104. Professor Mohammad Keyhani on Generativity, The New Digital Pathway to Business Growth
Our metric for business is value generation. The scope of Economics For Business is not determined by business size or type — we don’t label firms as small, medium or large, or by the stage of their development, or by industry.
Key Takeaways & Actionable Insights
We see business through the lens of entrepreneurship, defined as the intentional pursuit of new economic value. A reasonable proxy metric we can use is growth. Business growth is consequence of generating new economic value. That value is determined by customers, and a growing company is creating more customers and/or adding to its share of customer dollars spent in value exchange.
The changing dimensions of business growth.
The economic route to growth is changing. In today’s markets, we often see speed of growth that goes beyond historical expectations. Business models can expand their reach and accelerate their performance over networks faster than ever before.
An Austrian perspective on business enables entrepreneurs to perform in a high-growth environment: Austrian entrepreneurs recognize the boundaryless-ness of markets, the flexibility of capital combinations, and re-combinations to respond to the rolling flow of value learning signals from consumers, and the benefits of shedding control in order to accept complexity and emergence. Austrian entrepreneurs are well-placed to enjoy success in today’s markets.
Professor Mohammad Keyhani sums up the Austrian entrepreneur’s advantage in the term Generativity.
The generativity of a system is the capacity to produce unprompted, unanticipated change through unfiltered contributions from a large, broad, and varied audience. The concept of generativity is closely aligned with the Austrian ideas of spontaneous order and emergence.
By way of an example, the concept has been applied to technologies, where the characteristics of generativity can be identified as the increase in participation as an input and the increase of innovation as an output. One of the results of this thinking has been open innovation: anyone can participate (e.g., when corporate research is not limited to a corporate R&D lab, ideas can come from anywhere outside the corporation), and more and better innovation is an outcome.
One of the potential effects of generativity is to overcome knowledge constraints. Open innovation is an example: even the biggest corporation with the best minds in its employment can not possibly have a majority of good ideas. They don’t even know what answers they should be looking for.
Detaching the search process from the searcher.
When we face knowledge constraints, we search for answers. But a searcher only knows to search in certain places. Generativity can separate the search from the searcher, unleashing the search process to look in places that would be blind spots for the searcher. Similarly, generative design can generate product ideas that the human designer could not.
The incentives of the market can take control of the search process. The demand side (via broad, unfiltered participation) defines the problem to be solved and the supply side (via equally broad and equally unfiltered participation) creates solutions.
Generative characteristics can be built-in to a product or service.
5 characteristics of generativity in products are:
Leverage: the product can be put to many uses, and users can do many things with it, including those that the product designer could never anticipate.
Adaptability: the product can be further modified to broaden its range of tasks even further; new code can be contributed by users, accessories can be added, and so on.
Ease Of Mastery: there are no or low barriers to broad usage and broad adoption due to unusual or hard-to-acquire skills.
Accessibility: the product is accessible to everyone and its usage is not limited to a specific set of users.
Transferability: The advances in and changes to the technology made by some users are transferable to all users; new users can build on what previous users have contributed.
Generative products are tools for entrepreneurs.
Generative products are a little hard to describe or categorize. They’re more like toolkits rather than specific use products. Professor Keyhani started a website to curate some of these kinds of tools / toolkits for entrepreneurs: Entrepreneur-Tools.Zeef.com/Keyhanimo
Some examples he mentions:
Zapier.com and Integromat.com link web apps and digital tools together via API’s to assemble automated workflows.
Airtable.com — flexible and powerful cloud-based relational database for regular users.
No-code software development tools like Adalo.com (build your own app), Voiceflow.com (build your own voice app) and Bubble.io (anyone can be a software developer).
There is a broad future growth path in generativity.
Let users generate innovations; let them accumulate (new users can build on the innovations of earlier users); focus on capturing as much of the value as is appropriate for the entrepreneur-as-orchestrator.
Additional Resources
Professor Keyhani’s website: MohammadKeyhani.com
How Generative Is Your Business? (PDF): Download Here
“A Theory of Digital Firm-Designed Markets: Defying Knowledge Constraints with Crowds and Marketplaces” by Mohammad Keyhani, et al (PDF): Download Here
The Austrian Business Model (video): https://e4epod.com/model
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