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Building Blocks for Innovation Theories

Horace Dediu, 4/27/2016


We tend to think product improvements are inherently valuable and desirable but experience and data shows that not all improvements are absorbed and certainly not all are valued. Moreover, the very idea of “innovation” carries within it the connotation of positive improvement and yet it’s hard to find funding for innovation and it’s often hard to find markets for improvements.

Much of the paradox stems from an insufficient understanding of the foundation and definition of innovations. The duality of innovation as both positive and negative and as resulting from “improvements” as well as “creative destruction.” To address this, the process of theory building requires agreement of terms and factors surrounding innovations. In an effort to create this agreement we will explore the following questions in subsequent posts:

1. What is innovation? Can we define a taxonomy for ideas, inventions, novelties, discoveries, and creations?

2. What is a disruption (formally-speaking)?

3. What is performance? How does it relate to utility, quantity, price and other microeconomic concepts?

4. What is a new market? How do we distinguish a new industry from a new market?

5. Why do firms matter? Are firms causal to economic growth?

6. What is the role of technology in innovation? Can we innovate without technology? Can we fail to innovate with technology?

7. Do firms “live” in the biological sense? If not, how do we measure their existence?

8. What are entrepreneurs? What do they do that is different from what managers or business leaders do?

9. What is P-space and how can we navigate it?" How do you think about your business and economy in performance terms.

10. What is a diffusion? Is adoption a good measure of technological progress?

11. How does capital map to P-space?

12. How can we maximize economic growth? Is there a growth algorithm? What is the role of government policy in growth?

13. What is the difference between consumption and non-consumption? What is non-production?

14. What are the known forms of disruption? Could there be forms of disruption that we haven't identified yet?

15. Why do customers buy solutions? How can we understand what causes someone to make a purchase decision?

16. Are profit motives necessary for growth? What motivates individuals and companies if not profit?