I think it's fairly safe to say that most true data-driven companies sustain their innovation and business over the years. They have little incentive to take many risks and will hold their own throughout time.
That's to say that real innovation is being more data-inspired. Taking risks with what is known based on your intuition/opinion.
A timeless read on this topic is Clayton Christensen's "Innovators Dilemma".
I think the exact same phenomena applies to investing too. You can sustain your growth by making moves purely off data, but your big wins may come from being "data-inspired"
The irony in this all is that nobody can tell the future and therefore what we know in the current moment is the best thing we've got. Even those with more experience, resources, and knowledge can be disrupted. That's the beauty of the world.
To use Clayton Christensen’s theory of innovation here, to sustain innovation, businesses tend to be purely data driven. They continue to grow and make more money based on choices made with pure data.
For disruptive innovation however, there needs to be an “argument” or opinion to help drive that data based on the industry trends. Companies then take a risk of delivering something new and good enough to the market. Also known as disruptive innovation.
This has shifted the idea of being data-driven to being one of “data-inspired”.
Anyone can make the same dataset fall into their favor. That’s the problem with being purely data-driven. Another way to think of it in the US especially is that our two party system makes wildly different conclusions from the same data. What’s preventing businesses from doing the same?
"Innovation is key" is a mantra that sounds good, but it's not true. It's what people want to believe. It's like saying you need to constantly buy lottery tickets so you don't risk being a poor retiree.
If you have established a business and you bank on "innovation" your likelihood of anything from a net loss to catastrophic failure is actually quite high. In the long run, most companies fail anyway, whether they attempt to innovate or not.
Case in point, those companies that did survive in the S&P 500 since its inception don't strike me as particularly innovative:
>Visionary ideas derive directly from centering people at the margins
But I think the conundrum is still one step further - in these instances of the rich college kids building for their marginalized selves, they had the means by which to do it. The big for-profit corporations have the means too, but their existence is credited to being for-profit, because the corporations exhibiting not-as-profitable behavior eventually shrink or disappear.
So I would say innovation still comes back to who can shoulder the risk. Wealthy college students can take the risks because they can always fall back on their trust funds or nepotic jobs, but decision makers at corporations can't because their not-profitable decisions affects their continued existence at a profitable corp.
That means "Data Driven Innovation" comes down not to be literally "Data Driven", but really about spinning a story with whatever data to convince corporate gatekeepers that this new feature for the marginalized isn't that risky an innovation. Unfortunately people do take it literally, which is why this piece is a great reminder about where real innovation comes from.
Agree with your thoughts on the concepts identified, very hard to measure. (especially in terms of the balance sheet or other financial reporting)
Another example of a company that seems to manage to manage innovation is 3M. They've got a history of unveiling innovative products each decade without fail and have grown steadily over the years. Often under-rated IMO.
This is BS - if a company knows all the answers to these questions, then the company is not innovating. The hardest thing about innovation is finding out who else believes your vision. The assumption that a good business has answered all these questions is the assumption that this good business is not innovating.
Revenue forecasting for new products is hard, and investors who add value to high risk start ups must recognize the risk in innovation. If you want answers to these questions, either insist on bullshit stories or invest in old school businesses. No risk = no return.
Why innovation? What research? It's so much hoo-ha over really expenaive append-only databases. It's been over ten years, the best anyone has come up with are ledgers, contracts that trigger when you don't want them to and can never be renegotiated, and pump and dump schemes. It's time to move on.
Patent data alone isn’t enough to measure innovation. Instead, it’s necessary to leverage both leading and lagging indicators to paint a holistic picture of the market, a company, or a technology area.
And right there you just pinpointed the reason why so few companies truly innovate anymore. There's no benefit to innovation if the only thing you're ever evaluated on is how profitable you were in the prior three months.
This is definitely a problem in our culture and the 'what's next' mentality can end up adding a lot of noise to innovation. New is exciting & fun for sure, but what's better for business and progress is something novel that is then flushed out over a relatively long term to become a successful business. Then the business is in a better place to make huge impact (see Apple...)
Real innovation doesn't lead with absolute certainty, it does not know whether it will lead to a reward. I really don't understand the mentality here where everyone thinks they know what they are doing before they do it. I can understand the need to have confidence and the desire to measure out a metric of predictive possibilities, but they are only predictions. For some things, you really don't know what will happen until it happens - especially when it involves chaotic systems such as people and their wants/needs/desires.
That's a pretty foolish assumption. Look at the long view, innovation typically comes in fits and spurts, no predicting when the next will start or the current one will fade away.
That's to say that real innovation is being more data-inspired. Taking risks with what is known based on your intuition/opinion.
A timeless read on this topic is Clayton Christensen's "Innovators Dilemma".
I think the exact same phenomena applies to investing too. You can sustain your growth by making moves purely off data, but your big wins may come from being "data-inspired"
This blog somewhat covers these ideas in more detail: https://amplitude.com/blog/data-driven-data-informed-data-in...
The irony in this all is that nobody can tell the future and therefore what we know in the current moment is the best thing we've got. Even those with more experience, resources, and knowledge can be disrupted. That's the beauty of the world.
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