Innovation as collective intelligence: reconsidering the Schumpeterian view
By Lorenzo Bona
In recent times, the word innovation seems increasingly used with excessive ease or in vague ways. As a result, in many discussions, that word risks becoming an ambiguous expression rather than a meaningful concept. For this reason, it seems helpful to revisit a fundamental perspective developed by Joseph Schumpeter – a central voice in the history of economic thought – whose seminal studies on the functioning of markets and the phenomenon of entrepreneurship continue to offer valuable guidance.
His perspective helped identify five categories of innovative activity:
The creation of a new product or service;
The introduction of a new production technique;
The reorganization of production or management;
The development of new sources of supply;
The opening of new markets.
A few historical and contemporary examples may help illustrate how these categories relate to real-world situations:
Product Innovation: Apple’s launch of the iPhone– just a couple of years before 2010 – created a new kind of product by integrating a phone, camera, music player, and Internet browser into one device. It fundamentally transformed the mobile phone industry, consumer expectations, and changed the ways people interact.
Production Technique Innovation: In the 15th century, Johannes Gutenberg launched the movable-type printing press – a pioneering production technique that greatly increased the speed and scale of book production. It helped minimize costs and accelerated a widespread circulation of knowledge across Europe.
Organizational Innovation: In the early 20th century, Henry Ford revolutionized manufacturing by introducing the assembly line for mass production of the Model T car. This new organizational approach dramatically reduced production time and costs, reshaping industrial production in the automotive sector and similar fields.
Sourcing Innovation: In the early 17th century, the British East India Company established organized trade routes between Asia and Europe. In doing so, it enabled the large-scale import of exotic goods like tea, spices, silk, and cotton, making them more accessible to European markets and creating entirely new supply chains.
Market Expansion Innovation: In the late 2000s, Airbnb created a new market in the hospitality sector by allowing individuals to rent out their homes or rooms to travelers. This innovation significantly disrupted the traditional hotel industry.
The Schumpeterian perspective summarized here helps us understand that by exploiting profit opportunities linked to new combinations of productive factors, the entrepreneur-innovator becomes the driving force behind economic cycles – the dynamic process through which modern market economies evolve over time.
On the other hand, Schumpeter also reminds us that economic change is not driven solely by individual entrepreneurs. It results from a broader system of production and exchange in which entrepreneur-imitators also play a crucial role: by adopting successful business practices, they enhance the effectiveness of market competition – benefiting consumers through lower prices and greater variety – while simultaneously stimulating the search for new opportunities that both emerging and established innovators can exploit for profit.
Furthermore, this economist’s perspectives offers valuable insights into how innovative combinations often emerge in clusters, involving many entrepreneurs pursuing different forms of innovation simultaneously. As these clusters expand, they give rise to economic booms. When they contract, economic downturns—or slumps—follow.
In this way, innovation, properly understood, is not a solitary act, but part of a complex and collective process of transformation and ongoing problem-solving – largely driven by what, to a large extent, might be seen as a collective intelligence that helps guide the evolution of humanity.