The Small Worlds data measure applied to business innovation

In my book, Information-Driven Business, I introduce the concept of the “Small Worlds” test on information.  In summary, this measure determines the relationship between complexity and separation in any data.  One of the best ways to apply this test is to use it to determine how innovative a new product or business idea actually is.

There are two things we can learn from the past two decades.  The first is that new and truly disruptive businesses almost always use information in a new way (examples include the way new credit card issuers use loyalty schemes and Amazon’s ability to recommend purchases).  The second is that the information associated with truly disruptive businesses more closely adheres to the Small Worlds principle that separation and complexity have a logarithmic relationship.  That is, adding more complexity in the information only results in users having to navigate a small number of extra steps.

For instance, the telephone network of the early twentieth century was requiring a linear growth in telephone operators to keep growing, but by the second half of the twentieth century it had innovated to ensure that moving from the simplest transaction (calling next door) and the most complex (calling the other side of the world) only added a small number of exchanges.  Similarly, iTunes doesn’t just allow you buy music online, rather it innovates by reducing the number of steps required to relate information on your iPod to the artist and album that you are interested in.

You can preview through Google Books the chapter of Information-Driven Business defining the “Small Worlds” measure.