Higher order systems create new sources of value

Industrialised components do more than cut costs — they provide the foundation for entirely new products and markets. As once novel capabilities become utilities, they are combined in fresh ways to generate economic value. Electricity enabled radio, telephony and computing; cloud infrastructure enables countless digital services.

Unit margins may fall as something commoditises, yet volume increases and new opportunities appear above it. The challenge is spotting which higher order systems will succeed, since many experiments will fail before a few become the next generators of wealth.