Growth and Fitness
through Innovation
How to
augment the returns
from your stake
© Klaus G. Saul
1. Advance to grow
New insight into the phenomena of innovation has been obtained by a thorough analysis of the irreversible behaviour in complex systems.
As a result there now is a new perception of the human impact on the variables depicting growth in the macroscopic world.
It is shown how stakeholders can facilitate or accelerate the progressive change. Their impact manifests in an accelerated progress, a re-enforced importance of the intangible assets and an increasing interconnectivity of emerging new order parameters.
1-1
The use of the
word innovation is connected with considerable confusion. There are numerous people
addressing any novel product or service as an innovation
regardless whether it adds socio-economic value or not. But more than 99% of those
”pseudo”-innovative ideas are not worth the investment. They fail [EXHIBIT 1]
without generating pertinent returns.
Therefore and for reasons of thorough analysis we are concerned with the original meaning of the word, coined by the famous scientist Joseph Alois Schumpeter (1883-1950). Schumpeter’s revolutionary ideas can be learned from [EXHIBIT-2]
1-2
Unfortunately
the competitive advantages of innovations are transient. For there are always
competitors eager to invest into better problem solutions. They imitate the pioneering
innovators and try to pass them by means of established network externalities, learning curves, specific expertise, skills, economies of scale or scope and the like to
meet the preferences of the markets better.
1-3
The resulting
competition causes prices to drop. They can decay until they hit the bottom line
of the marginal costs of the innovatively improved production {Heuss, E. (1965)}. When that state has been
reached it does no longer matter who had paid the bill to get there.
1-4
The transition from the
original steady state to the more stable one produces macroscopic value [EXHIBIT-3] as has
been described by Kurt Hornschild {Hornschild, K. (1998)}. The amount of the
macroscopic value is an indicator for the attractiveness of the new state. It tells
something, too, about the number of paths leading to that new state. Most of these paths
require investment for their activation. Some even allow investors to capture considerable
returns on the investment. But anyhow, creative entrepreneurs can facilitate and accelerate the
value creating transition by selecting most appropriate paths. If they are smart enough to
select those which preserve their own competitive advantages [EXHIBIT-4] they may even
control the entire competitive battle field up to the end of the tranistion.
1-5
As soon as the attracting new steady state is attained the advantages of the innovation
are accessible to everybody almost free of charge. The initial vision has
transformed into a public good and the former competitive advantages are irreversibly gone .
1-6
To better
understand the irreversible feature of the transition it is useful to look into the
structure of the underlying complex system [EXHIBIT-5 ]. It builds upon the ”Maximum
Information (or Entropy) Principle” (MIP) introduced by Jaynes and later extensively
elaborated by Hermann Haken {Haken, H. (2000)}. The MIP has proven
to be very powerful in describing self-organising complex systems from in particular
statistical physics, thermodynamics, biology, sociology and the economy. It is fundamental
and allows to derive new types of autopoietic variables that describe the growth in the
macroscopic world.
1-7
Evidently one of
these continuously growing variables is the macroscopic value of [EXHIBIT-3] itself.
Another is associated with the human civilisation [EXHIBIT-6]; yet a third one is related
to the capacity of the Earth’s resources [EXHIBIT-7] for the deployment of human
activities while yet a further one is related to the ever growing fitness of the entire
global ecosystem.
1-8
It seems incredible but today we
live with approximately 6 billion fellow men together on a single planet Earth. Human life
expectancy is about 75 years on the average. Not even thousand generations ago the Earth
was completely overcrowded by 5 million people [EXHIBIT 7] having a life expectancy of
five years on the average..
1-9
In those days
our predecessors had not yet elaborated the quality of life to the extent of the present
world. But without their innovative creativity 99.9% of our fellow men would not have had
an opportunity for a humane existence. Without the progress they have induced there would
be none to read these lines, let alone to grasp them.
1-10
The following
six chapters are focused on the identification and the optimization of the control
parameter "alpha" in equation (4.2) of [EXHIBIT-5]. We start by identifying the
essence of meaningful information. We shall perceive the progressive change and the
evolution in the Darwinian world as growth of information carrying meaning for living
matter. We shall further learn that much of the anthropogenic progressive change
means overcoming the boundary conditions of the actual human existence.
In the third chapter we shall familiarise ourselves with new approaches to identifying promising transitory paths. By analysis and comparison of different business cases with lessons learned from the recent past we shall enable ourselves to identify the winning concepts for progress with a 75-80% reliability.
In the forth chapter we shall learn from a decision tree analysis what the the optimum control parameter "alpha" looks like. It will be shown that this, indeed, is the optimum "alpha" which allows the leading stakeholders to retain a maximum competitive advantage during the entire transition.
The fifth chapter is to familiarise the reader with innovation opportunities by means of "critical masses" generated as a result of preceding innovations. The insight will shed new light on the idea of Schumpeter on "co-innovations".
The sixth chapter takes into account modern flexible management tools. With this re-eneforced understanding innovations will no longer be perceived as ”bets on an unknown future”. On the contrary and in the light of the new economy the unknown future enables most flexible stakeholders to run evolutionary innovations along the Black-Scholes model and capture real option opportunities.
The seventh and final chapter is to exorcise all strategically unreasonable bias. It will be seen why stakeholders are well advised to pursue an efficient sharing of tasks among symbiotically co-operating competent partners.
LITERATURE
Dr. Klaus G. SAUL; Leiter Fachausschuss S1.3
INNOVATIONSMANAGEMENT
DEUTSCHE GESELLSCHAFT FÜR LUFT- UND RAUMFAHRT - LILIENTHAL- OBERT e.V. (DGLR) 53175 Bonn