Disruptive Innovations: Aspects of German And European Woes

This is dubious, to say the least. It looks as if it is merely an attempt to support old-fashioned business models of publishing companies originating in the 19^th or 20^th century against newcomers like Google. And German Government, the outgoing one as well as the incoming one, appear to prefer side-lining with some 'ancien regime' gathering together old-fashioned businesses at the expense of innovative newcomers riding on the waves generated by the Digital Revolution, in particular concerning Google as news aggregator and book scanning organisation (See also various Documents provided by German Government for EU Council: 9285/09, 10221/09 and 13147/09)

When I think of Google, the specific story of their founders comes into my mind. The parents of Mr Sergey Brin, one of the Google founders, lived in the Soviet Union. Sergey was born in Moscow. Both parents are high-profile academics. Having a Jewish background, on some day they felt that they might have better chances to thrive elsewhere and considered emigration. But where to go? Well, it can be easily understood in view of the particulars of the German history of the 20^th century that this family wasn't that eager to come to Germany. But why not emigrating, for example, to Cambridge, one of the centres of excellence in the United Kingdom? Needless to say that they did not. They eventually arrived in the United States of America, and Sergey's father now is a mathematics professor at the University of Maryland and his mother is a research scientist at NASA's Goddard Space Flight Center. And, yes, Sergey met Mr Larry Page, both got deeply involved in data mining techniques, founded Google, and now they are among the richest people on earth. Anybody daring to argue that similar careers would have been only remotely possible if the Brin family had decided to emigrate to western Europe?

The first prototypes of the Google data-centre were made up of standard PC components which, of course, had been readily available in Europe at that time. But here nobody showed up to undertake what Mr Brin and Mr Page achieved across the pond. Later on, bureaucratic efforts were started to establish something like a European counterpart to Google, burning some taxpayer's money, but without perceivable result.

Hence, the bitter row with Google about their business model as currently conducted by various stakeholders from European soil is tainted with two big failures of the campaigners in question: At first, they have utterly failed to take the pre-emptive strike by inventing something like Google before Brin and Page did it, despite the fact that all necessary means were available in Europe at that time. Bad luck or intellectual slothfulness, don't care, this kind of defeat of old Europe is simply a matter of fact now. Secondly, now, as the superiority of Google as a disruptive innovation in terms of technology and business model becomes indisputable, they are trying to play foul by attempting to choke the necessary transformation of businesses and society by lobbying for an introduction of some sort of strangling regulation.

Such examples of European sclerosis might perhaps induce some sense of humility in broader circles of the society as well as with the top brass of our political elite: Recognising what is not known or mastered might well be a first step towards improvement. But many can't or won't go this way. Vested interest are fighting for the restitution of the status quo ante. And a considerable majority of our elite appears to be quite dumb if matters concerning the Digital Revolution are at stake. There is an impression that we are reigned by far too many people who are used to delegate e-mail to their secretaries, can't tell you what a browser is and who are unable to distinguish it from an operating system or any other piece of software, let alone productively using social software on the net. Those folks present in all layers of our society, not limited to the elite, are increasingly perceived as some sort of a burden. The political response to this situation is the rise of Pirate Parties throughout Europe. However, as often in politics, the cure to one problem might carry pickaback a bunch of deficiencies, having the potential to cause a lot of new problems. In this particular case, some of the top activists of the German Piratenpartei - which won 2% of the votes in recent general elections - were politically formed earlier this decade by FFII in the campaign against the EU Directive on the patentability of computer-implemented inventions. And they now bring in their resentment against the patent system into the ongoing programmatic discourse of this awaking political power, many of them acting without having any broader understanding of the inner workings of this field of law.

Patent people should never forget that inventions taken alone might well get patented but are quite worthless for the society if they do not mature into innovations: An innovation is a new way of doing something in real life. If a society is not willing to experiment with new ways of doing something in real life, forget about patenting. Patenting is a way of enabling a certain class of augmented business models which were not possible without this. In political speeches, Europe pretends to be one of the most innovative places on earth. However, the reality appears to be closer to sclerosis than to any innovation paradise. Innovation, in particular by disruptive technologies, tends to create imparities which do not go well with some sort of widespread state of European mind strongly preferring enjoyment of modest linear progress not harming anybody, the fruits of which equally spread over all citizens.

As you can learn from Schumpeter, in reality innovation might imply a creative destruction of former ways of doing things.

The destruction of former ways of doing by disruptive innovation is not a monotone and linear process. At the beginning, a disruptive innovation almost always shows some inferiority compared to established ways of doing things. This inferiority needs to be overcome by investing into its further development in view not only of its present properties but considering some sort of superior potential in it.

For example, today we take it for granted that ships crossing the oceans for transportation purposes are built of steel and powered by some sort of diesel engine. But to shipwrights of the 19^th century, highly experienced in manipulating wood and constructing vessels driven by sails, the idea of replacing cheap and durable wood by rust-prone, heavy and expensive iron must have appeared a bit lunatic. Moreover, taking away rigging and inserting instead a steam or diesel engine, including the need to provide fuel supplies sufficient for thousands of miles on high seas, surely might not have been that plausible as it appears to us now. Many of the early steamers utterly failed; for example, some were unable to cross any Ocean because of the fuel storage was dimensioned far to small. As a result, at the turn from the wooden sailing-vessel era to the iron steamship era, many shipwrights balked, refusing to go along with the innovators. When, after heavy investment, research and development all over the world, steamships reached maturity and got mainstream, it was too late for many shipyards which meanwhile had gone bust because of the conservatism of their management preventing to get early experiences and expertise in the new technologies.

The same can be said with regard to the transistor technology which, when standing at its infancy, surely was inferior to vacuum tubes. The voltage and power limits of early Germanium transistors were pathetic, and those devices were quite expensive, too. In this particular case the trick to bring them into mainstream involved the development of devices where the tiny size and the absence of cathode heating are decisive, e.g. miniaturised hearing aids powered by coin cells, or portable miniature radios.

Sometimes the losers of the Digital Revolution in various businesses based on business models now challenged by disruptive technologies seem to look like the shipwrights of the 19^th century insisting on wooden sail-vessels. Or, like engineers swearing that the vacuum tube will never be replaced by semiconductors.