Innovator: From CV Penning To Business Planning

1. Innovator as subject of economy of knowledge. The highest level of modern technologies inevitably leads to creation of new wealth. This is the warning voiced by the major futurologist Alvin Toffler [1]. This new wealth by its dimensions will surpass everything created earlier. Now we intend to have a brief look at who will create and consequently possess all this new wealth.

The innovator is becoming the main subject of the new economy. Let’s explain ourselves, however: one should distinguish an innovator from the author of an idea. An innovator is a subject who is at the center of the crystallization of an idea and its coming into life:  the original idea (normally, technological); the business idea on the basis of the original one; formation of the team’s core; transformation of the business idea into a business plan; search for an investor; creation of a start-up and driving it to the tops of technological and, consequently, commercial success.

One of the peculiarities distinguishing the innovator from any other office-worker is that his salary is a part of investment in the realization of an idea or a project. Innovator doesn’t write a CV, he finds a business idea and makes it real.  He doesn’t look for a job, but, rather, for an investor.

Let’s analyze the following: what are the processes that put the innovator at the edge of the acutest problems of today’s economy?

The matter is, that the modern technologies offer so many opportunities for development of new business ideas on their base that the realization and approbation of these ideas is impossible within the framework of only one company, country or even region of the world. What is necessary is a global market of ideas. Therefore the innovator becomes a player of the global market.

Meanwhile the innovation market doesn’t operate automatically. The reason is, good ideas find it hard to go ahead inside the companies due to existing barriers, inevitable in economic structures with developed bureaucratic machine. In such an environment ideas cannot be realized freely, because the resources are limited and a real war is waged for them. Result is many big companies make startups of their ideas outside themselves. Thus they conduct approbation of their ideas, in conditions close to actual, where the innovator is not hindered by bureaucratic barriers, and where he remains face to face with the economic system, where his product will be required. In that way, the market of innovations is a reality which is fighting for its viability. And the innovator acts upon this ever conquerable market ground.

The above approach which may be called an innovation outsourcing has a number of advantages we shall examine more closely.

Organization of an idea in the shape one single company makes it inevitable to attain a highest level of production discipline, planning and responsibility for the result. A failure at the obligations automatically puts the innovator in a tricky financial situation; in fact he is left without his wages. Simultaneously the very process of compensation for the work results assumes maximally rational forms. The innovator’s wages become automatically linked to the financial (sales) and market (the company’s value) indices of his activity. The better the company’s performance, the better off the innovator is. Which is nothing else but the application of an ideal motivation scheme depending on the labor results, when the corporate top management’s permanent headache is done away with for good?

An important forecast may be done at this moment: within quite soon the innovators will possess their own innovation history, containing the chronicle of realization of their ideas. Similarly to the credit history of each borrower, the innovators will have their history as a replacement of the traditional resume.

2. Innovator as possessor of vital resources. It’s quite reasonable to ask a question: why the innovator should be looked upon as a qualitatively new subject of the coming economy?

The answer can be formulated in the terms of vital resources, quite recently developed by Evgeny Balatsky [2-3].

So, there are four vital resources, which can be arranged according to the level of value (deficit): money, energy, knowledge and time. An ordinary capitalist basically has only two first resources: money and energy (organizational structure of a capitalist). To the contrary, the innovator has knowledge and time necessary for turning knowledge into life and getting economic results of this process. One should bear in mind that the resources are transformed chiefly in one direction: resources of a higher order easily enough transform into the lower order (can be seen even in the popular sayings, for example, “time is money”, “knowledge is power”) while the reverse transformation is practically impossible (you can’t buy knowledge or time for money). Knowledge is treated as recognized experience, while money can only buy the simplest experience, for example to possess for time some objects of lifeless matter (country house, car etc.), rent someone else’s body, listen to a course of lectures (analogous to reading to a book, though the acquisition of knowledge in an educational center is valued much more and achieved for getting a certificate) etc.

While revealing the principle difference among the various vital resources, let’s consider an example. A human embryo starts with a cell, which appeared on this planet 1.3 billion years ago, and develops into a baby within 9 months. In other words, due to knowledge introduced in this process, the embryo acquires the 1.3 billion years of evolution in 9 months. Now imagine, how many vital and bio-survival resources (money is the modern equivalent to this order of resources: in a more primitive for they are food, drink, air etc.) were spent in these 1.3 billion yeas, to overcome the way from the simplest cell to human creature. This is the difference between the knowledge which is a condensed experience (time), and bio-survival resources of the lowest order. All the above said does not cancel the importance of the bio-survival resources, their unconditional presence largely facilitates the processes of accumulation of resources of the highest order, because it neutralizes the bio-survival angst, the main source of fears, uncertainty and diseases of people.

Speaking of the phenomenon of transformation of resources, one should remark that some businessmen possess a widely accepted mistake: once they get money, everything else can be bought (someone else’s knowledge, time etc.). That was partly true only in the period of industrial development, when the means of production were inaccessible to the mere mortals. But it’s quite untrue in our days of the economy of knowledge, when the basic means of production is the human mind, intuition and imagination. These are immaterial assets, you cannot buy them, and they can be only attracted by similar immaterial assets, while money plays only an accessory part. An indirect proof of this fact is that, as is widely known, in creative professions the productivity of one category of workers (programmers, for example) can differ exponentially, which is impossible in traditional economy.

All the above mentioned leads to one clear conclusion: in future the universal wealth will beredistributed in favor of innovators. In the era of knowledge money will be quickly devaluated, and they can only be held by effective business models, which models will require knowledge and time, and those are in possession of innovators and inventors. That’s why precisely the innovators will defined the directions along which money and energy will be driven, so that they will possess a colossal evolutionary advantage over the current owners of lower vital resources. Not far away is the time when innovators will invest in innovators, because they will control most of the planet’s vital resources.

In practice the process of resource transfer from investors to innovators will work out according to a very simple scheme: if now the team of innovators gets as a rule 15% to 30% in startups of the companies, this share will be growing because the high motivation of the team of innovators is the key factor of curbing risks of the hi-tech projects.

We have spoken about the responsibility of the innovator for the results of the project. Also we should mention the responsibility of the investor for his obligations before the innovator. No one will be astonished that the only possible violation of the investor is the unilateral reduction of the agreed amount of investment. Currently there is no legal persecution of the investor for his violation of obligations before the innovator. However, we can offer the following scheme of responsibility: for his violation the investor will be left out of the project, with keeping a small share in the company on condition that he allows the team of innovators some time for search of a new investor before he stops the financing altogether. Most probably, this scheme will be accepted everywhere and the innovator will get an adequate protection against the arbitrary behavior of the owners of the lower vital resource.

3. What an innovator should have and be able to do. The modern level of technological development created an entire social layer of people, which can be called innovators. This social layer is restructuring the economic system in which three types of agents function: community of investors, business incubators and innovators. We can see websites where each one can register his idea and expects his idea to be realized and supported financially. We can indicate such portals as Y-combinator and SBAR (Community of Russia’s Business Angels), we you can upload a description of your idea. It is similar to playing on stock exchange, only in this case you bet other resources than money: the innovators knowledge and time, which he spent on the creation of his idea, on its description and the search of supporters to realize it.

What is the set of documents, which the innovator should prepare to start searching money for his project? As a rule, they are three documents: the project’s brief resume (core description of business model), the project’s presentation and the business plan. It will not harm to make an English translation of the project resume, to make it an open search of investor. Also, one should have a clear idea that what is being searched is the specific resource: money, therefore the main accent should be laid on the means of accrual of the investor’s money (business model).

The main components of the business model are: the description of the values offered to the potential client (what, whom to and in what way should be sold), the system of profit gaining (marketing, sales etc.). The key item here is the high, practically unlimited growth and profit potential of the company to be created. For less profitable projects there are less risky and more traditional spheres of investments.

Now we’ll briefly focus on the properties of the innovation idea. Heinrich Altschuller, back in the last century developed the Theory of Invention Task Solution (TITS) [4], where he formulated the main law of the technical systems (TS) development: they develop in the direction of the most ideal character of the realized functions. The most ideal means that, after the TS development, each function will require less and less resources (matter, power, time etc.). The terminal case is when the function exists, but there are no expenses for its realization.

The second criterion which the innovation idea should meet is that it should solve some technical contradiction, that is, find solution to a problem.

Therefore, if you knock against a significant contradiction and find a real solution to it, you can start writing a business plan and searching for a team of supporters. .

To clear it up, we shall give an important commentary to this thesis.

Business can be represented as a sum of algorithms and processes, whose work should lead to an excess of bio-survival resource (money). An innovation, a new technology, is also a sum of algorithms in a sphere of objects. Only, the complexity of these algorithms is exponentially higher than those realized in business. This fundamental contradiction – difference between the levels of complexity of business and innovation – is solved by a business model, which should transpose the complexity of algorithms of the innovation into the relative simplicity of the algorithms of business. Also important is that the more complex the algorithms of the business model are, the higher are the risks because the result of the working of complex algorithms is practically unforeseeable. This fact is the main barrier in the way of innovations, because business tries to get profits in a familiar way, while the innovation imposes changes without any guarantees of success. That’s why it’s so vital at the first steps of the innovation project to have a clear picture of the business model of the future company and to be able to deliver this business model to the potential investor. Without this the innovator cannot solve the above fundamental contradiction between business and innovation.

Further, as I have expressed, the process of search for an investor begins or rather the initial stage of the project realization at the expense of innovator himself. Generally speaking, the projects invested by innovators themselves are very popular with the potential investors, because precisely such projects bear the stamp of extremely high motivation of the innovator, which in turn, cuts down the project risks. 

But this is not all. Innovator also should possess a charisma, that is, to be able to win people over. This is an opinion shared by investors themselves. And it has a simple explanation: neither the investor, neither his business structures, as a rule, are experts in the area where the innovator’s ideas are generated. Moreover, for the peak areas of science and technologies they may be no such experts as the innovator himself. In many cases it’s he himself who is the most competent expert. Result is his charisma in part undoes the psychological discomfort experienced by the investor before the high uncertainty of the fate faced by his money. 

Let’s underscore once again that the development of the innovation infrastructure should not be a competence of separate companies only. For example, Google and Apple created a powerful interior contingent of innovators by endowing them with time and material resources for approbation of their ideas. And this made both companies leasers in their markets. Their example shows what a potential is freed, if you let the people do what they want to do, at least one day per week. Meanwhile today the task should be formulated at a larger scale: how to organize the working process so that the innovators could generate and realize their ideas all the time. In case of Russia, it’s the only possible way of strategic development of the nation; otherwise the country will face the chance to become a raw materials appendix to the developed countries.  

4. The place of innovator in the system of economic agents. In conclusion we will mention that we can already witness the establishment and functioning of communities of investors of various project stages (for example, SBAR), of business incubators (for example, in Strogino), though there are no organizations which would represent interests of innovators in the quickly molded system of hi tech business. We believe that in the near time this failure should be compensated, and the appearing new subject of economy should be adequately represented at all the levels of social organization.            

Table 1. Relations between the resources and quadrants of the money flow

To better understand the place of innovator in the modern economic system, we can address Table 1, which reflect the relations between the quadrants of the money flow and the vital resources. 

The concept of the money flow quadrant was introduced by Robert Kiyosaki [5]. He defined the 4 basic quadrants: employee, self-employed, business owner and investor. Our opinion is, it’s not enough. In the era of information, we can see another subject (innovator) which requires another quadrant (pentant?) of the money flow, since he is radically different from the participants of the other quadrants. Thus, the first quadrant (employee) is dependent on the security of the bio-survival strategies, the second quadrant (self-employed) on the quality of the services provided by him (perfectionism) and the sensation of personal freedom, the third quadrant (business owner) on the construction of a system, which would work efficiently without his participation, the fourth quadrant (investor) on the passive income of his investment. Contrary to them all, the inhabitant of the fifth quadrant (innovator) is involved in the coming into life of those opportunities which his ideas can give him and the entire socio-economic system. Innovator is the evolutionary adept of the information society, he is clearly outside of the limits of purely economic concepts and relationships, because he tries not only to possess one specific vital resource, but to realize scientific and technical opportunities, which once realized set practically all the vital resources free.

And the last definition: the innovator is an active principle, while the investor is a passive one. The innovator defines the development vector and the directions of investment of the lower vital resource (money), while the investor only follows and fails to follow the indicated direction. This is what makes the innovator the most progressive element of the socio-economic system.

Literature

1. Toffler A., Toffler H. Revolutionary Wealth. AST, Moscow, 2008.
2. Balatsky E. Theory of Vital Resources: Models and Economic Estimates// «Monitoring of Public Opinion», №2, 2007.
3. Balatsky Е. Vital Resources and the Contours of Cognition// «Messenger of the Russian Academy of Sciences», №6, 2008.
4. Orlov М. Elements of Classical TRIZ. A Practical Guide for Inventive Mind. SOLON-Press, Moscow, 2005.
5. KiyosakiR., LecterSh. Quadrant of Money Flow. Minsk, «Pot Pourri», 2007.