Key Principles - Faces of Innovation

KEY PRINCIPLES

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Recognizing the Innovators

If one word describes the growth of the usefulness of the Internet in the 21st Century it is ”Innovation.” The Faces of Innovation project will help identify, publicize, and promote the work for these innovators who have created the hundreds of thousands of applications for tablets and smartphones as well as the programs that run on traditional desktop and laptop computers. As an example of the scale of this innovation, studies have shown at that the downloading of “apps” has gone from zero in 2007 when the first iPhone was introduced more than 9 billion in 2010, and to 29 billion in 2011. That is expected to rise to 77 billion by 2014 generating revenues of some $35 billion. New programs that allow machines to “talk” to each other are being released every day. Utilities have far better data on where they need to produce more electricity and from where it can be diverted. Manufacturing organizations now have automatic ordering capabilities so that their suppliers know when they need to produce more sub-assemblies and when they need to arrive at the plant.

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Impact on the Economy

The Internet has changed the nature of a “startup.” In the Internet bubble of the early 2000?s companies were reaching out to venture capitalists for millions of dollars to try and engineer one program or system. The failure rate was enormous because the scale of each system needed to create revenue commensurate with the capital investment. Apps that can be purchased for under one dollar do not need the investment of several millions to come to market. 1.7 billion copies of “Angry Birds” have been downloaded on all platforms at prices ranging from free to the full version at $2.99 US. Thus initial capital investment is no longer a barrier to entry. Efficiencies not possible prior to the Internet are now “business as usual” as every farm, every retailer, every shipper uses the Internet to know when they need raw materials, when is the best time to sell, and where is the best market.

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An Employment Engine

According to Bloomberg at a time when IBM, “the world?s largest computer services provider” was laying off 1,000 workers the “so-called app economy blossoms, with more than 500,000 software programs now written for Apple?s iPhone alone.” The growth of using smartphones and tablets to reach the Internet via high-speed wireless networks has created a competition for speed and bandwidth among the major network providers. According to a study by economists Robert Shapiro and Kevin Hassett in 2012 showed that the competitive drive to move from 2G to 3G “created 1.5 million jobs at a time when the economy [as a whole] was losing five million.” It is too soon to measure the employment effects of moving from 3G to 4G but it is likely similar growth will be realized. At the same time we are far more likely to find a dial-up modem in a museum of technology than in the typical home or business. Broadband access for families and business people has totally changed the way we think about the Internet and how we think about what we can do with it.

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Ancillary Effects of Innovation

Apps like Uber ? an on-demand private car application ? not only provide jobs for the people who work at the San Francisco-based company, but are creating a new class of livery (private car for hire) drivers. Uber takes a 20% fee leaving the remainder for the drivers. Drivers who were renting standard taxi cabs from local companies are buying their own cars and going into business for themselves. Those cars were sold by someone, are maintained by someone, are fueled by someone, and it is likely that some drivers will expand to become the King of Uber in one more major cities. A Wall Street Journal article summarized the phenomenon saying, “Mobile apps have spawned new sets of jobs that people across the country are performing without having to have a computer-science degree.” While users of Uber and other wireless apps most often employ a wireless device, the “backroom” activities that make it possible ? the underlying software, checking and approving credit cards, understanding where a car is located and how long it will take to get to you requires high-speed connections wired to the Internet.

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Keeping Innovators Innovating

The government has little to do with the innovative “app” economy. Unlike the telephone system through most of the 20th century, the Internet operates on a doctrine that allows any legal application and any device that does no harm to be connected to the Internet. The major operating system providers ? Apple, Google, and Microsoft ? have standards in place to protect consumers? privacy and their devices? operations. Innovators are free to test their theories in the open market without (in most cases) the need to involve any level of government with the possible exception of the U.S. Patent Office. Word-of-mouth endorsements ? “going viral” are the primary mechanism of promoting these new, innovative products. Endorsements disseminated over the Internet of applications that run on the Internet to help users make more use of the Internet is an astonishing development that no one could have foreseen in 1991. Like a retail store, what you see on the shelf is far less than the tip of the app iceberg. The fabric had to be grown, harvested, shipped, turned into thread, dyed, cut to a pattern, marketed, and shipped. Most of what we see in the app world is only possible because of the vast, seamless, high-speed Internet which could be called the World Wired Web.

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