As an entrepreneur or startup investor, should you care about the history of innovation?

The answer is not obvious. Of course it’s generally crucial to learn from history, particularly in politics. The world is a more peaceful and prosperous place today because we learned from the mistakes of the past (with a lot of room for improvement, obviously).

But in the field of innovation it’s not that easy. Believing too much in the lessons of the past can prevent you from trying new things that might suddenly succeed. Thinking that “this idea has never worked before, therefore it never will” is the safest way to miss out on the best opportunities.

Some technologies change the rules fundamentally. For example, before the Internet became widely available, distribution of information was costly and therefore controlled by a few media and communications companies. Now anybody can create and publish content online for free. The power (and money) has completely shifted to companies that make information discoverable, such as Google.

It’s very much possible that we’re going to see similar fundamental shifts as a result of current new tech waves, such as AI and Web3. It’s very hard to predict what this will look like, but it’s likely not going to resemble the past very much.

So if we shouldn’t stick to preconceived notions from history on what is and isn’t possible, what can we actually learn from previous waves of innovation?

One aspect is how technology waves usually play out in terms of timing and company creation dynamics. You can see common patterns going back to technologies such as electricity, the telegraph or the automobile, as well as the most recent waves.

Most new technologies need some time to find their “dominant design”. For example, the Apple Macintosh, introduced in 1984, defined what a modern personal computer looks like in terms of UI, application domains, abstraction of underlying complexity, and so on. Once the dominant design emerges, you see an explosion of new companies in the space, later leading to a sharp consolidation process. At one point there were hundreds of PC manufacturers, now there are only a handful left.

That’s one of the most certain rules in innovation: The true winners are typically companies that emerge around the time a dominant design has been found (the “iPhone moment”) and then manage to survive the brutal consolidation process.

Where do we stand with current waves? I would argue that web3 and the metaverse have not yet found their dominant design. Too much is still awfully clumsy and needs to radically improve. AI has already seen several waves of development over decades, and deep learning is at a fairly robust stage now. But things keep improving exponentially, so we’re probably not going to see any major consolidation anytime soon. Interesting times indeed, in all three fields.

Learning from the past is crucial in innovation too. But you need to do it in a selective way. Some book tips below.

Classic book by James Utterback, inventor of the “dominant design” concept:

Great stories about past innovation waves:

About the process of innovation and invention:

Amazing historical account of the Telegraphy bubble (yes, there was such a thing):

Originally posted on LinkedIn

Categories: Entrepreneurship

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