Think Bigger. Aim Higher. Go Further.

Month: December 2008 Page 1 of 2

Out of Cache; Will Work For Bandwidth

We can measure the time in minutes, we can measure distance in miles, and we can measure mass in grams – so how do we measure Innovation?  Am I missing something or is this possibly the most stunning omission in the history of civilization?  Who is keeping score? Where’s the referee? This is serious business, folks – the fact, factors, and factories of innovation should be in laser sharp focus to everyone right now, here is why:

The total US liability is estimated at 53 trillion dollars. Every US citizen must become more productive by $175,000 each to cover the invisible mortgage.   Government and corporations are not going to fix this problem – they will leave it to the kids to figure out how to make, mix, and measure innovation.

Natural Resources of Bandwidth

It is official; the United States has run out of bandwidth and we need to create more. The only way to accomplish this is an extraordinary expansion in the breadth, depth, and scale of innovation. This is a situation that cannot be rationalized by any conventional school of thought – starting with our definition for innovation.

The accepted definition for innovation is “something novel and useful”. I hope that I am not insulting any B-school professors or innovation guru’s but “something novel and useful” is already bankrupt as a definition for the only thing that can pull us out of this flaming tailspin of debt economics.

So let’s try something that the kids can do well (because they get to pick up the tab):

Innovation = Bandwidth Created / Bandwidth Expended

So there it is: a simple, clean, and effective:  If the number is greater than 1 we have a creation of wealth. If the number is equal to 1 we have a transfer of wealth, if the number is less than 1 we have the creation of more debt.

It should not matter how one defines bandwidth as long as the top number and the bottom number are measured the same way. If the kids can increase the top number, or lower the bottom number for anything anywhere by using their social, creative, or intellectual ability, alone or in groups, then they can become successful innovators.

Business case

There is a clear and rational business case for bandwidth – people will pay for it at a price relative to their own available bandwidth. Let’s give the kids a game they can win.  Let’s give them a score that they can keep. Let’s show them how entrepreneurs work, think, and play.

For the same amount of bandwidth expended, they can create more bandwidth for 10 rich people or more bandwidth for 1000 poor people. Let the kids decide. If they give some people more bandwidth at the expense of the bandwidth of others, they lose.  If they find synergies that act as a bandwidth multiplier, they win. Let the kids figure it out.

All we need to do is help develop standards to measure bandwidth.

It’s the least that our old people can do and a much simpler problem for our feeble minds to solve.  The Ingenesist Project specifies 3 web applications which if deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation – we believe that this may do the trick.  There may be others working on the problem too, we don’t care – at the end of the day, we all work for bandwidth.

Advertising in the Age of Social Capitalism

The recipe for selling great products to great customers in the age of Social Media resides first in helping people find their highest talent and passion.

The great innovations of our time were created by people doing what they enjoyed most by using their talents to the highest potential.  Disney, Boeing, Apple, Mattel, and nearly every other ground breaking venture had the secret sauce of people doing what they were best at and most passionate about.

Advertising in the Age of Social Capitalism

Computer Enabled Society is in the midst of a struggle to reorganize itself outside of the construct of the traditional corporation. People seek to develop methods and systems that allow for the reallocation of social capital, creative capital, and intellectual capital to match a person’s natural talents and passions with those complementary to other people.

If marketers have the foresight and methods to “get ‘em while they’re young”, they certainly also have the foresight and methods to develop ‘em to their highest purchasing potential.  All they need to do is listen and support to the future trends in Social Capitalism.

Instead, mass marketing pays mass money for mass audience from which to draw mass revenues.  As a result, actual products are designed to be marketed and thrown away; not to be particularly useful, productive, or even healthy.  Such unnecessary innovation wastes human effort and natural resources while mass marketing of unnecessary innovation wastes the time and bandwidth of those for whom the product is irrelevant (yes, Spam).  Economies of scale will become liabilities of scale in an Social Capital driven Innovation Economy.

Few realize that advertising can become a highly useful component of the Innovation Economy.  In many professional societies, practitioners look forward to hearing from vendors, educators, and fellow practitioners for trends, news, and developments that can strengthen their community.  Bad products are rejected quickly and good ones are elevated quickly. This is how the great innovations are found. This is where the early adopters congregate. This is where brand loyalty is unyielding. This is where wealth is created.  This is efficiency that society wants and needs.

The Ingenesist Project starts the discussion by specifying the creation of a knowledge inventory in society.  This simple exercise enables communities of practice to form around a set of knowledge attributes.  Advertisers can quickly identify target markets and support the operating costs of these communities in exchange for the bandwidth of the members.   The community will look forward to learning about the advances in the field of their interest and ad copy will become far more useful and efficient to deliver in greater detail.

When communities of practice merge with other communities in the innovation process, the message of the advertiser can be carried far and clear as people share ideas and coordinate activity.  Feedback to the vender is highly qualified thereby creating a virtuous circle of innovation.  In the age of social media, highly targeted advertising is simply more efficient than “bending the herd” in a TV era mass market model.

Social Media Frequent Flyer Miles

The Internet is a lot like a commercial airplane – it is very useful in transporting us to distant lands but the real work must happen on the ground.  The organization of society at both ends of an Internet destination must be developed if real wealth is to be created. Social Media needs to develop this component at this critical juncture of human history when vast amounts of social capital, creative capital, and intellectual capital are being sent to the shores of despair upon Unemployment Air Line.

Computer enabled society:

The great opportunity of our generation in the fair, sustainable, and equitable creation of wealth through innovation in a computer-enabled, open-sourced, and democratic society that can organize its own knowledge in the form of a financial instrument.  The great danger, of course, is if we miss our flight and engender a computer simulated society where it is easier to interact with online community than our own neighbors.  It’s like getting on an airplane for the fine view, good food, and interesting conversation.  Social capital is by far the most powerful force of change and social media must now touch the ground in a meaningful, systemic, repeatable, and scalable manner.

The analogy continues:

The earliest days of aviation were a novelty at best.  Some commercial enterprise emerged in the form of barnstorming, carrying the mail, light cargo, aerial photography, and warfare. Likewise, the evolution of the internet brought us on-line gaming, e-mail, e-commerce, assorted photography, and hacking, etc.  It was not until the invention of municipal airports that the airplane became a true time machine by increasing human productivity and allowing us to see history that would otherwise be unavailable traveling by sea.  The true value of both commercial aviation and social media over “sail mail” is precisely through the increase in human productivity to transfer information to the ground.

Three Web Applications:

First, social media needs to develop a knowledge inventory system by geographic areas.  Second, Social Media needs a search engine at a local level that combines knowledge assets to form “strategic” social networks that can execute a specific business plan at reduced risk; cooking the “secret sauce”.  Third; an Innovation Bank must “pull” knowledge surplus and “pull” knowledge deficits together from diverse communities.  These three applications will provide everyone with the tools needed to create wealth in their communities.

Social Media has the potential to become the airport of the Internet Transportation System.  Nothing meaningful can happen until the rubber meets the tarmac.  So, let’s start building runways.

Social Media; An Alternate Universe of Wealth Creation

The Known Universe

The Known Universe

Computer enabled society has been called an “alternate universe“.  If Social Media intends to make serious money, perhaps it should act like one as well.  In finance, Risk is also often called an alternate universe.

Beneath the surface of this little 4 letter word resides a complex network of financial instruments that do far more to channel and direct the flow of money than any commercial trend, marketing campaign, or hot new web app.

Risk is actually a very simple thing to understand.  All you need to do is answer all three of the following simple questions:

1. Can I identify the peril?
2. What is the probability that the peril will get me?
3. If it does get me, what are the consequences?

The Insurance industry is absolutely gigantic – too important to fail – yet it produces nothing that can be held in the palm of one’s hand.  Insurance lives and breathes in an alternate universe of information.  Any place where these three questions cannot be fully and completely managed, you will find an insurance product.  Where there is no insurance product, there is no capitalism.

Here is how it works:  suppose there are 10 identical cabins in the woods.  Each cabin is worth exactly 1000 dollars.  There is a 100 percent probability that 1 of cabins will burn down every year, but nobody knows which.   Therefore, each cabin owner needs to have 1000 dollars sitting in a savings account in case their cabin burns that year.  Together, 10,000 dollars sits in a bank not being invested in productive enterprise.  Along comes an insurance company to reorganize the assets by offering to replace any cabin if all 10 cabins agree to pay 100 dollar per year premium (plus an admin fee). Now each of the cabin owners can pay 100 dollars per year and release 9000 dollars to the economy as productive capital.

Insurance opens the floodgates of wealth creation; bankers lend, investors invest, and entrepreneurs innovate where risks are reduced to zero; all bets are hedged.  But there is a trick; the peril must be identified (fire), the probability must be known (10%), and the consequences must be quantified ($1000).  This only works if the assets are pooled in identical lots that have the same probability of loss and suffer the same fate.  This is valuable information and it’s worth a whole lot of money.

Social Media is poised to open the floodgates of wealth creation in a similar way – by connecting local communities, neighborhoods, peers, and colleagues with computer enabled society.  Today, it is often easier, cheaper, and safer to make friends online than in person, but nothing tangible can really happen until the rubber meets the road;  people need to congregate.   The Ingenesist Project suggests that the 3 dimensions of human capital, creative capital, and intellectual capital can be identified, normalized, quantified and pooled into risk sharing cooperatives through social media as a means of eliminating innovation risk.

The trick is for society to organize itself in a slightly different way – this is where Social Media needs to position itself with the next generation of applications.  If so, the business model for social media will become hugely important to an innovation economy – too important to fail.

Options, Options, What Are My Options?

In finance, an option is the right, without the obligation, of taking a financial position some time in the future.  As with any financial term, options are associated with “code speak” such as: volatility, exercise, strike, call, put, etc., glazing over many an eye.  At the same time, people want, buy, and trade options all day long in everyday life without even knowing it.  Options have value; otherwise people would not want them.

The ROI model of valuation fails when applied to social media.  The number of hits per ad dollar just does not translate to brand loyalty or scale into rivers of cash flow.  There is little surprise that corporations have great difficulty socializing because they simply don’t exist, except as a folder labeled “ROI” in the filing cabinet of an attorney in Bermuda.  In fact, losing control of the message makes for an expensive funeral in that same filing cabinet.  The Social Media industry is trying to live in the ROI structure and struggling to create revenue.

The cardinal rule of business is to collect assets and shed liabilities.  A “right” is an asset while an “obligation” is a liability.  An option is an asset without the liability, to make a decision some time in the future.  As such, options favor long term planning and strategic nurturing rather than short term profit taking of the ROI model. Asian countries and corporations set a good example of buying options in the future through product quality, education, and economic patience.  American corporations should do the same if they hope to benefit from social media.

People do not want ROI, they want options.  They want the option to separate peers from mentors from friends from family.  They want the option to experience before buying.  People want the option to meet their physical, mental, emotional, and spiritual needs.  They want the option to be anonymous or public in their interaction.  They want the option to collaborate and support others.  They want the option to overcome physical barriers.

People want to meet new people, get new ideas, and hold the option to act on those new ideas or collect on past ideas shared with others.  If they exercise an option and discover another along the way, they want the option to pursue many options to meet a changing market. If they create something in one market, they want the option to apply it to adapt it and access other markets.  If they help someone else up the ladder, they want an option to access what that person, in turn, has created from their help. If they make a friend, they want the option of meeting their new friend’s friends.

Likewise, when people are in trouble, they will turn to their collection of options and start exercising them as society has for millenia.  The great financial transformation will occur when on-line society gets threaded into the fabric of off-line society through the trade of options.  This is the area that needs to develop so that all the pieces can fall into place.  This may in fact become the lasting legacy of the financial meltdown.

Options can be the traded like money throughout and across on-line and off-line social networks if there were a way to keep track of them.  While The Ingenesist Project specifies promising strategies for trading options in a social network with varying levels of practicality, we can say with great confidence that it this next paradigm of economic development will never happen with an ROI mentality.

Web 3.0; An Elephant Never Forgets

The opportunity for America reminds me of the elephant that is convinced since birth that the slender rope tying him to the fence post is stronger than he.  When the elephant grows up, he still believes the rope is stronger even though the elephant now has gained the strength to pull the whole building down.  Americans are the 8000 pound elephant in the middle of the room.  The question on everyone’s mind is: what will the elephant do next?

Throughout history, economists have determined the structure of business, enterprise, and commerce and wisely the government complies.  With remarkable success over the last 150 years,  corporations had been the source of most innovation sufficient to support the value of a currency.  Fortunately, the corporation had become the center of economic policy while the knowledge inventory within them have been fenced inside the accounting term: “intangible assets”.  Unfortunately, our corporations can no longer innovate efficiently enough to support the debt. Witnessing GM facing up to this very question, while the government manufactures money like taffy, seems a lot like feeding sugar calories to an elephant that is too big to fit out the door, dead or alive.

What the economists and many of the great visionaries of out time do not anticipate is the emergence of computer enabled society and the tangibility of knowledge outside the corporate structure through developments of social media.  Web 3.0 is supposed to bring us a semantic web – a computer program will be able to read the elephant story above and determine whether it is about education, zoology, macramé, Interior decorating, taxidermy, building demolition, or cliché old business metaphors.   Perhaps this is our little rope tied to the post as we wait for Mother Corpora to provide solutions.  Get a grip, the only computer that can read, classify, and extract a thousand words for any photograph is between our collective big floppy ears.  Web 3.0 will be semantic alright, except by the integration and capitalization of human knowledge through social media.

We spend billions on a human genome project to inventory our DNA, but nothing to inventory the knowledge as it exists naturally in society.  We will build statistical models to forecast weather, elections, click-throughs, insurance, demographics, and mortgage risk; but nothing to predict the value of various combination of social capital, creative capital, and intellectual capital in society.  We have search engines that match most worthy blog to most worthy keyword, but little to match most worthy mentor to most worthy apprentice.  The top reasons why start-ups, businesses, innovations, and markets fail are due to the wrong knowledge in the wrong place at the wrong time. It seems that if we solve the knowledge inventory problem, then we can solve the innovation risk problem.  That, in turn, will solve the money problem which solves the elephant problem.  We need to release the great “intangible asset” into the wild world of tangibility and trust that it knows where to go.

Sometimes it just takes someone to give us permission to do things differently.  So here I go: human knowledge is the most perfect, predictable, flexible, and valuable capital asset in our world.  Knowledge can become far more tangible than anyone could have ever imagined. Information, knowledge, and innovation are profoundly related – separated they are useless, integrated they are wisdom.  Everyone on earth innovates every day, period. The vast majority of people will do the right thing given the right incentives.  With the next development of the Internet, we will have the tools to organize ourselves in a far more efficient manner than the command and control structure of a traditional corporation.  Management can be outsourced too. Corporations respond to corporate priorities, social networks respond to social priorities.  Which one sounds like a business case to curb global warming?

The Ingenesist Project specifies three web applications which if developed and deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation and inside social networks.  Just because people have never organized themselves in an open sourced innovation economy before, does not mean that they never will.  But once they do, well, let’s just say that an elephant never forgets.

That Pesky Little Problem With Market Capitalism

Technological change must always precede economic growth.  We are going about the process of market capitalism as if economic growth can precede technological change.  Somewhere along the line we have gotten the cart in front of the mule.

It seems that this situation can be fairly easily corrected – after all, it’s the same cart and the same mule.  All we need to do is get the same driver to point the same carrot on the same stick in the opposite direction; and the system should turn itself around.  Impossible we ask? Well, maybe not….yet.

The same species…

Economic growth and technological change are the same species; each is represented by human productivity.  If I take a loan to buy a house, the debt is “counted” as economic growth backed by my future productivity.  If I go to work and invent a method that provides a better way for people to accomplish something, that same productivity increases with my innovation.  They should hedge each other much like insurance.  The problem arises when we forget to count the mule.

If A = C and B = C, then A = B

If any two currencies are backed by the same standard, they should be readily convertible.  If Euro’s and Dollars are both backed by Gold, they would be convertible between each other and the market can simply choose to trade one or the other.  Arbitrage opportunities would keep the system balance.

This is the same case with debt and innovation; two currencies represented by the same standard, i.e., productivity.

What if a new currency was introduced and pegged to human productivity?  That currency would also be proportional to the dollar. Arbitrage opportunities between debt and innovation currencies would seek a balance. The two scorecards would hedge each other as they should.

It is going to happen eventually, why wait?

While this may seem odd to talk about one State, two currencies, it is not so odd to talk about what happens if the dollar fails.  People will start trading a different currency.   The Plumber will trade ideas with the lawyer who will trade with the doctor, carpenter, teacher, grocer, laborer, etc.  A computer enabled society will build a knowledge inventory of who knows what.  Reputations will arise thus organizing knowledge in the form of a financial instrument.  This social medium will be the tool that organizes trading schemes and establishing supply and demand.  An Innovation Bank will keep track of who owes what to whom and distribute wealth in the form of tangential innovation.  Venture “capital” will be the cheapest money in town – it’s like money in the bank for an innovation economy. This is in fact, the nature of society and largely the function it has served for thousands of years.

Little carrot on a big stick

The difference between now and any other time in history is that society is computer enabled.  Human knowledge has been held hostage behind the construct of “intangible assets” on a corporate balance sheet for too long.  There is a great deal of energy building up and it can now find a productive outlet through social media.  The best government policy is to accommodate what people will do naturally.  It would be extremely inexpensive to empower society to form an innovation economy to hedge market capitalism. People need a currency that is first and foremost natural for them to trade.   Later, Wall Street can convert and gamble at their peril. But first, point the stick in a different direction and the system will correct itself.

[The Ingenesist Project (http://www.ingenesist.com) has specified three web application which if deployed to social media would allow social capital, creative capital, and intellectual capital to become tangible inside social networks.]

The Great Convergence

Hey Kids, It’s 3D:

The objective of this article is to discuss the Great Convergence of computer enabled society. Social media must not be allowed to converge to a single apex – rather, it must converge to 3 distinct and tangible dimensions.

The factors of production for the industrial economy are land, labor, and capital.  If you lose one, you can’t use the other two to build an SUV, for example.  The factors of production for an innovation economy are social capital, creative capital, and intellectual capital. All production in the new economic paradigm will result from the allocation of a “secret sauce” of social capital, creative capital, and intellectual capital.  Again, if you lose one, you can’t use the other two to build anything meaningful.

The congregation of congregations:

In order to find The Great Convergence, we simply need to examine Social Media to discover where social capital, creative capital, and intellectual capital tend to congregate.

One of the more obvious illustrations appears to be playing out between LinkedIn, Facebook, and Myspace.  Many people use Linkedin for professional contacts (intellectual Capital), other people use Facebook for friends, family and more diverse associations (Social Capital), while many others use MySpace to post videos of their rock band, Artwork, or to discover the latest Mash up (Creative Capital).  Of course there are many more social networks, lots of cross talk, different demographics, rants and raves, etc.  I intentionally leave this analysis sparse as these conditions simply reflect the nature of The Great Convergence.

The Next Economic Paradigm:

We need to watch The Great Convergence with laser focus and deep personal interest because it will be extremely important for the development of what comes after the knowledge economy.   Whatever form this next economic paradigm takes, globally and locally, will depend upon The Great Convergence.  The Innovation Economy is the only wrench left in the toolbox for resolving the vast global problems that we face today.

The Innovation Economy must end global warming, restore financial accountability, enact sustainable enterprise, and institute renewable energy – or not.  This is a huge burden to ask of the next “greatest generation”.  It is clearly in everyone’s best interest to identify, encourage, and support The Great Convergence to form in 3D, before the old single-apex game “resets” and starts all over again, perhaps for the last time.

[The Ingenesist Project discusses this concept at length and identified various predictions, methods, and scenarios, including specifications for an Innovation Economy.]

Finally, A Definition for Innovation

Innovation: The rate of change in knowledge with respect to time 

[In earlier post we identified the 5 essential elements of a market economy. What would be the currency of an innovation economy? Currency is anything that serves as a medium of exchange, a stored value, and a standard of value. Basically we are asking; What are those things that people are out in the World trading among each other today?]

Today, innovation is repeatedly cited as the only thing that can get us out of the financial/environmental/sustainability conditions that find our ourselves in, yet the most common definitions for this term are deeply and tragically flawed.

Most definitions for innovation boil down to: “a new idea introduced that has an economic outcome” or “something new that is useful”. While these definitions match some observations, they are reflective and “You know it when you see it”. As such, there is little to define innovation before it happens or to make more of it from this definition.  It is like defining “Art” as the thing that people stare at.  Unfortunately, this is just the beginning of our troubles.

“Innovation is a new idea introduced that has an economic outcome” is impossible.

This definition defines one unknown quantity (innovation) with four other unknown quantities: what is new; what is an idea; what constitutes “introduced”; and what is an economic outcome?  From High School Algebra we know that you cannot solve one equation with two unknowns – let alone four.  There is little that you, I or anyone else can do to satisfy this definition.  Therefore, it is not useful.

Granted, this definition sells plenty of ad copy as the guru of the week wax-poetic over those four pesky unknown thingies.  I found one consultant who claims that innovation has 51 variables and only he can solve that matrix – for a price.

What is the truth about the phenomenon of Innovation?

A useful definition must clarify the subject in a manner that is repeatable and measurable.

If we look at history we know that economic “benefit” and innovation are mutually dependent – you can’t have one without the other.  Wealth has been created by increasing human productivity through innovation in agriculture, manufacturing, computers, etc.

Next, we observe that information, knowledge and innovation are also mutually dependent – you cannot have one without the other two.  Wealth is created by integrating information, knowledge and innovation.

Next; look at our society; everywhere we turn, people are collecting information from each other, building their knowledge, and innovating together, i.e., coming up with better ways to do things. All of these little exchanges obviously add up to something because things like IPods and Airplanes get built and lots of stuff rolls off assembly lines.

Innovation is anything that increases human productivity

Next we can say that information, knowledge and innovation can be related as follows:

  • Information is defined as facts and data

This should not surprise anyone.

  • Knowledge is proportional to the rate of change of information (facts and data) over time.

This is a little trickier to grasp. But any good teacher knows that information must be introduced in a certain order and at a certain speed before the information can become knowledge – this is called learning. Learning is a mental process for turning information from a book, a lecture, or personal experience into knowledge that can be used later.  Therefore, knowledge is proportional to the rate of change of information and can only exist inside a person’s head.

  • Innovation is proportional to the rate of change of knowledge over time

trickier still, but for example; everyone has had an ‘Ah-Ha!’ moment during a brainstorming session, some incredible event that we witness, or even after some real bad mistake that we made. The Ah-Ha moment is a spike in our knowledge that happens in a very short period of time. Innovation is related to this high rate of change of knowledge.  Then we blurt it out, or write it down, or make a sketch, give a lecture, in the form of information, etc.

Definition of Innovation:

a. Innovation is anything that increasing human productivity.
b. Innovation is proportional to the rate of change of knowledge and information.

Admittedly, not as sexy in the sound bite but this definition does include all conversations, sketches, dreams, and ideas of all people on Earth and allows them to combine with the sketches, dreams, ideas, of all people on Earth to become designs, methods, and processes which further combine to become products, systems, and institutions, etc.

Let entrepreneurs worry about the economic outcome

Since innovation can be difficult to observe directly. Our new definition allows us to use a proxy that is easier for entrepreneurs to see. For example; if you want to identify innovation as it is happening, simply look for high rates of change of knowledge in a community. If you want to create innovation, do things that create high rates of change of knowledge. Likewise, if you want to identify knowledge, look for high rates of change of information.  If you want to create knowledge, do things that create high rates of change of information.

We need to give the entrepreneur a game they can win. The key is that everyone must be included in the game. This is a definition that can be used by anyone and everyone, in fact, it already is.

notes:

[Anyone familiar with differential Calculus can see an equation forming where Innovation is the derivative of knowledge and knowledge is the derivative of information. Calculus is the study of change like geometry is the study of space. Since the mathematics is beyond the scope of this article, I’ll finish with the following analogy for defining information, knowledge, and innovation more intuitively: “Information is to knowledge is to innovation what distance is to velocity is to acceleration”]

Business Plans of the Innovation Economy

There is no shortage of money in the world but there is plenty of risk. Most business failures are due to knowledge deficits such as the inexperienced management team, a poor assessment of market conditions, underestimating the amount of money needed, underestimating a competitor, loss of a key employee, poor understanding of the technology, etc. These are knowledge problems not financial problems, yet they can sink the most promising companies.

To solve the knowledge problems is to decrease the risk of innovating. To decrease the risk of innovating will decrease the cost of venture capital. Decreased cost of money to innovate will induce innovation economics.

With a computer enabled knowledge inventory in the correct format and a Percentile Search Engine that returns probabilities on strategic combination of assets, the business plan of the innovation economy becomes very simple; The Innovation Bank does one thing very well over and over again – it matches correct knowledge surplus with the correct knowledge deficit at any point in time for any strategic reason. This process is then repeated over and over in infinite different combination.

The first business structure is made up from two single knowledge transactions arranged in parallel – like a parallel circuit. This arrangement represents a brainstorming session between two or more people.

The Percentile Search Engine matches the person with the knowledge supply to a person with the knowledge demand. The transaction can be as simple as a conversation, sketch on a napkin, or white board flow chart. Each time the cycle goes around the new ideas of one person ignites a new ideas in the other person. Each time the transaction occurs, there is a net increase of new knowledge. The conclusion is usually some tangible action, system, or method. The conversation stops when no new knowledge can be created in either person – or when people just get tired (rate of change approaches zero).

The entrepreneur is very interested in the outcome of these conversations and uses the Percentile Search Engine to select, regulate, modify, adjust, analyze, and record the transactions. The Percentile Search Engine is used again to select diverse participants for the parallel business structure with the intention of producing a specific outcome.

The second business structure is made up from two single knowledge transactions arranged in series – like a series circuit. This arrangement represents the product development cycle.

Again, the Percentile Search Engine matches the person with the knowledge supply to a person with the knowledge demand. The transaction is a simple conversation and the outcome is a prototype process, system, or method. Each step in the series is an improvement to the method. Each time the transaction occurs, there is a net increase of new knowledge. The conclusion is the development of the system, business plan, or method. The conversation stops when the product is ready for another iteration or the market. The Percentile Search Engine is used again to select diverse participants to continue the series business structure with the intention of producing a specific outcome.

The entrepreneur is very interested in the outcome of these iterations and uses the Percentile Search Engine to select, regulate, modify, adjust, analyze, and record the transactions.

Now if we mix the parallel and series circuits, we form what looks like a neural network of parallel and series networks. Now, we are squarely in the regime of “designer” Social Networks. Participants are paid in micro-royalties instead of wages. By definition, a relatively small input produces a very large output – if it can be captured.  This will be the source of wealth creation from the new corporations of the Innovation Economy.

We determined in an earlier chapter that information, knowledge and innovation are related as mathematical derivatives.  The accounting system will identify innovation by measuring the rate of change of knowledge transfer within a social network.  Any number of current methods, systems, or innovation consultants can deal with this.  Similarly, in order to identify high rates of change of knowledge in a social network, the accounting system will measure high rates of change of information.  This too is quite simple using common systems, methods, consultants and tools.  No new infrastructure is required with the exception of the knowledge inventory, percentile search engine, and innovation bank.

The entrepreneur can now do what they do best; identify assets operating at low productivity and reallocate them to areas of high productivity by running them through an innovation system.  Remember, most businesses fail due to knowledge deficits.  To reduce or eliminate these risks will make the fact or innovation predictable and therefore negotiable.

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