Interview: Larry Downes

Downes is a consultant and speaker on developing business strategies in an age of constant disruption caused by information technology. He is author of the Business Week and New York Times business bestseller, Unleashing the Killer App: Digital Strategies for Market Dominance (Harvard Business School Press, 1998), which has sold nearly 200,000 copies and was named by the Wall Street Journal as one of the five most important books ever published on business and technology. His new book, The Laws of Disruption: Harnessing the New Forces that Govern Business and Life in the Digital Age (Basic Books 2009) offers nine strategies for success in the emerging world of digital life. It combines Downes’s unique perspective on economics, law, and innovation in the digital age. He is also a Partner with the Bell-Mason Group, which works with Global 1000 corporations, providing corporate venturing methodologies, tools, techniques and support that accelerate corporate innovation and venturing programs.

Downes has held faculty appointments at The University of Chicago Graduate School of Business, Northwestern University School of Law, and the University of California-Berkeley’s Haas School of Business, where he taught courses on corporate strategy and technology law. He is currently a nonresident Fellow with the Stanford Law School Center for Internet & Society.

Here is an excerpt from my interview of Downes. The complete interview is also available.

Morris: At one point [in The Laws of Disruption], you observe that when confronted with the weird economics of information, the core principles of public law, private law, and in formation law are being turned upside down.” How to cope with this extensive as well as intensive disruption?

Downes: In many respects the best coping mechanisms here are the same as they are for the killer apps themselves. First and foremost, senior executives, especially those outside of the legal department, need to be aware of that fact that law is now the single greatest impediment to innovation in every industry. Next, they need to understand why, and that requires much greater appreciation both for the fundamentals of law as well as the ways digital technology is undermining those fundamentals. Then, just as with killer apps, organizations (including governments and consumer groups) who find ways of adapting even slightly more quickly than everyone else will stand to gain the most from the new reality.

Frankly, most governments are firmly stuck in the “denial” phase of transformation. Corporations are slightly better. Consumers, on the other hand, are leading the charge here in a way they’ve never been able to before the availability of the “collective action” tools the Internet and particularly social networking tools give them.

Morris: Given your response to the previous question as well as what you recommend in the concluding chapter of this book, it seems that what Joseph Schumpeter’s concept of “creative destruction” is relevant to the challenge of harnessing what you characterize as “the new forces that govern life and business in the digital age.” Is that a fair assessment?

Downes: Absolutely. What we’re experiencing is precisely what Schumpeter talked about. The only difference is that the cycle time between periods of “creative destruction” and what [Thomas] Kuhn called “normal science” (or “business as usual”) keeps getting shorter. Essentially, information technology has created an environment of constant creative destruction.

Think for just a moment of the impact that fact has on the traditional process of strategic planning, which assumes relatively stable markets and predictable responses from competitors. In many ways companies are better off not to have a strategic plan at all. But what I’d prefer to see is the emergence of new tools and methods that reflect the chaotic reality of a Schumpeterian world.

Of course when we talk about legal institutions like governments, regulators, and courts, the very idea of a strategy is completely alien. Getting legal institutions–whose goal is to minimize unpredictable outcomes and penalize chaos–instead to embrace creative destruction is a daunting proposition. My guess is that rather than reform existing forms of regulation, digital life will evolve its own, organic forms of law that will better suit its unique properties.

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If you wish to read the complete interview, please contact me at interllect@mindspring.com.

Also, you are cordially invited to check out the resources at these Web sites:

http://larrydownes.com/

http://cyberlaw.stanford.edu/blog/larry-downes

http://www.bellmasongroup.com/index.shtml