Technology, innovation and risk

Not dead. Thinking.

For the past few days, I’ve been struggling to articulate some ideas about an emergent and participatory business culture. As a result of the recent final review of several projects at ACID, I’ve been thinking about research conducted for a market need, as opposed to research and product development occurring independently of any market need, and the associated difficulties with identifying a market for a product ex post facto as it were.

There are a few key issues that underline these ideas that I am going to propose, and I suppose my response to this emergent culture will generally be regarded as controversial. I’m going to phrase these proposals as business and technology theory mythbusting. If Adam and Jamie can do it to measure how much damage an embattled dummy called ‘Buster’ can take in a variety of explosions, accidents and free-fall ventures, then I can do it for strategy. Or something. In any case, I have three ‘myths’ (perhaps more accurately, ‘misconceptions’) that I want to dispel:
1. the internet and open source communities are examples of a gift economy (this is an oversimplification at best, and just wrong, at worst);
2. innovation is inherently financially valuable to organisations (an over-generalisation, and economically unsound, as I point out below); and
3. risk management is a cost-savings measure (this is a remarkably common, but decidedly insufficient interpretation of risk management).

I know there are some friends and colleagues of mine who will probably be gobsmacked about the above list. But it’s not as bad as it sounds. To some extent there is a degree of truth in all the notions listed above, but in all cases, the dominant understanding of technology, innovation and risk is simply shallow. And that has meant that the implementation and application of technology, innovation and risk management has been seriously flawed. So, to explain….

1. The internet and open source communities are not based on a gift economy

As a hacker and an advocate of the many benefits of online communication systems, I’ve often extolled the value of the creative and participatory online community. And I still believe in the value of shared knowledge; I wouldn’t be writing about social software, blogging and Web 2.0 mashups if I didn’t see immense value in a user-driven (or as Axel Bruns would call it, a produser-driven) environment. However, I’m beginning to question whether cybercommunities are genuinely gift economies or whether they would be more accurately described as reputational economies. They’re not gift economies, because they are not, strictly speaking, based in reciprocal sharing. Further, there is a degree in any cyberculture of exhibitionism and lurking participation which isn’t adequately communicated by a sharing economy, or public commons. Sharing occurs, certainly, but there ultimately develops an hierarchy of contribution quality, such that maximum functionality and elegant design in open source software tools will experience much more widespread adoption than quick and dirty tools, and in cybercommunities and/or blogs or wiki, a natural A-list of writers and artists emerges. Doctorow’s concept of ‘whuffie’ as a currency of reputation, based on perceived productivity seems a more accurate economic interpretation of internet based communities of interest.

2. Innovation is inherently valuable

Even at face value, this is an oversimplification across all organisations. But in strictly pecuniary terms, innovation may not actually deliver financial benefits. Innovation in an organisation can bring about process improvements, sustain interest of stakeholders in an organisational context, and permit idea development. (I should note that I’m not limiting this discussion to work place environments; this could be in artistic communities, cybercommunities, political parties and so on.) But when it comes down to measurements of the cost of supporting innovation in an organisation, it’s an expensive and risky strategy, and it doesn’t always generate improvements in purely financial terms. Indeed the financial value of innovation declines at a much faster rate than traditional ‘productivity’ for any organisational context. The point is that innovation can deliver some extraordinarily rich intangible benefits to an organisation, and these may have a trickle down cost to the organisation that is significantly more expensive than non-innovative productivity. So the value of innovation shouldn’t be just oversimplified as it is in so many management texts. I think we need to be clear that the financial value of innovation is simply too variable to be defined.

3. Risk management is a cost-saving measure

This is probably the biggest ‘myth’ (or at least ‘misconception’) of the three. In so much corporate government and triple bottom line theory, risk management is seen as being a cost savings measure to keep Boards happy and companies free of (or at least less vulnerable to) litigation. The act of risk management is, and has been regarded as a form of insurance (it’s not really – insurance is characterised by spending in advance for some future possibility of loss, and often involves greater spending than is returned for claims, where risk management is preventative). But risk management is not limited to a form of insurance or preventative medicine. Risk management is primarily about communication. It’s a means of keeping track of systems, improving communications processes, and having details on hand when a process is challenged. It’s a means of connecting all stakeholders in an engagement, and getting them to talk to each other to solve problems as Surowiecke intends in his Wisdom of Crowds. Of course there may be cost savings that occur as a result of this improved communications architecture, but risk management shouldn’t be considered as a simple series of automated tools that save an organisation money. Risk management only works where the people who participate in an organisational or inter-organisational engagement are invested in the process, and are communicating freely.

These ideas may in isolation seem fairly obvious. (I can hear the chorus of “well duh” from here.) But I think some of the problems I’m having with the theories expounded in texts I’m reviewing at the moment stem from over-simplification of these ideas, and this is impacting on the robustness of conclusions reached. I think it may well be time to take a step back in our ruminating about the value of technology, innovation and risk, and consider just how the enmeshing of these phenomena is resulting in a somewhat flimsy rhetoric of hope.

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