Centralized innovation is beset by two weaknesses

Centralized innovation is limited because, first: the future cannot be predicted and discovering it requires maximizing exploration. Wu explains:

This is the essential weakness of a centralized approach to innovation: the notion that it can be a planned and systematic process, best directed by a kind of central intelligence; that it is simply a matter of assembling all the best minds and putting them to work in unison. Were it so, the future could be planned and executed in a scientific manner.^[1]

Second, innovation that is controlled by a single entity is unavoidably constrained by preserving its own existence and maximizing efficiency. Wu observes that “if everything is entrusted to a single mind, its inevitable subjective distortions will distort, if not altogether disable, the innovation process.”^[2]

Here, then, we come to the second weakness that afflicts centralized systems of innovation: the necessity, by definition, of placing all control in a few hands. This is not to say that doing so holds no benefit. To be sure, there is less “waste”: instead of ten companies competing to develop a better telephone—reinventing the wheel, as it were, every time—society’s resources can be synchronized in their pursuit of the common goal. There is no duplication of research, with many laboratories chasing the same invention. (That avoidance of redundancy in applying brain capital should sound familiar from Vail’s philosophy of industrial organization: centralized innovation is the R&D sibling of monopoly, with the same type of claim to efficiency.) Yet if all resources for solving any problem are directed by a single, centralized intelligence, that mastermind has to be right in predicting the future if innovation is to proceed effectively. And that’s the problem: monopoly presumes a prescience that humans are seldom capable of.^[3]

This is especially problematic, because the Prime directive of institutions is self-preservation, so they are inherently predisposed to be unable to innovate anything that they fear might harm their institutional existence. (This can ultimately lead to the phenomenon whereby Institutions become committed to preserving the problem they were formed to solve.) Add to that, the tendency for negativity dominance to trigger loss aversion and it is easy to see how centralized systems rapidly lose their strategic agility: Efficiency is purchased by a loss in flexibility.

#innovation #systems-thinking #centralization