability not yet realized and inventing the technology to make it possible. The act of flying and the ability to use computers to operate artificial limbs was simply unfathomable before its time. Self-driving cars are another strong example of this type of innovation.

Variation #1: Google: Problem Solving

Google’s story is a prime example of the type of innovation explained above, with one primary difference. Unlike the printing press, Google’s purpose sprung from a concrete problem: the Google founders recognized that the sheer mass and astronomical rate of growth of online content was creating a fragmented and disorganized Web. They realized that this incredible network of information would be meaningless and provide little use to the average consumer without a means of wielding it. They foresaw the potential of structuring and ranking content in order to enable its access and use. Their purpose was not to improve upon the Internet (streamlining), nor to establish a new Internet (as with the printing press), but rather to apply mostly existing technology to answer a dire need that they comprehended [11].

*Companies like Altavista and Lycos conceptualized this kind of problem-solving before Google. Google was the only company able to ship this concept to millions (and billions, within a few decades) around the globe.

Further examples include the invention of plastic drip irrigation systems by Israeli engineers. Drip irrigation works by running hoses alongside plants and “dripping” the exact necessary amount of water onto the plant, saving water and allowing for a drastic increase in agricultural output in arid environments. Today, with many of the world’s largest agriculture hubs (California, India, and more) employing drip irrigation, the technology has noticeably revolutionized agriculture.

Israeli engineers were not the first to conceive drip irrigation technology — it had been practiced in primitive forms in China centuries earlier — but Israeli engineers recognized the reason why drip irrigation was never widely adopted: the holes in the pipes would block up with particles, stopping water, and making its application unrealistic for large-scale farming. They solved this by replacing the classic holes with a series of plastic nozzles and pipes. Instead of directing water to drip through holes and thus being susceptible to clogging, these nozzles slowed water by limiting the velocity of the water’s flow [12]. Just as with Google, these engineers did not reinvent agriculture. Rather, they understood and eventually solved a serious limitation of modern agriculture.

In short, the purpose of this variation of innovation is to solve an actual problem rather than to establish a radically new capability.

Variation #2: Airbnb — Resource Extraction

At times, innovation is not the invention of new technology, but rather the act of correctly identifying untapped resources. The innovative idea brought forth by Airbnb in 2008 was not so unlike the discovery of oil in 1859. They weren’t discoveries per se, both residential homes and oil existed before, but they redefined the resource’s potential. They both invented a different purpose for the resource and a new way of extracting its value.

2. The Internet

The Internet embodies a new kind of innovation, one that envisioned a novel way in which people could interact with the material world and with each other. Its purpose was not a particular goal, but rather to enable an entirely new kind of interface. It accomplished this by establishing a standard communication protocol through which people could interact with other people, all through pixelated screens. In comparison to the printing press, the Internet was a more fundamental form of innovation. The printing press was driven by the purpose of enabling the mass distribution of the written word. The Internet practically introduced a new language — a new form of communication that allowed people to interact across a virtual, cyber network [13].

Both the invention of social networks and blockchain are excellent examples of this kind of innovation. Social networks envisioned using existing technology (the Internet), to enable a network of individuals to build “profiles” of themselves in the digital world, complete with relationships, histories, and reputations. Across different sectors, Bitcoin and blockchain innovation enabled scarcity in digital form and thus, the potential for real digital value. Eden Block and its research center has focused on decentralized technology — an extremely valuable emerging market with the potential to radically restructure the digital world.

Innovation v. Streamlining: Case Studies

Long before steam engines were powering the industrial revolution, they were entertaining guests at Ancient Greek cocktail parties. The steam engine’s evolution from party trick to world-changing provides an excellent example of how innovation gives way to streamlining in a continuous cycle. The Greeks first devised the mechanical processes that enable the steam engines in the first century A.D. The Greeks heated water, producing vapor, but they only used the steam to turn a small turbine that certainly delighted and enthralled guests, but had no larger purpose. In 1712, Thomas Newcomen, while barely altering the underlying technology, envisioned a new purpose for this ancient Greek party trick and radically altered the course of history by inventing the first engine to power a machine. Further, it wasn’t until 64 years later that James Watt streamlined the engine to the point where it was efficient enough to power the mighty industrial revolution [14]. Can we categorize the ideas of the Greeks, Newcomen, and Watt all as simply “good ideas?”

In reality, the true spark of innovation was not present in all the layers that created the steam engine. The Greeks merely discovered a way to harness natural energy but were unable to conceptualize a defined purpose. They could not imagine a purpose beyond that of a novel party trick. It was not until 1600 years later that the real innovation occurred. Newcomen did not invent the concept of interconverting various forms of kinetic energy and harnessing it into mechanical force — the concept had long since existed in the form of wind and watermills for example. Rather, he saw that steam could be used to move a turbine in much the same way as water. This was the ultimate form of innovation. It was the ability to take a simple, well-known fact about the world and channel it to serve a visionary purpose.

What followed this innovation was a classic case of streamlining. Watt’s device did not put forward a new purpose, but rather a more effective path of achieving what Newcomen had already envisioned. This jump in efficiency stood until new forms of innovation, in the form of electric motors and internal combustion engines, arose.

The evolution of steam engine technology shows this often overlooked aspect of innovation. Frequently, the potential of the original purpose far exceeds the expectations of the innovator (and certainly of the investors). Even after the perfection of an efficient steam engine, the technology’s purpose was reimagined, spurring further impact. In 1872, a brilliant English polymath, Charles Babbage, took the very same steam engine and conceptualized a radically new purpose for it. He envisioned how mechanical force produced by the steam engine could be harnessed to perform complex mathematical calculations at a dizzying rate. Babbage’s machines had the underlying structure of a basic-computer — with separated data and program memory; it was so far ahead of its time that it took many decades for the full implication of this groundbreaking innovation to be felt around the globe, in a form powered by electricity. This very first steam-powered computer was improved by many subsequent bouts of streamlining (many of which included smaller-scale innovation in their own right) until the modern computer was born [15].

Conclusion

Technological progress flies along a straight trajectory until the appearance of true acts of innovation: paradigm shifts. These truly innovative ideas appear as sharp angles, breaking the linear path and representing fundamental shifts in the way humans engage with the world. These shifts occur when someone sees the world differently than their contemporaries, and envisions a new purpose towards which to direct their efforts. At times these efforts take years to be realized, other times centuries. When the wheel turns and direction changes, progress flies straight until the next radically new angle is found.

To facilitate innovation, we must focus on identifying and predicting these angles. We must encourage those innovators who are willing to question the existing paradigms. We understand that the many forms of innovation share one commonality: they reimagine how humans interact with each other and with the world. In subsequent articles, we will explore those factors that enable revolutionary ideas to emerge and thrive, and explore why some markets embrace innovation while others do not.

Eden Block’s focus on blockchain technology and its associated industry will take subsequent articles through the lens of the innovators, the ventures, and the larger market trends that arise from identifiable and transformative innovation.

References

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