The Inexorable Rise of a Platform for Innovation

Category: Business & Economics
Published on Feb 29, 2012

With each passing year, the Internet grows richer in content, more diverse in its user base, and more accessible to the masses through countless connected devices—from automobiles and household appliances to iPads and urban street kiosks. Its global reach and exceptional versatility make the Internet an increasingly potent and indispensable platform for creativity, commerce and innovation, not least because the growing accessibility of information technologies puts the tools required to collaborate, create value, and compete at everybody’s fingertips. Indeed, could the Internet’s most lasting contribution to innovation be its capacity to provide global scale and world-class business capabilities to promising entrepreneurs around the world?

Having already grown from 1 billion to over 2.3 billion users since 2006, skyrocketing Internet penetration will certainly increase humanity’s creative potential.[1] By the end of this decade, a majority of people in the developing world will have access, particularly as accessing the Internet through mobile phones becomes prevalent.[2] Even today, nearly 90% of the most impoverished populations of Brazil, India, China, and South Africa have access to a mobile device.[3] In fact, there are already more mobile devices than humans, and by 2016 there will be some 10 billion mobile connected devices around the world (that’s 1.4 devices per person).[4] By the same date, telecommunications networks will be carrying 130 exabytes of data each year, the equivalent to 33 billion DVDs and a 18-fold increase mobile traffic in 2011.[5]

This explosion of Internet usage has ushered in a dramatic shift in power to companies that develop devices and applications for the Web, particularly those that enable social networking. Just five years ago, Facebook had 150 million users. By the end of 2012, the world’s most popular social networking platform will have an estimated 1 billion users worldwide, making it the most successful consumer service on the planet. But the more noteworthy development is the fact that social networking is creating an entirely new fabric of connectivity in society and reshaping the very nature of human communities. Whereas communities have historically revolved around geography, ethnicity and professional affiliations, today millions of people can rapidly connect and collaborate across disciplines, borders and identities to accomplish virtually any conceivable shared objective or endeavour.

At the same time, growing Internet usage in business and everyday life is making every economic and social process from dating to drug discovery increasingly data intensive. Today, WalMart logs more than 1 million customer transactions every hour into a global database estimated to contain more than 2.5 petabytes of data, the equivalent of 167 times the information contained in the US Library of Congress.[6] The retailer’s massive investments in its ability to collect, integrate, and analyze data—including information contained in its suppliers’ databases—makes it possible to source popular items automatically, adjust prices in real time, and quickly shift items from store to store. McKinsey estimates that a retailer using big data to its full potential could increase its operating margin by more than 60 percent.[7] Over time, this still largely untapped potential to extract insights from big data, will become a key dimension of business competitiveness, create entirely new kinds of occupations for data scientists, and generate new consumer services and innovations that we can scarcely imagine today.

In these times of economic malaise, however, the Internet’s most important contribution may be boosting the capacity and productivity of the small and medium size business sector. In the past, entrepreneurs had to build-up most of their business infrastructures from scratch. Today, everything from market research to back-office support to contract manufacturing is available on tap. And most, if not all of it, can be managed over the Web.  You can rent your IT and communications infrastructure from the likes of Google, Skype or Amazon, for example, and as your business grows their services will scale with you. Or, if you need web designers, marketers or software coders, you can hire short-term freelancers using Web-enabled marketplaces such as ELance or ODesk. With the aid of technology, start-ups can now go global from day one, reaching overseas markets and talent pools with a few clicks. And, the growing ranks of individuals who want to work more flexibly and collaboratively can now do so without the cumbersome bureaucracy that inevitably besets large organizations.

The upshot is that the small can suddenly become very large very quickly with superefficient business models that allow entrepreneurs to design, develop and deliver their products and services around the world with a fraction of the resources that would have been required just a decade ago. A recent study found that at least one-third of SMEs make extensive use of web technologies, and those that do have benefited tremendously, using new Internet-based services to perform the functions that entire departments once performed for large corporations.[8] The tech-savvy start-ups not only grow and export twice as much as others, they also create twice the number of jobs.[9] A strong presence on the Internet does not only benefit the companies in question but also the economy at large. For example, in the United Kingdom 71% of SMEs use the Internet with medium or high intensity, and the Internet contributes about 5.4% to British GDP. In Russia, on the other hand, only about 41% of SMEs have medium or high internet usage, and the Internet only contributes 0.8% to Russian GDP.[10] So, with the economies of advanced industrial countries in desperate need of more high-growth startups with the potential to expand and reach scale, the Internet’s greatest gift is to the entrepreneurs who harness its enormous potential to create the services and jobs of the future.


[1] Internet penetration data available is from World Bank (http://data.worldbank.org/). Last updated: Feb 16, 2012.

[2] Ibid.

[3] In China alone, the number of mobile Internet users is expected to reach 600 million by 2012 (China Economic Review, 2011).

[4] Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016 (Cisco, February 14, 2012) http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.pdf

[5] Ibid.

[6] “Data, data everywhere,” The Economist, February 25, 2010.

[7] James Manyika, Michael Chui, Brad Brown, Jacques Bughin, Richard Dobbs, Charles Roxburgh and Angela Hung Byers, “Big data: The next frontier for innovation, competition, and productivity.” (McKinsey Global Institute, May 2011).

[8] Matthieu Pélissié du Rausas et al. Internet Matters: The Net’s Sweeping Impact on Growth, Jobs, and Prosperity (McKinsey Global Institute, 2011).

[9] Ibid.

[10] Ibid.

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Comments

Insightful post with great data (no pun intended). Am a big fan! Building a platform and company with eCommerce and payments experts that helps retailers leverage real-time predictive modeling capabilities to flip these data challenges into opportunities.
My favorite statistic is from a McKinsey paper on Big Data [7] – we have been generating more data than we have storage for as of 2007, and the gap has been widening ever since. This only points to an urgent and growing need for extracting insights from data in real-time.
Spot on with your insights.

posted by Alok Bhanot on 03.03.12 at 5:49 pm

Hey Alok, thanks a lot for your comments. I agree with you – extracting insights from data is a big challenge and those who figure it out are poised to reap pretty big rewards.

AW

posted by Anthony D. Williams on 03.03.12 at 6:38 pm

We are working on this.

Please check out http://www.cdling.com. (pronounced “seedling”), Cdling is a platform that builds trust between startups, investors and the experts who support them.

posted by Michael Cayley on 03.05.12 at 11:34 pm

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