What will the gig economy do for innovation?

Thanks to Tim Harford, I have recently discovered a blog on creativity by Keith Sawyer from the University of North Carolina. He is the author of Group Genius in which he argues that creativity comes from collaboration rather than from a few brilliant individuals.

[W]e’re drawn to the image of the lone genius whose mystical moment of insight changed the world. But the lone genius is a myth; instead, it’s group genius that generates breakthrough innovation. When we collaborate, creativity unfolds across people; the sparks fly faster, and the whole is greater than the sum of its parts.

There is plenty of evidence, he says, to kill off the legend of the brilliant loner:

[T]he myth of the genius is relatively recent: it emerged during the Romantic period. And pretty much all of the people we think of as natural, solitary geniuses were in fact deeply collaborative in their work.

The evidence that collaboration drives creativity is overwhelming.

He links to a number of other writers and academics making similar arguments. This one is particularly interesting. It turns out entrepreneurs aren’t all that creative after all.

[A]ll of the conversation I hear is about how entrepreneurs drive innovation. We keep hearing that small startups identify opportunities that big companies miss. Visionary outsiders come up with radical ideas, that transform entire industries, and make billions of dollars in the process. That’s the story we’re used to hearing…and this new article says just the opposite!

Basically, entrepreneurs have only two choices. Either they can work in ways that are “compatible with existing institutions” or they can “engage in collective action to change the institutional order.” The second option is pretty darned hard, and usually isn’t possible.

[E]ntrepreneurs are even more constrained by these institutional forces than established firms, because they’re just trying to get on their feet and stay alive; and they have to steal away customers from the established players, and those customers are comfortable with the old ways of doing business. “New ventures often adopt the structures of incumbent firms in their industry. Although not very creative, it is a rational choice for entrepreneurs wishing to grow their ventures successfully”

[I]t’s time to get rid of “the heroic image of innovative entrepreneurs that have plagued entrepreneurship research for decades”

This is a similar theme to Ha Joon Chang’s:

Very much influenced by capitalist folklore, with characters such as Thomas Edison and Bill Gates, and by the pioneering work of Joseph Schumpeter, the Austrian-born Harvard economics professor, our view of entrepreneurship is too much tinged by the individualistic perspective – entrepreneurship is what those heroic individuals with exceptional vision and determination do.

However, if it ever was true, this individualistic view of entrepreneurship is becoming increasingly obsolete. In the course of capitalist development, entrepreneurship has become an increasingly collective endeavour.

If effective entrepreneurship ever was a purely individual thing, it has stopped being so at least for the last century. The collective ability to build and manage effective organizations and institutions is now far more important than the drives or even the talents of a nation’s individual members in determining its prosperity.

That last point is important. Innovation needs organisation. As Wharton’s Ethan Mollick said, in his exquisitely titled study People and Process, Suits and Innovators, it’s the middle managers who make the difference, even in creative, innovative, and knowledge-intensive industries.

[V]ariation among middle managers has a particularly large impact on firm performance, much larger than that of those individuals who are assigned innovative roles.

[I]t is the individuals who fill the role of middle managers – the “suits” – rather than the creative innovators that best explain variation in firm performance.

The results also show that middle managers are necessary to facilitate firm performance in creative, innovative, and knowledge-intensive industries.

While organisations often put barriers in the way of innovation, at least they have the infrastructure and the collective space to bring people together, allow them to co-create and then turn that creativity into something tangible.

All this got me thinking. If self-employment and the gig economy really are the future of work what does this mean for creativity and innovation? How will an increasingly atomised workforce, doing bits and pieces here an there, create anything new?

Doubtless many will respond by saying that self-employed people collaborate all the time and are, especially in professional occupations, usually very well networked. All of that is true but that’s not the sort of working together that creates things. You can meet people in coffee shops, kick around ideas and even work on the odd project with them but real collaboration means committing to each other and working together over a long period to take an idea through to its conclusion. That’s how we learn and ultimately how e innovate. It’s not impossible to achieve this outside a formal organisation but it’s much more difficult.

This is what the advocates of more self-employment and the gig economy miss. It is organisation that moves the world forward. If more of the workforce is outside formal organisations then it must create other forms of organisation if it is to work to its full potential. That’s what I was getting at when I wrote about the Olympic Torch as a metaphor. Bringing lots of little fires together to make a big one.

Organisation and institutions enable creativity and bring us the prosperity that goes with it. Disorganisation and fragmentation don’t. An fragmented and disconnected workforce will find it much more difficult to harness their group genius. More of us working in this way implies a steady erosion of the country’s human capital. Last month, Institute for Employment Studies Director Nigel Meager remarked that we haven’t even begun to understand the “possible downsides of a world in which more people spend more of their working lives in this form of work”. One of them might be that much of our creative talent never gets chance to bloom.

Update: Recent research from the Centre for Economic Policy Research found that worker productivity is contagious. Peer effects and networks between workers cause a productivity spillover. Team members learn from each other and raise each other’s performance. As the old saying goes, the whole is greater than the same of the parts.

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18 Responses to What will the gig economy do for innovation?

  1. octopushr says:

    Really enjoyed this post. Just one point however…

    In my mind the defining characteristic of an entrepreneur isn’t being highly creative or innovative. It’s having a high tolerance for risk. Entrepreneurs are the ones who see an opportunity that, in all honesty, someone else has probably seen too. It’s just that the entrepreneur is willing to bet their career, house, marriage etc. on chasing that opportunity.

    There is of course a survivor bias to the stories you hear in the media.

  2. Pingback: What will the gig economy do for innovation? | Flip Chart Fairy Tales | sdbast

  3. duncan brown says:

    Of course government investment too is key to rates of innovation in the economy, in science, defence, space etc, rather than these individual entrpreneurs and innovators working in their little skunkworks. Having said this, large employers do struggle in my experience to give innovators the autonomy they do require to come up with new ideas and products, and in many sectors from media to technology, we have seen innovators have their great ideas rejected or ignored by corporations and they have had to leave to develop them and reap the appropriate rewards from doing so

    • octopushr says:

      Good points Duncan.

      Not sure if you’ve read The Innovator’s Dilemma but I highly recommend it. Gives a great explanation why disruptive innovation is often ignored by the incumbent players in a market.

  4. ballantine70 says:

    I’d disagree with the lone creator myth being an invention of the Romantic era. It’s fairly central to monotheistic religions too! In all seriousness, that myth is one that permeates deep into Western culture.

    I’ve been looking recently in depth at collaboration within organisations, and the role that collaboration has to play in innovation – some recent reflections here: http://mmitii.mattballantine.com/2015/12/08/anti-innovative/ and http://mmitii.mattballantine.com/2015/12/04/harnessing-the-gig-economy/

  5. Truth to Power says:

    The contributor ‘octopushr’ makes extremely valid points – your message is confused you have somehow conflated ‘entrepreneurship’, ‘invention’, and ‘innovation’, each of which are different, and have somehow used them interchangeably.

    Entrepreneur – Thomas Edison, Steve Jobs, and Bill Gates fall into the entrepreneurial camp. Steve Jobs, and Bill Gates plagiarised inventions from Rank Xerox (the object oriented operating system and mouse) and then Bill gates plagiarised the Apple operating system (which used a combination of software and hardware) to produce windows (which was a software solution implemented on faster microprocessors). I do not believe that either of them were technological experts, but they did have a vision.

    Invent – this is to creates something new e.g., ‘Colossus’ the world’s first programmable, electronic, digital computer. Sir Barnes Wallace ‘invented’ the bouncing bomb (he was not an entrepreneur) perhaps he may have called upon the expertise of his friends but on this he was very much a lone Wolfe. John Harrison invented the ‘marine chronometer’, and then innovated two other timepieces. Inventors tend to be secretive and often work in isolation.

    Innovate – this is to take an invention/innovation and apply it to something new, alternatively it may develop an invention/innovation to a higher level (spiral innovation) e.g., the children of ‘Colossus’. The iPhone was innovated from the iPad (which was being developed but had not been marketed). On completion of the iPhone Apple introduced the iPad. It might be argued that as well as being an entrepreneur Steve Jobs did have the vision and hence was an innovator of these products.

    It is very difficult to ‘invent’ and ‘innovate’ within a corporate environment – the US understand this but we don’t. The Richard Foster and Sarah Kaplan book which I reference later are relevant here.

    During the early to mid 1900’s Joseph Schumpeter (one of the most important economists of that century) had written ‘The perfectly bureaucratized giant industrial unit not only ousts the small or medium-sized firm and “expropriates” its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class which in the process stands to lose not only its income but also what is infinitely more important, its function.’

    He had also written the ‘Schumpeterian trilogy’ (DTI Economics Paper No 12 The Empirical Economics of Standards et al) which divides the technological change process into three distinct phases:

    • INVENTION
    • INNOVATION
    • DIFFUSION

    Each of these phases requires different styles of management and business models; ‘invention’ and ‘innovation’ phases being entrepreneurial business models (horizontally integrated), whilst manufacture and ‘diffusion’ phase are the public corporate models visible to the public (vertically integrated). Exposing an ‘invention’ to your competitors can damage your ownership of the ‘Intellectual Property’, and likewise exposing your planned ‘innovation’ too early can destroy your commercial advantage. The concept of sharing ideas amongst people within large teams (the larger the team the more likely it is that these things will leak) is a poor idea. If you look at the structure of Apple you will find that people work in small isolated cells of expertise who have little knowledge of the ‘big picture’ often only becoming aware of the product on the day that it is released (see: https://youtu.be/qi1uwqC1x98 which also explains their structure).

    The late Steve JOBs said (though some think that it may have been his advertising agency):

    ‘Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.’

    It was also stated that:

    The Macintosh project was going to save Apple from the bloated Lisa project and the bureaucracy of the company. He tried to insufflate the team with entrepreneurial values, calling them rebels and artists, while the other Apple employees were bozos. The team was even in a separate building on Bandley Drive, where Steve hung a pirate flag: “better be a pirate than join the Navy,” he said — meaning the Navy was the rest of Apple.’

    Returning to ‘Schumpeter’s trilogy’; the ‘invention’ and ‘innovation’ were conducted at Apple Bandley Drive (which flew a Pirate Flag), whereas the manufacture and ‘the diffusion of the innovation’s output’ sat within Apple’s Corporate Headquarters the part that was managed by John Sculley (an expert in marketing).

    It is interesting to note that the US corporations recognize ‘Schumpeter’s trilogy’ and place their ‘invention’ and ‘innovation’ elsewhere such as Palo Alto Research Centre (PARC), formerly known as Xerox PARC, which has a flat horizontally integrated non-corporate structure.

    We know from Richard Foster and Sarah Kaplan, in their book ‘Creative Destruction: Why Companies That Are Built to Last Underperform the Market–And How to Successfully Transform them’ that Corporations, which have hierarchical structures, kill innovation, underperform but create sustained employment.

    The fundamental difficulty in the UK is that industry tend to focus on ‘inventions’ that will give them a rapid return on their investment. Long term ‘inventions came from government funded ‘Super Research’ programmes, and since industry does not fund such programmes we shall have problems. An example of this is the procurement of nuclear reactors where we have to depend on the Chinese as Labour closed down our government research programmes … we are simply living on the fat of old research programmes. The US understands innovation … the UK struggles and gets bogged down with corporatism.

    • Needs2Cash says:

      Very interesting post, thank you.

      Any thoughts on the viability of a ocialist replacement for the iPad as proposed by John McDonnell.

      • Truth to Power says:

        I assume that you are referring to the so called ‘gig ecconomy’ which is a flat networked structure.

        In my view and as explained within the Richard Foster and Sarah Kaplan book hierachical corporate structures do not create wealth but provide employment to the masses and survive. In contrast flat networked organisations are the wealth creators. Towards the end of their wealth creating period (about 10 years) they are consumed by the hierarchical corporates. These organisations do perform some spiral innovation to survive however their main purpose is to provide employment.

        In essence you need both; you need the hierarchical corporates create and provide the funding for the markets, and you need the flat networks to provide the inventions and innovation and create wealth. I am not sure what that ballance should be.

        I don’t have much confidence in John McDonnel.

  6. Dave Timoney says:

    One of the problems that the self-employed have in respect of innovation is simply finding the time (and material resources) to experiment. A hand-to-mouth business may have innovative ideas, but it is less likely to have the flexibility (or capital) to pursue them.

    Logically, an institutional response to this problem would be a combination of a basic income, public R&D facilities (i.e. libraries with knobs on), and free skills training. This would do far more for innovation among micro-businesses than tax-breaks.

    Many startups are birthed out of larger organisations, and their innovative ideas have often been rejected as incompatible by the parent businesses. What this implies is that “stealing” (i.e. pursuing an idea on company time that does not align with the company’s interests) is crucial.

    In other words, large businesses provide an informal institutional resource for innovation at a social level. However, the trends in company organisation over the last 40 years (financialisation, outsourcing, offshoring etc) have tended to diminish that social dividend – e.g. the decline in apprenticeships.

    If we are facing a slowdown in innovation, it is likely to be as much the product of changes within company cultures as the growth of self-employment.

    • Truth to Power says:

      In the past people would have had the time and the inquisitiveness to test new ideas in the laboratory. Today scientists and engineers are forced to work to strict timescales, materials, and components are accounted for and assigned to specific tasks so the opportunities for scientists to try ideas (not on the Gantt Chart) is unlikely.

      Scientists work through the theory, build something, test it out and compare against the real world and you find that they do not match. These are oddities that you do not understand, cannot explain, and becomes part of your ‘tacit knowledge’. Over days, months, years and decades acquire more ‘tacit knowledge’. At some time in the future the accumulated ‘tacit knowledge’, and possibly newly acquired ‘implicit knowledge’, collide. At this point things become clear and start to make sense. The result is a discovery, invention, or perhaps an innovation. The scientist internalises his/her thoughts and ideas which he/she may use later perhaps to start a new business. Scientists never show their full pack of cards, they are secretive and often paranoid of their ideas being plagiarised.

      The inventors/innovators will come from places where they have been able to acquire ‘tacit knowledge’.

      I question whether the use of the word ‘stealing’ is appropriate as it is their intangible ‘tacit knowledge’ and experience that is the key.

      • Another change is that “this individualistic view of entrepreneurship is becoming increasingly obsolete.” (quoted above) seems to have coincided with the slow down in new inventions which both Rick and I have blogged about before.

        Another change is that stronger patent and copyright laws have made it harder for start up founders to leave a large organisation taking rejected innovations with them.

        So, I suggest we could, and used to, get more invention and innovation from small companies, but they are being stifled. As Bill Gate’s admitted, if we had current patent laws at the time, Microsoft would not have been able to develop products such as Excel. In a world of patent thickets and cross-licensing agreements only large firms can buy their way in.

        • Dave Timoney says:

          Two wrinkles. First, the issue is less about only large firms being able to buy their way in (i.e. high barriers to entry) and more that the legal framework privileges incumbents. Second, many firms have decided to outsource their R&D to the “market” (which operates like a beauty pageant), relying on acquisitions to bring through new products (Microsoft is a good example of this).

          Barriers to entry in certain sectors, notably software, have fallen hugely in cost over the last 30 years. However, this has gone hand in hand with the culture of the trade-sale (far more prevalent than IPOs) – i.e. the expectation that an innovative product will be bought up by an incumbent. This produces a bias in the wider economy towards those sectors characterised by rapid development and exit (the founders cashing-in).

          This in turn reinforces the idea that much of modern innovation is trivial. However, that’s probably misleading because the scale of this dispersed ecology of innovation obscures the quantum of substantive inventions (the market is very noisy). The good news is that a similar downward trend in entry costs is now observable in hardware, pharma, materials science etc. The bad news is that – as with software – this may ultimately be to the benefit of a small number of very large incumbents.

        • Truth to Power says:

          From the 1980 until this present day government research laboratories became agencies and many have become privatised, or operate as trading funds. During the journey the ‘the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes’ were suppressed, moved into the background, and eliminated, because they did not fit into the newly developing corporate culture. Some formed their own companies, but others disappeared. In August 1999 John Baker wrote a report for the Minister for Science and the Financial Secretary for the Treasury called ‘”Creating Knowledge Creating Wealth” – Realising the Economic Potential of Public Sector Research Establishments’ (PSREs) which accelerated the privatisation. Baker recognised that the problems, which included the decline of innovation, were caused by the way that the PSRE’s were being managed. He stated ‘I strongly recommend that the departmental PSREs be put at greater arm’s length from Government departments. Ministers should consider how this should best be done for each of these PSREs, with the presumption in favour of a move to less central control – except where there is an overwhelming case to the contrary.’ This was attractive to the politicians as they realised that they would make money from these ‘sell offs’ and their managements were also keen as they saw this as an opportunity for them to ‘become rich’. The central departments started to ask the question as to how they should be managing their research.

          I spoke to industry (primes and SMEs), academia, trade associations, looked at how other countries, the ‘oil and gas industry’ ran their research. Industrial funding tends to focus on near term. Government funded research focuses on both near and into the future – but in these times of austerity the government itself now focuses on near term (where are our far reaching innovative super research programmes – they don’t exist so we need to call in the Chinese). It soon became apparent that the way we manage IP is a problem. I spoke to our IP experts about proposed changes and had their support. I spoke to industry and we came up with ways of jointly funding and sharing in IP. We recognised that the next invention/innovation could come from anywhere so we wanted to open things to a broader spread of scientists and engineers (like in the US and Australia). The fundamental problem was Senior Civil Servants, mainly within the Agencies, wished to have absolute control of the research and use the IP however they decided, rather than assuming a new role where they shaped, influenced, and shared (which I was trying to achieve). The new model would have been leaner and had many fewer Civil Servants – this was not liked by the Civil Servants within the agencies who wanted assured employment. The fundamental problem is that they are autopoietic systems that resist fundamental change – such change have to be driven by the politicians and the Senior Civil Servant (who won’t).

          The agencies have produced things like the ‘Centre for defence Enterprise’ but beneath the façade is still the old people and bureaucracies. As my ex director once said to me – ‘just lie down and enjoy the ride’.

        • Truth to Power says:

          Perhaps I should add that our thinking, and models, aligned with what is known as ‘Shared Value’ … but then ‘Shared Value’ did not exist then.

      • Dave Timoney says:

        Seriously, stealing is the right word. Many people got their start as business owners by half-inching tools and material. Shrinkage might be an issue for an individual firm (though, as Mike Ashley has shown, you can go over-board in countering it), but at the level of the economy it actually has as many pros as cons, not least because assets that might otherwise be idle or under-utilised are put to more productive use. This is why we are ambivalent about characters like Sergeant Bilko and Arthur Daley.

  7. koenfucius says:

    Great post about an important theme (which appears to be one to which you return regularly :-))

    I think that there is little doubt that that creativity and innovation are mostly a collective affair – and not just for complex products involving advanced technology. The concern that a “gig economy”, with inevitably way more atomized workers, will affect a country’s innovation capability would appear to be justified from that perspective.

    However, I’m not sure the distinction between employment and self-employment is as stark as you sketch it: “Organisation and institutions enable creativity and bring us the prosperity that goes with it. Disorganisation and fragmentation don’t.”

    One would expect that employees of an organization find it easier to network with their colleagues. But organizational silos mean that they can be atomized just like their self-employed counterparts. Also, innovation that relies heavily or exclusively on the inputs of employees from a single organization may suffer from a narrow field of vision, and indeed from group think, in comparison to an arrangement with people from multiple backgrounds. At the same time, freelancers are not necessarily as disorganized and fragmented as you suggest: there are numerous professional networks – online and IRL – where ideas are shared and jointly developed.

    As commenter Truth to Power says, there are different forms of creativity and innovation. Some forms of innovation can only realistically be done by teams run and populated from within a single company – it’s hard to see how an iPad could have been realized by a bunch of self-employed dudes. Then again, there are no indications that all of industry is going to be turned into a disorganized, fragmented population of freelancers any time soon.

    But there are also examples of open innovation, where no single company was behind it – the open software movement with Linux springs to mind. And even large organizations engage in open innovation. Arguably they still provide the structure that some forms of innovation require, but they do it with people that are not on their payroll (e.g. Lego: https://goo.gl/2DY0eV).

    A critical condition for effective innovation is effective networking and teamwork. That is not guaranteed to happen in a conventional organization. It is also harder and more effortful to make it happen with people who do not all belong to the same organization.

    But the combination can, when managed well, give the best of both worlds: the corporate structure with the agility and diversity of giggers.

  8. Dipper says:

    late to the party here, but I’ve been recommended “The Entrepreneurial State” by Mariana Mazzucato, which argues that innovation has been historically driven by state spending, not by individual entrepreneurs.

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