Innovation is revolutionary only when it results in a shift in power. “Disruption” has become such a throwaway term that we forget our society is reshaping itself through power shifts every day. Three stories from this weekend’s New York Times illustrate the point.
“The Rise of The Toothbrush Test,” asserts that tech companies are increasingly managing their merger transactions without the help of investment bankers (see charts below). The trend arises, says the Times, because bankers understand deals that are based on valuations and earnings per share, but Google, Facebook, Cisco et al. are more interested in the potential to open new markets. (The article title attributes two key yardsticks to Larry Page: “is it something you will use once or twice a day, and does it make your life better?” The smart electric toothbrush is presumably on its way.) If innovation is on the rise across the economy, then it won’t just be tech companies abandoning the financial engineers.
Second, David Carr’s regular column on media was titled “The View From #Ferguson.” It’s old news that Twitter trends point to stories faster than CNN, let alone the Wall Street Journal, but there’s a certain symmetry between Al Jazeera relying in part on Twitter when covering the Arab Spring and Twitter drawing attention to the Al Jazeera news crew being tear gassed in Ferguson, Missouri.
Carr points out that Dow Jones (the WSJ’s parent) has acquired Storyful, “which creates narratives from the Twitter stream.” He sites both CNN and NBC as making similar plays. A decade ago the hand-wringing among media professionals was that citizen journalists could never substitute for trained reporters; now it turns out the professionals can’t do their job without the crowd.
Finally, a Harvard Business School working paper comparing the decisions of crowdfunders vs those of experts (“Wisdom or Madness? Comparing Crowds with Expert Evaluation In Funding the Arts”), also mentioned in the Times, concludes that in general a crowd of amateurs and a group of experts will choose the same projects to fund, but when they differ, it is because experts have a higher degree of false negatives, that is, they do not fund projects that turn out to be successful when funded by the crowd. In other words, experts exert a conservative influence on innovation by suppressing experiments that might make it obsolete — the authors suggest this applies “in fields as diverse as technology entrepreneurship and the arts.”
Investment bankers disintermediated, news crowdsourced, investment reallocated by amateurs — none of this is surprising to the digital natives, or even the digital immigrant (and indeed was suggested long ago by among others Clay Shirky, David Weinberger, and even in my 1998 book BLUR).
Each of the digital-driven innovations above is a minor footnote to the digital revolution. The big story is the shift in power, and how it will reshape our institutions. If your product or service is used twice a day and makes someone’s life better, watch out. – CAM