"Almost always the men who achieve fundamental inventions of a new [scientific] paradigm have been either very young or very new to the field whose paradigm they change." This remarkable finding of Thomas Kuhn - made in 1962: hence the use of "men" - jumped out at me this week when I re-read his book, The Structure of Scientific Revolutions. It was one of the most important books of the last century, and I think it has stunning implications for business and how to make pots of money.
In the last thirty years, we have become mesmerized by data. The availability of information from the web has multiplied exponentially, as has the ability to process it cheaply. But, if we will only listen, Thomas Kuhn tells us something that is immensely valuable. It's not the data, stupid. He studied all the important cases of scientific breakthroughs in the past several centuries, and in almost none of them did the breakthrough come from new data. He quotes the historian, Herbert Butterfield, who also studied the origins of modern science. Typically, Butterfield said, a breakthrough involved "picking up the other end of the stick" by "handling the same bundle of data as before, but placing them in a new system of relations with one another by giving them a different framework".
So, point 1 is this - it's not new information that leads to breakthroughs. It's a new way of looking at the data. It's rearranging the puzzle that already exists. There is a word for this - thinking. And thinking is what is in short supply today - not data, not experience, but the ability to look at a problem or opportunity from a new angle, with a different framework. The fact that thinking is in short supply gives a huge advantage to those few people really willing to think hard.
Point 2 is the quite amazing insight from Kuhn quoted at the start of this blog - the best thinkers about an important issue are those who are relatively new to it. This truly is counterintuitive. We naturally expect that stupendous innovations will come from old hands, from people whose lives have been devoted to grappling with a field of study and its problems. Yet the truth is the opposite. Albert Einstein, for example, upended the field of physics in 1905, with his theory of relativity. At the time he was working as a patent officer (second class), an essentially lowly, clerical job with limited access to all the scientific information about the field in which Einstein was truly interested. Einstein was a callow youth, new to the field and not even working in it "properly" - he attended no university and had little access to the great brains in physics. He had no data that professional physicists did not have. But he had the great advantage of being able to think.
Point 3 is that what stops the emergence of breakthroughs is experience and expertise in the existing "paradigm" - the approved way of looking at any field. As Kuhn explains, we all become prisoners of the existing way of thinking about our domain. So the less we are committed to that way of thinking - to all the habits and assumptions which come with it - the more chance there is that we can view the bundle of data from a different angle. To do this, we have to think and question. Very often the clue comes from noting that the existing theory works only approximately, and that there are bits of information that don't fit into the framework very well. Scientists and business people do their best to ignore such information, because it goes against what "they know".
Only someone coming to the field ignorant or with no commitment to existing assumptions can think properly about the implications of information that does not fit. "The new paradigm," Kuhn says, "emerges all at once, sometimes in the middle of the night, in the mind of a man deeply immersed in crisis." The crisis arises from the discrepancy between the existing framework of thinking, and an alternative way of thinking that gives proper weight to discordant information. In fact, a new theory is always resisted by the "old guard" - the new framework does not win by convincing them of its superiority, but because they eventually die; and a new generation that has grown up with the new framework takes over.
The Value of Ignorance in Business
Ignorance, naivety, and inexperience have extraordinary value in business - if we are prepared to think. We don't have to be young, but we probably do have to be relatively new to a field. The process of valuable innovation happens in precisely the way Kuhn describes for science. It is generally outsiders who rearrange the pieces of the puzzle in an industry in a radical new way, which the insiders could not have imagined.
There was a bright young Swede who founded a mail order company when he was 17. He knew nothing about furniture, and he didn't sell it. When he was 23, he tried to fit a table into his car, and couldn't. A friend suggested removing the legs. That was when Ingvar Kamprad, the mail order salesman, had the idea of flat-packed furniture, which he started selling. Thinking more about furniture, he dreamed up a totally new system, at the heart of which was a chain of mammoth stores, which designed its own furniture, had it made by outside suppliers who were closely integrated into the system, and sold to customers who drove to the stores, took the goods home, and assembled them. By cutting out the cost of transporting fresh air, which in the traditional furniture industry comprised almost half total expenses, and making the customers do much of the hard work, Kamprad slashed the cost of furnishing a home by two-thirds - and created an empire worth more than $40 billion. Nobody within the furniture industry created IKEA, and probably nobody could have done.
And so it goes.
In the early 1960s, Fred Smith wrote a paper for his economics prof at Yale suggesting overnight delivery for courier packages. Folklore varies - some suggest the professor gave Smith a C grade, while others have the professor saying to get a C, the idea had to be feasible. In any case, nobody in the industry at the time thought up the idea, and it was left to Smith to create Fedex.
IBM and DEC were the leaders in computers, and Wang was the leader in word processors, but none of them ever profitably made a personal computer. Steve Jobs and Bill Gates were the new kids on the block who disrupted and hugely enlarged the computer industry. Jobs also transformed five other industries: animated movies, music, phone, tablet computing, and digital publishing.
The leading online business in every segment is different from the previous offline leader. No bookseller conceived of Amazon. No established betting company devised a betting exchange. Nobody in the minicab or taxi industry invented Uber. Nobody in hotels came up with Airbnb.
In science and business, revolutions come from outsiders. You could be one of them. If you want to be, there is one further thing you need to know.
Use Meta-Principles to Transform Any Industry
My regular readers won't be surprised by this point. There are just a handful of ideas - what I call business genes or meta-principles - which may well unlock a way to transform a business.
The 80/20 principle is one of these. It tells you to seek out the most profitable segments and ways of doing business, where less effort can give much higher returns. These segments and ways of doing business always exist; we just have to find them. The Principle gives us valuable clues.
The Boston Box - aka the BCG Growth/Share Matrix - and its even more valuable corollary, the Star Principle - say that the best businesses are the leading ones in markets or niches that are growing fast. Working or investing in stars is the way to get ahead; creating a new star business is the best way to make a fortune.
A drawback of the Star Principle, however, is that it doesn't tell you how to invent a new star business. For that you need a new principle that I have been working on for the last four years, which is to Simplify a market or product. There are two reliable ways to do this, and I'll be telling you what they are in the coming months - my book Simplify, written with venture capitalist Greg Lockwood, will be out in April. I'll be spilling the beans in my blogs in March.
1. Anyone can innovate. It just takes confidence, the willingness to think from first principles, naivety, and ignorance. It requires being an outsider. If you can think, and think you can innovate, you can. So think. And then do.
2. You don't need new data. You need insight. To get insight, rearrange familiar data into new and vastly more profitable patterns.
3. Earth-shattering innovation is greatly helped by using a few meta-principles that provide clues, and nearly always work.