Innovation as the means for Economic Evolution

It is suggested that economic growth is an outcome of the innovation trajectory we set. Today managing innovation is complex; often success is measured and valued by the creative destruction of others. The ability to ‘evolve’ is very determinant on the knowledge base, either within a given economy or within a ‘federation’ to bring together as something new, offering more value than what is on offer today.

The combining of the dynamics within innovations parts

Innovation is highly dynamic in its constant change but also in its needs of constant co-ordination of its parts.

I’ve been writing a lot recently on different issues that need thinking through for regaining a more sustaining innovation growth engine. Here I wanted to think out loud, about National issues that become more drags and not accelerators to innovation,  and then try to identify some of the reasons, and then finish with a personal reflection on the US versus European and some suggested actions needed for improving their innovation activity.

Often we forget to put our own innovation efforts into context, so I’d like to go up to the helicopter view here, maybe it helps us to relate better to some of the external barriers that need equal resolution, as we do often come up against these as we try to innovate within borders. Innovation cannot be contained, it needs harnessing but allowed to ‘move’ where it needs to go.

Nations are Very Different and should simply resist copying.

No one nation can just copy another, the same as one business entity cannot simply copy another, each has distinct characteristics, a history and a certain set of ‘physical’ boundaries on where it is located. Different cultures, different histories set each Nation and Business entity apart. The main differences of Nations required to innovate for jobs, for wealth creation is they simply can’t migrate to another country, or spread themselves around the globe to tap into the activities in these different places. Some try to though, with imaginative joint collaborative investments.

Each Nation have to think differently, they are all firmly anchored in their settings, in their history, their investments already made and their own unique needs.  The job of nations is to attract as broad a set of innovation activity and set about to create the ‘right’ conditions and facilitate these as best they can, and always forced to work within the economic circumstances they find themselves within. They can’t escape but they can create the ‘right’ conditions.

The Value of the Innovation System needs well constructing.

The innovation system operating within each country is made up of a set of resources, capabilities, technologies and institutions, all broadly conceived, that need to systematically contribute to the process of innovation. It is the way this is constructed in scope, scale and efficacy will largely determine the innovation prospects. Some countries have a well evolved (national) innovation system that devotes significant resources and knowledge to the system (such as the EU), others allow the market conditions to attract and generate innovation (perhaps the USA).

The argument is if you have a good innovation system you get good innovation policies from this. I often wonder if this is really the case as policies, the world over, are governed not so much by common sense or allowing for market demands to dictate but are ‘interfered with’ by politics, by intervention that often distorts and puts markets out of good order. Decisions often made have knock-on effect that were not fully considered or simply ignored. So each nation makes its innovation system choices.

Capturing and Measuring the Innovation Activities

Innovation operates at the level of people, by firms and networks of firms learning to do new things in collaborative ventures. For them the mechanisms are the important enablers not the macroeconomic structures politicians often get caught up in. What allows competition to thrive, what needs to be in place to be within a cooperative system, where are the resources needed and the knowledge required to be accessed?

It is the ability to create ‘value’ that will determine if one location over another is the appropriate place. Many nations focus hard on these factors, to ensure the set of activities needed to be undertaken by the firm can be achieved. If Nations are not focusing on this point they simply will lose the enterprise and all its surrounding knowledge to somewhere else.

Also sometimes Nations get lost in their fasciniation with statistics and measurements, with comparision. How can you really compare and contrast Nations for innovation, they are simply different? Nations often forgets what is needed is to provide a ‘track record’ and environment so as to allow breakthrough innovation to happen within their borders. This requires providing a friendly set of conditions and encouragement to simply pursue around given ideas or thoughts and find every means possible to facilitate this, look at Singapore and its government as an excellent example, of providing this committed support.

Nations best roles is providing the right climate and nurturing the culture to accommodate it through education, infrastructure and constantly encouraging outward looking thinking and clear the path to make it happen and then anchor the business entity, not only with incentives but in this commitment to fully support it for mutual ‘win-wins’. They grow, we grow.

Often Innovation National Structures Get Caught Up in Other People’s Business

Enterprises claim they ‘welcome’ government involvement, but often they don’t, especially when they see what comes with it in ‘red tape, bureaucracy, countless meetings and committees. Enterprises clearly differ in their innovation capabilities, some are minimally resourced, some are haphazard, highly entrepreneurial and opportunistic while others are highly organized and considerable resourced. How the innovation systems that are put in place to help in all the myriad variations can work is both a demanding and difficult one to balance that is for sure.

Getting Out of the Way, or Placing Yourself in the Middle

The difficulty is where does a Nation wanting to promote, develop and protect its innovation base stand? Does it stay on the sidelines allowing the ‘dynamics’ of the market decide or does it wade right into the middle and swim alongside all the parties, accepting the rough and the smooth?

It comes back to the same problem “it all depends”. Today I think if Nations want to achieve superior innovation outcomes they need to ensure particular skills and practices are present, on their soil, to manage and navigate today’s world of highly uncertain, complex and highly distributed environments by crafting, and crafting really well, the mechanisms that enable this. I do not feel allowing innovation to simply flow is the right way, it needs deep understanding of all elements of innovation effect and often within National policies this is not the case.

Where government and its agencies can dramatically help is in providing instruments and ‘healthy’ funding options to promote and accelerate innovation and hopefully anchor it deeper into its society.

Often the Choice is Hard to Let Go Of

For me, the EU is not the ideal benchmark on how to set about innovation. It is overly structured, complicated and layered. In the EU, the 7th Innovation Research Framework attempts to put this all into place. Alongside its Competitiveness and Innovation Framework program these provide the overarching themes and objectives of where innovation will contribute in society.

The EU funnels its considerable funds through either these programs or derivatives of these or bodies set up to focus and promote ‘given’ activity. It invests in partnership with regional development parties and offers structural funds yet still with all the hard work of streamlining its disbursement into ‘promising’ innovations it struggles to get that innovation momentum required.

The structure itself has a maze that thousands are engaged in, to just pilot their projects through or offer their services to manage this activity to obtain funds or train you in its understanding. This set of activities, born out of necessity, offers no real added value and continues to ‘depress’ and not ‘progress’ innovation as the EU would like.

Taking this ‘highly structured’ route to innovation is not the right way. Innovation needs to be devolved as far down as it can go. The closer it gets to the actual needs of innovation, the better the delivery of resources, funds, structures etc. When the innovation is full of unknowns, completely new technology for instance, then the resource can be effectively channeled to the organizing structure to dispense more in the “R” of research than dispersing for the “D” in development. The EU simply has not got its balance right on dispursement of innovation, both in funds and knowledge, it is to much top down.

Certainly Nations Need a Center of Innovation Knowledge and Expertise

In many countries this is ‘outsourced’ to think tanks, institutions, universities or simply review committees set up to advice government on policy. Often that advice is highly skewed to where the information is coming from. The value of innovation experts residing within a center of excellence can make a difference, it can reduce the risk of failure, improve the chances of pushing the emerging winners.

This center can balance out much of the external, often highly biased thinking. This center can constantly raise the awareness for innovation and highlight the drivers, capabilities and resources needed for growth and wealth. These centers need to translate the needs of “the know-how and why” out into the market as opportunities to pursue. The market needs to determine, detect and explore these.

Proactive Innovation Needs to be Channelled Through Entrepreneurs.

Innovation is considered one of the few proactive strategies available to promote wealth and growth. It does need organizing; it cannot be left to chance. It is working on the connectivity points; to reduce often abstract agenda’s and turn them into tangible opportunities. We need to make the approaches and thinking around innovation as coherent, accessible and open as possible.

At the heart of any future within innovation is the entrepreneur and the ability of nations to succeed in today’s environment of ‘stagnation’ is to provide the environment for these new entities and smaller ideas -rich ones to grow. Joseph Schumpeter talked about ‘creative destruction’ many years ago, back in 1942, that applies even more in today’s world. Creative destruction resulting from innovation and entrepreneurship is the force that creates sustainable long-term economic growth.

Schumpeter concluded that radical innovation can lead to a better society but it is the way you interpret this will determine the winners from the losers. In Europe the entrepreneur exploits existing structures whereas that shinning beacon of entrepreneur activity lying in Silicon Valley and in a number of other innovation hot spots of the USA seem to have a greater appetite for radical change. This has its consequences and its attractions. Venture capital has its concentration in the US; failure is not only tolerated but talked about as a learning point, a certain badge of honor even. In much of the rest of the world failure is a heavy stigma that constrains and is often judged harshly by society.

The USA Has the Inbuilt Structure and Capabilities, Only if it simply would realize it and execute on a given (and agreed) plan but will they ‘grasp’ it?

If the US was to really study its emerging innovation activity, the value of entrepreneurs and small business holders to the economy and job creation (yes, really), and bring together that ‘collective learning curve’ of all the positive forces to facilitate entrepreneurs and SME growth it would have such a economically powerful lift to its current milaise. The difficulty is the activity undertaken in the Entrepreneur sector is often not captured, so it is never really methodically enhanced upon, support only is provided in piecemeal fashion, not in a comprehensive roadmap.

If only policymakers could realize the potential of supporting entrepreneurs fully, it has its new launching point to the future. Equally it can quickly position itself as the vibrant ecosystem ‘core’ for innovation start up and acceleration.

The US has most, if not all of the factors needed in place, it just needs a collective recognition of what it has, what it can provide and that is simply, going back to what America use to do best; to provide the best possible conditions to pioneer, to explore, to extract, to venture forth and simply innovate. It is through the recognition that the small business is the economic generator of jobs and through recognizing and then intensifying the factors needed that would then allow entrepreneurship to flourish there would be a real path to growth and fresh economic activity.

Reigniting that American dream

The American dream is still around, it is still part of the make up and often the American gets highly caught up in the adventure, that pioneering need; innovation can certainly feed that ‘desire’. This is a great trait to have, willingness to have a go. This time to reignite this desire it has to recognise that it (the US) needs to move across a new innovation landscape or prairie, a global one, where entrepreneurs are free and able to roam where they want to, for those best ‘feeding grounds. This is where the US can grasp and firmly anchor entrepreneurs in their backyard as it has nearly all of the enablers and through this ‘anchoring’ it might help transform its economy back to an engine of value and real worth built back on that currently lost entrepreneur ‘spirit’ it has been in the past famous for.

To do this policy needs to ‘anchor’ everything that entrepreneurs require and seek to protect this by all the means possible, not in protective practices but in proactive practices and stimulus. Clear the current innovation ‘wood for the trees’ so it can then allow the emerging best to grow tall and give the new growth needed for the ‘ecosystem’ it will attract around it.

This was originally submitted and published in for their topic of the month. Some modifications have been made for this seperate post.

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