After some recent #innochat debates (www.innochat.com) around innovation including the future of Nations, of the US, and of innovation itself and how it needs an organizing framework to work more efficiently, I wanted to dig a little deeper, to get my own head around all of this. We do have real problems in the world and we need to find solutions but something strange is happening and I was not sure I understood it. So I’ve been on a little investigative journey that is beginning to make some good sense, well at least to me.
A host of financial contagion has been heaped upon us progressively in recent years.
We have gone through a host of speculative bubbles, rising debts, global recessions in the recent years and we are still standing. Our real financial assets seem to have been refinanced a few times to enter into our jargon the use of ‘toxic assets’ that we are still working through. Many of the developed world’s economies are far too weak to create jobs or achieve the economic growth spoken about by our politicians. Increased government backed spending is heading us to another bubble based on imported price inflation, rising commodity prices and steps that might take us back to increased taxes, higher inflation and lower public services. Even if some form of deal is made at the eleventh hour to raise the debt ceiling in the US, it will only be a short term stop gap. We seem to be in deep trouble.
Yet we still seemingly function, in some parts extremely well, others badly- why?
Where I do puzzle though, is why do our economies still function? We seem to be still standing, well hopefully, as I write this blog with the US debt deadline fast approaching of August 2nd. There is a set of arguments that build on the thinking that we are measuring the wrong activities. We are still caught up in the economic theories of the 20th century of models and doctrine.
According to some, a new theory is emerging in the last decade, the one called “innovation economics”. It is based on knowledge, technology, entrepreneurship and innovation and these take a more centre stage and are combined forces that are mutually dependent.
The issue is that the ‘force’ of innovation has not yet been fully grasped in economic models or government policies. It is ‘lagging’ partly as many of the dominant advisors advocate older models of measures that ignore or simply have not been adequately captured enough to influence or change the economic thinking around the importance of innovation. The present older economic thinking is still based on allocating efficiently, searching for equilibrium, trying to ‘force’ rationality into markets, thinking individuals are constantly searching for this but are they?
Innovation economics works in different ways according to what I’m still trying to fully understand (if I ever will). Firstly there are constant ‘disruptive’ forces that keep the markets constantly out of equilibrium or disturb it simply to knock it out of this ‘even’ state. Resources are invested not according to ‘edict’ or just policy levers alone but seek to go where there is a natural ‘intersection’ where the convergence of those factors that meet the ‘need’ just simply combine. These respect no borders, they go where they seem to work, and these are where innovative activities thrive.
Nothing is as predictable as we have come to expect in the past, it is this seeking out extraordinary changes in new ideas, concepts and connections that has a powerful new force behind it for this new economic force. We live in simply ‘chaotic’ times and we need to manage this accordingly, to ‘grab’ the breaking opportunites and to ‘anchor them’ onto our shores, by providing the innovation factors that are needed and attractive; to commit and grow them around mutual partnerships and dependencies.
Recognizing this quantum change
If we accept or get a ‘sense’ that “innovation economics” are driving economies, often in hidden ways, then the quicker we identify the critical levers of innovation the better. The old school of capital accumulation and its value (to stockholders), budget management thinking of surplus or deficit, social spending all get challenged in very different, perhaps unique ways. Governments and the different sectors (business, non profit, communities) need to work out the building blocks of innovation in far more smarter ways than today.
We need to value agility, flexibility, knowledge adoption and rapid diffusion; we need to view productivity in different ways. People, skilled in different appealing ways, using the new value drivers have increasing value that needs greater premium recognition.
The new innovation productivity need
The measurement of how each organization is improving its productivity needs some rethinking. It is the ‘relentless’ focus on technology, on knowledge acquisition, absorption and diffusion. It is opening up the ‘black box’ of actual innovation activities going on in organizations and valuing these.
We need to focus on the adaptive efficiency that constantly takes place within organizations to spot trends, react to them and absorb the learning to adjust and innovate through these, to provide the new innovation coming from this set of activities.
This calls for investments in knowledge, in infrastructure that focus on activities that spur new productivity approaches that lead to innovation. These are not just the traditional ones based of lower costs, still judged today, as the winning value but on the new innovation value scale of ‘new generation activity that is occurring’.
We need a deeper innovation grounding of internal workings
It calls for a deeper grounding in what is actually going on inside organizations within their innovation activities. It is combining of these four emerging forces of knowledge, technology, entrepreneurship and innovation that make the growth models of tomorrow and innovations ‘black box’ as our need to really get into to understand.
What are your thoughts?
We need to find a new economic order that reflects the changes that have beeb going over in the last thirty years, know we have to learn there real value points. We unleashed a series of events in pursuit of opening up across global markets which are destroying much of the past in whole communities, shifting jobs and wealth creation, complex trading policies, chronic imbalances in tax and managing through national vested value generating stimulus packages. The world is simply different, our need is to find the economic levers of this new world.
We are seeing speculative investments that are always seeking constant new ‘feeding grounds’, erratic monetary policies along with the quest for low interest rates and increased monetary supply leading to speculative asset investments. Some past lax oversight, forced consolidations for organizations to continue in existence when they should be closed, and changing capital reserve requirements are all adding even further to uncertainly and draining financial reserves.They are equally draining our personal reserves of respecting the institutions charged with managing these. These need understanding better.
So we do need some very different economic thinking, one that reflects the change in the economy. Are the new denominators of value, based on creation through innovation? It does seem the concept of ‘innovation economics’ based on knowledge, technology, entrepreneurship and innovation might hold something important within its emerging theories to consider? Do you see this also?