It is time to rethink the main drivers of innovation. The key activities for successful innovation are not just company research and participating in innovation systems. One activity that is just as important is skilful information search directed towards opportunities in the world outside the organizaton or innovation system. To understand this line of thinking, we introduce the cave model of innovation.

Many continue to associate innovation with brilliant individuals working largely in isolation from the external world: the da Vinci paradigm. Indeed, von Hippel’s book Democratizing Innovation could be interpreted as following this perspective. Von Hippel would argue that a dedicated mounatineer, for example, will not find exactly the equipment he or she wants on the market. Therefore he or she will innovate to get just the right equipment. The innovation process, according to von Hippel, is often assumed to take place in someone’s garage workshop.

However, in today’s discussions, innovation most often is associated not with lonely genius but with systematic research. The OECD has research as a core indicator of innovativeness among companies. The assumption is: If you conduct research, your dreams about innovation will come true.

Innovation is also commonly associated with networks or actor systems. In this perspective, belonging to an innovation system is the key to company innovation.

Regarding innovation management, models mostly focus on factors such as internal teams, champions, selection (innovation funnel), commitment to customers, and design.

What the Germans refer to as umwelt – the surrounding world – is more or less overlooked in these discussions on innovation

All the perspectives mentioned have one thing in common. What the Germans refer to as umwelt – the surrounding world – is more or less overlooked in these discussions on innovation. Isn’t that strange?

Learning from Alfa Laval and ABBA

We are told that Gustaf de Laval invented the milk separator, which was the innovation that became the foundation for the Alfa Laval Company. However, the milk separator was first invented by Wilhelm Lefeldt some years earlier. What de Laval did was to collect information from the German paper Milchzeitung, on Lefeldt’s separator, make improvements to it and bring it to market.

The pop group ABBA was an innovation in terms mainly of the unique sound they produced. In the 1970s, Benny Andersson had searched unsuccessfully for a better synthesizer. In extending his search, he found out about a secret project being conducted by the organ maker, Yamaha, in Japan. He successfully negotiated with Yamaha to buy a prototype. The machine, called GX-1, was far ahead of Minimoog, which was the commercial state-of-the-art in synthesizers at the time. The first song ‘Does your mother know’ that was recorded using the GX-1, became an immediate hit.

The GX-1 did not enter the market as a commercial product for another five years when it appeared as the DX-7. ABBA was able to exploit this sound for many years before groups such as U2 adopted it.

Innovation seems to be about brilliant information search!

The Nobel theory of information shortage

In 1945 Herbert Simon’s Administrative Behaviour was published. His point of departure was managers’ dedication to rational decision making. This involves choosing among alternatives by relating them to goals and understanding the consequence of every choice in relation to a particular goal, which Simon describes as the necessity to ‘calculate consequences’.

In the real world, however, no-one has full knowledge about every possible alternative and its various outcomes. Reality, therefore, is characterized by uncertainty, which in turn is caused in part by limited information and in part by limited thinking capability (i.e. limited capacity to understand and interpret existing information).

Simon maintained that people are irrational

As a result, Simon maintained that people are irrational. This was shocking to traditional economists, who had always assumed that market actors were rational – based on the assumption of perfect information. Simon showed that people try to be rational within the frame of limited information and limited understanding of causality. He called this phenomenon bounded rationality, for which he was awarded the Nobel Prize in 1978.

The cave model

The cave model (fig. 1) allows us to manage parts of the problems Simon points to. This model makes the metaphorical assumption that all innovation actors are housed in a dark cave. The rock surrounding represents lack of information and lack of thinking capability. The cave entrance provides a restricted view of the outside world, for instance, including some buyers, suppliers, competitors and innovation partners.

Beyond this, but hidden from the actors in the cave, are multiple factors that are affecting or could affect current (or potential) innovation processes. These include people who could contribute with ideas, potential donors, EU-funding possibilities, potential customers, opinion leaders, and the ‘X’ factor that could decide the success of the innovation process.

Figure 1: The cave model. Source: Frankelius (2009).

The good news is that the entrance to the cave can be widened to allow the innovators to view more of the outside world. There are two ways that they can expand their view.

The first is simply to search for more (relevant) information. Because notwithstanding modern tools, such as external databases (e.g. ABI/Inform, Ei Compendex, Pharmaprojects) we can reconsider Simons’s idea that we are stuck in irrational darkness. Some companies have become very professional in searching for information. The biotech company Biovitrum and the electrical company Siemens, for example, spend millions of dollars on sophisticated searches that go far beyond simple ‘Googling’.

The second is brain-training, to think about things from new angles. The main challenge here is abandoning the old economic model (a focus on sellers and buyers) and adopting a broader model that includes the relevant X factors. Such a shift will allow the innovation actors to see new things in the external world.

The good news is that the entrance to the cave can be widened

I define X factors as ‘external factors that are (or could be) important for a specific innovation process but at the same time are not at the core of traditional economic theories’.

Conclusion: Innovation is about information

Innovation management includes some strategic challenges that are less often discussed in the innovation literature. These include:

  • being more creative in paying attention to multiple external factors;
  • mapping the organization’s existing information;
  • defining strategic information needs;
  • satisfying the firm’s information needs and being open to unexpected signals.

There are concrete ways of addressing these challenges, for example, the scanning method (Aguilar, 1967), the business intelligence cycle (Meyer, 1987) and the world mapping method (Frankelius & Rosén, 1993).

The cave model can be the springboard to a greater focus on the wider world. External information is the carrier of inspiration and the very fundament of innovation. External information is also the key to managing existing innovation processes successfully. Note that the cave model has many connections with the notion of knowledge transfer.


Aguilar F.J. (1967) Scanning the Business Environment. New York: Macmillan.

Frankelius, P. (2009) Simon’s theorem reconsidered – towards a theoretical framework for competitive intelligence. The Third European Competitive Intelligence Symposium, June 1–12.

Frankelius, P. & Rosén, C-G. (1993). Företaget & Omvärlden (The Company and the Surrounding World). Malmö: Liber.

Meyer, H.E. (1987) Real World Intelligence: Organized Information for Executives. New York: Grove Weidenfeld.

Simon, H. (1945) Administrative Behavior. New York: Macmillan.

About the author

Per Frankelius, PhD, is Associate Professor at Örebro University. He is on the board of the Swedish Entrepreneurship Forum, a Fellow of the Linnean Society of London and a member of the Royal Economic Society.

His doctoral research was on the development of the first project to use DNA-technology to develop a pharmaceutical (growth hormone). His current research focuses on innovation in the arts (e.g. opera) as well as public sector innovation.

Frankelius was Secretary-General in the government inquiry (SOU) Innovative Processes 2002–03, and leader of the project (2003–05), which led to the creation of the Swedish Business School. In 2006 he was elected to membership of the Swedish Broadcasting Commission. He has been involved with several regional strategies, and is at present employed part time by Örebro Regional Council.

His research on innovation has been presented at conferences in many countries including the USA, Russia, Hungary, Finland, and the UK. As the author of some 350 publications Frankelius has been active and vocal in the national and international scientific community and society in general.