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(originally published by Booz & Company)


The Evolution of Technology

S+B: By “technologies,” do you mean just machines, or a broader definition?
There are very recognizable physical technologies, such as radar or gene sequencing or chemical engineering, but I wanted to open up the whole discussion of innovation to a wider class of things beyond the obvious. Because if you view technology as the centerpiece of the arrangements of an economy, of these means to a purpose, then questions must be raised. Are shoelaces technologies? Surely, they are means to a purpose. I’d have to say yes. What about traffic lights, tax laws, university administrations? Are those all means to purposes? Certainly. What about venture capital financing? In a very real sense, in the sense that they were developed by humans as new ways to meet some need, these are all evolving technologies and innovation.

The economy thus isn’t something that contains a few technologies. The economy is its technologies and is an expression of its technologies — in the same way that an ecosystem emerges from its species. And if an economy consists of its technologies, then it automatically changes the moment you change any of the technologies. If a part of the legal system or venture capital financing is altered, changes reverberate throughout the entire economy, and not just in the parts of the economy most directly impacted by what has occurred. Any time a new species comes into the ecosystem, the ecosystem changes.

S+B: How can decision makers use this concept of economies and innovation?
ARTHUR: Most people think of innovation as a specific action done differently than anyone did it before. So, for instance, if you come up with a better way to sequence genes, that’s innovation.

But once you start to see the economy as an evolving system of technologies, you begin to realize that an awful lot of innovation has to do with understanding the new possibilities that exist. For example, starting around the 1960s, the possibility of digitization came along. Someone could take, say, a business process and redesign it inside a computer and get something very different.

The movie business initially used computers just for accounting and bookkeeping and the like. But in the 1980s, moviemakers began to re-express their existing graphic special effects through the new digital languages. In other words, the movie business combined some of its old processes with some of the new possibilities to create completely new technologies. Then it started to use those technologies for new types of filmmaking, and for other things. That’s not the same as just adopting an existing set of tools and techniques; that’s a much more alive and dynamic activity. Call it innovation.

For decision makers, the payoff of this idea occurs when they see some big new technology about to come into the economy and change everything. If you can adopt and adapt this change in some new way, you can be in a very privileged position. Just look at messaging capabilities. In the 19th century, we embedded message sending in the economy within electronics, through technologies such as the telegraph and telephone. Later, we embedded message sending within photonics, through fiber optics. Then computer hardware and software led to the ability to send messages almost instantaneously and for everything to communicate with everything — and this has defined business processes in the economy during the last few decades.

Fifteen years ago, I would have walked into an airport with a piece of paper and somebody at a desk would have looked at the ticket and done certain things to it to show that I was allowed to board the plane. Now, I come in and maybe I put a credit card or a frequent flyer card under a machine and instantaneously there’s a whole conversation from that machine to other devices that say, “Yes, this guy has made a reservation,” and God knows what other things they’re checking on. A whole set of conversations is triggered. It’s all because computers, photonics, and electronics made it possible.

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