The Mysterious Black Box

For many years people have sought insight about innovation prowess and patent values from patent data.  This has led to the creation of a number of proprietary algorithms that use patent statistic to deliver this insight.  The sellers of these algorithms often require end-users to take on faith that the algorithms used are correct and have been scientifically examined for their correlation with the reported findings.  Thomson Scientific’s recent publication of the Thompson Reuters Top 100 Innovators top 100 global innovative companies brings this requirement of faith to mind not because of the companies included on the list – it looks like those on the list are innovative – but because of the exclusions.  An obvious omission is China.  The creators of the report themselves said they were surprised no Chinese companies appeared on the list within the top 100 global innovative companies.

Given the surge of innovation taking place in China, it seems unlikely that all Chinese companies should be absent from a list of the top 100 global innovative companies, but they are absent from the Thomson list.  For more reasons why, please see Jeff Lindsay’s excellent post titled Invisible Innovation: The Blindness of the West to China’s Innovation Story.

The absence of Chinese companies on the Thomson list is more likely due to the algorithm Thomson uses than any lack of innovative prowess in China.  I could be wrong in this supposition.  I do not have the data.  It’s in a black box.  I do know the universal principle that what you see depends upon the lens through which you look.  I also know that you can miss a lot if you do not change lenses every once in a while.

As far as identifying innovative companies, there is probably nothing wrong with the algorithm Thomson uses.  It is a measure of statistics taken from companies known to be innovative to see what other companies fit the profile.  That filter will point people in the direction of innovative companies.  Any error in reporting the results may really rest with the interpretation of what the algorithm says, and more importantly, the authority given to that interpretation by its recipients.

As an analogy, if the editors of Entertainment Weekly® (EW) list a movie as one of the top 100 movies of all times, then it is a safe bet that the included movie is pretty good.  Still, the reader should add the corollary of “according to how EW sees movies.”  If you understand EW’s way of measuring greatness, then you can understand why some other great movies might never have had a chance to make the EW list, and then decide for yourself how that affects the authority you give to the entire EW ranking.  This is likewise the case with any tool that uses patent statistics to determine innovativeness and valuation.  In this case with patents, it is the top 100 global innovative companies as Thomson sees innovative companies.

The problem with black boxes is that people with decision-making responsibilities may give too much authority to a black box algorithm, Thomson’s or otherwise.  The financial crisis of 2008 shows where that kind of faith can lead.  Writing this post from a US perspective about innovation, and therefore looking through a US centric lens, I am concerned that US policy makers may give too much authority to this report on top global innovative companies – especially given that it is generated by a very respectable company in the IP industry – as a way to show that everything is hunky dory with US innovative leadership when out in the field we can see very clearly the rise of challenges from overseas.  That can lead to policy decisions that push investment to innovation-friendly initiatives down to a lower priority – I mean, we are already ahead, so why not spend the money elsewhere?

To the leaders of those innovative companies in China and other countries who wonder why they didn’t make the list, I wouldn’t be too concerned.  This report has no impact on your innovative prowess.  Reality is what it is, and sometimes the best way to get ahead is to avoid the competitive spotlight anyway, at least at first.  Was it not your own most famous general who said, “When you are close, appear to be far away”?

(Image credit: edvvc)

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