AN ILLUMINATING PERSPECTIVE ABOUT BUSINESS INNOVATION: THE PINBALL EFFECT

What follow are actually some raw but rich ideas from Dilip Mukerjea's work-in-progress, tentative titled 'Innovation Ecosystem Lifescape', which form an illuminating perspective about business innovation, as he sees it:

The process of business innovation should seek enlightenment from that of evolution, leading from simple consumptive forms towards more efficient and creative ones… and often back again… distilled into a series of ecological principles.

These principles follow a sort of Karmic Logic, and are all related to one another, in a sequence of cause-and-effects.

Think of them as pinballs, the ten pinballs of evolutionary innovation as applied to business, each pinging into the next and often in the process leading to the creation of net gain… that is, profit.

THE PINBALL EFFECT:

The first pinball is entropy, the imposition of a loss or cost.

According to the second law of thermodynamics, entropy means that every conversion of matter or energy leads to a net loss of potential energy. Every use of a resource creates a cost. Without new infusions of fuel, systems will quickly expend all their energy and run down.

It often takes a long time for the cost of an action to induce change in the system that created it.

The second pinball is feedback, the effect of the action.

Entropy triggers feedback, and the system begins to learn. Feedback imposes a forcing function that ultimately prevents past behaviours from recurring, either because a customer changes a buying habit, an employee changes a production decision, an executive is fired, or a company goes bankrupt. The more effectively soft-feedback signals work to cultivate change gradually, the less likely more extreme changes are compelled later.

So feedback closes the open loop, helping turn a chain into a web, imposing a forcing function that induces change. That knocks into the third pinball.

The third pinball is adaptation.

When resources are abundant, business pioneers have the competitive edge.

But when constraints kick in, the survival strategy is to adapt to fit specific niches more perfectly, and consume resources more frugally, than when at the pioneering stage. This expands the carrying capacity and enables more life to co-exist on fewer resources.

Thus, we arrive at the fourth pinball: specialization.

As organizations (organisms) adapt to the imposition of environmental changes, they grow more refined, different from the pioneers. They become specialists, able to excel in more narrowly defined niches, or places with particular attributes.

Over time, successive waves of limits and adaptations create an ever-greater array of specialists within the innovation ecosystem (marketspace), each matched to the niche opened up by the predecessor species.

Every appearance of a specialist triggers a succession of further changes in the ecosystem. Not just one part of the system adapts; they all do. Every action has not just one reaction, but myriad reactions.

Actions diffuse along every strand in the system’s web, changing not one thing but every thing, and changing them in different ways.

Now the fifth pinball gets activated: diversification.

Every time you trade information, you can get more in return. Similarly, each increase in diversification can lead to more diversity, as emerging corporate species create space for myriad smaller establishments to fit into the niches being created.

Since each specialized innovation entity (organism) is a specific information set, each represents a new tool… a choice. Since diversity means choice, this increase in diversity generally increases the resilience of the playing field.

Why are diverse systems often more resilient in the long-term? Simple ecosystems have limited information content and limited choices. In the short term, they might seem to offer greater stability, but that’s because they have no choice. They rebound only so long as the system is not stressed too severely.

When a fire or other crisis is mild, a simple system remains as is, rock solid, enabling individual species to rebound to previous population levels.

But when a crisis is severe, the simple ecosystem can’t flex, so it may in effect crack, break down, and collapse completely, often with catastrophic results for all its members... a la the financial collapse of September 15, 2008.

The system grows more complex, and with it the sixth pinball gets moving: complexity.

So long as change is regulated but not repressed, a complex organisation can adapt to it continuously. Small, frequent challenges can wind through the living alleyways of trade zones, feeding only on deadwood. They act as cleansing organisms and leave behind them a healthy, diverse terrain with a mix of young and mature players, in the fractal structure that renews itself on many levels simultaneously.

At the level of individual players, even individual categories of players, the change may be catastrophic. But for the system as a whole, small challenges clear the way for the development of a richer and more vibrant ecosystem. If we look at the whole, the number of different parts becomes greater; there is greater variety.

And with every thing affecting every other, the relationships among them become ever more complicated. Diagram them, and what you see might resemble a computer-generated fractal, where simple yes/no instructions lead to the gradual emergence of recurring patterns.

Since every niche is shaped and sculpted according to its relationship to every other, all the elements of the complex whole are dependent on one another, creating the seventh pinball: interdependence.

In a system of increasingly interdependent parts, every thing is related to every other, dependent on every other for its very definition. Lines of relationship are drawn from everywhere to everywhere. Chains become webs.

In a sense, each element of the whole becomes more unique, more individualized, as it grows more specialized and focused on its particular genius, its core competence. Yet through this individuation, it becomes more drawn into a larger whole. It is more individualized and yet less complete.

Specialised to one place and purpose, it loses its capacity to fit other niches and relies on others better suited. Like it or not, it falls into a condition of cooperation, the eighth pinball. Not by choice, not necessarily because it “desires” to or is drawn to by some sense of altruism, but by nature.

Ultimately, parts join as pieces of a larger whole and find that in serving the whole, they serve themselves best.

As this larger whole becomes defined, something astonishing often happens: New properties often emerge, not just in the marketspace but in all complex systems. Not by an individual alone but by individuals in the context of their times and their whole communities.

This is the ninth pinball… emergence.

Something new is created… a parachute is unbound from its pack (a caterpillar has metamorphosed into a butterfly?). This is a potential, a choice, a source of power, a bank account of new value.

Hence, synergy, the tenth pinball, the principle in nature that accounts for its extraordinary ability to end-run entropy.

In complex systems, more is created than was spent to get there… not just quantitatively, but qualitatively. The “more” may include greater efficiency… a continuous improvement in our capacity to carry out an existing function.

But its most compelling form is breakthrough innovation, the creation of a new resource containing a new capacity not present in its parts. Thus we see the creation of net gain…a profit. So can all businesses.

We use this profit to create greater distance between ourselves and our limits, our ground zero. And in using it, we find that we have knocked into our first pinball again and begun a new process of creation that can lead to the creation of profit in a whole new form.

As the pinballs are set in motion, change is inevitable, but the path they take is not predetermined. These pinballs collide and ping off in unexpected directions.

The future is created by actions we take in the present; and every action taken, no matter how small and inconsequential it seems, can change wholly the shape that emerges.

Say Keng's personal comments:

Dilip's foregoing illumination on innovation somehow brings back memory of the work of English historian James Burke [through his book, 'The Pinball Effect' (1996), which takes the reader on many different journeys through the web of knowledge ~ more precisely, history's most dramatic innovations] from where I got my first understanding & appreciation about the interconnectedness & the serendipitous interactions of all things around us.

Likewise, as a corollary to Dilip's key point, & drawing on James Burke's work, "Knowledge has many unforeseen & surprising effects. Like a pinball, a simple discovery in one area can - through necessity, intuition, or serendipity - connect with, bounce off, & redirect the course of another seemingly unrelated discovery made elsewhere in the world or at a distant time."

The larger picture I got out from here is that the fundamental mechanism of innovation, or change for that matter, is the same: the way all things come together & connect.