Glimmers and Signs of Innovative Health in the Commercial Internet

What are the signs of healthy behavior in an innovative industry? This seemingly simple question isn’t so simple to answer in a quickly evolving industry such as the Internet. Commercial behavior resides inside a complex value chain, which is a set of interrelated activities that produces a final product for end users. No single firm controls the value chain, and the quality, price, and user experience arise from the complex interactions between those participants. Moreover, over time many parts of this value chain have undergone innovative improvements, and no reasonable observer expects those improvements to cease tomorrow. There is no agreement about which criteria observers and policy makers should use to assess the performance of the commercial Internet. Ever since the commercial Internet first emerged, there have been arguments about how to best organize its value chain to achieve maximum value for the most users. Disagreements have not diminished with time. If anything, this debate has grown shrill as the number of commercial interests and business commentators have grown. This essay makes a novel contribution to this topic. It identifies patterns of healthy commercial behavior indicative of an innovative industry, and illustrates how to observe signs of such behavior in information technology markets, such as the Internet. Stated broadly, the essay identifies healthy behavior that correlates with desirable marketwide outcomes, such as improvement in products, lower prices, new capabilities, or other innovations that lead to productivity improvements among business users.