ANNUAL REPORT 2008 | 2009 - SinnerSchrader AG

10Jeff Jarvis: When innovation yields efficiencyWheninnovationyieldsefficiency[Jeff Jarvis, 12 June 2009, 7:48 AM]Much of the innovation we’ve seenlately hasn’t led to growth but insteadto efficiency – that is, shrinkage.I’ve been mulling over Mike Mandel’s coverstory in last week’s BusinessWeek, in which hetried to puncture another bubble: the belief thatwe’ve had a rich decade of American innovation.He argues that there’s actually an “innovationshortfall” and he uses economic stagnation toplead his case. Now I’m not economist (that’sa straight line) and so I won’t argue about theimpact of other events on growth – starting withthe so-called financial crisis.But as I thought through the major innovationsof the last decade, many of them have not ledto economic growth; they haven’t added moneyto the economy but left it in the economy. Thusmeasuring innovation’s impact in the revenue,growth, productivity, and market cap of largecompanies may not be valid. Instead, we are seeinginnovation take money out of their pockets,leaving it with their customers. What they, inturn, do with that extra money and what impactit has on the economy is an entirely differentquestion – and that impact is likely seen in anycase not in large companies but in individualconsumers and in small businesses. But I thinkthe proper measure of the changes in the lastdecade is the innovation dividend. See:w craigslist is blamed for destroying (that’sfrom the publishers’ perspective) $10 billion inclassified ad value annually*, replacing it withits reported $100 million revenue. Newspapersact as if that was their money – as if they had aGod-given right to it – but, of course, it wasn’t.When Craig Newmark spoke with my studentsat CUNY, and they asked him why he didn’tmaximize revenue at craigslist and sell it for billionsand then use that money for philanthropy,he told them that he thought he was doingmore good for the country and the economyby leaving more money in the pockets of thepeople who were doing the transactions henow enabled. He cut out a gross inefficiencyborn of the monopoly that newspapers heldover the means of production and distribution.If you try to measure his innovation’s impact onthe economy with old methods and metrics –built on the assumptions of the old economy –you can’t see it. He didn’t make companiesgrow or become more productive. He addedefficiency.w Amazon, eBay, and the Internet as a wholeare blamed for destroying large swaths of theretail marketplace. But again, they broughtefficiency in a number of ways: price transparency,which leads to lower prices for customers;critical-mass efficiency; the reduction of brickand-mortarand staff costs; and I’d imagine areduction in distribution and warehousing costs.The net result is fewer jobs, less rent, less waste(that is, books on shelves that get pulped; nowthey’re made just in time), and lower prices.Again, more money is left in the pockets of thetransactors. The impact of innovation on retailis seen in shrinkage and efficiency, not growth.w Google is blamed for destroying media but,of course, all it did was give advertisers a betterdeal. It dared to compete. Google did this notjust by creating abundance rather than sellingscarcity born of control of those means of productionand distribution. This created a moreefficient – read: less expensive – marketplace foradvertising. More important, Google revolutionizedadvertising by selling performance, provinga return on investment. So the money that didn’tstay in the pockets of people buying and sellingcars and homes, thanks to Craig, now stayedin the pockets of retailers and manufacturers