The post Living in a globally connected world of Innovation first appeared on Building Your Innovation & Ecosystem Intelligence.

I recently wrote in a blog (http://bit.ly/mXZjC3 ) called ‘the Risks of Dampening down Innovation Productivity” that with contracting economic performance, innovation performance suffers as well.

I’d like to look at a few of the hidden or even darker sides to this, not because it is simply a Monday blues sort of thing, but there are growing implications if we don’t clarify why ongoing innovation investment is really needed and what it can often cost on society.

The tough economic times we are presently facing

We are faced with some tough times; markets are contracting, business performance is struggling to maintain its previous levels, there is increasing argument we are heading for a double-dip recession, although I feel we are already in this. Jobs are tough to hold onto and even harder to find.
Presently economic policy is driven by the need to hang on to what we have got. Is this the right approach?  Does this really deliver a growth strategy that generates new jobs or simply try to hold onto the ones we have?

Many people feel the later and anyone in a job that feels vulnerable or concerned for their immediate future, welcomes any economic stimulus that helps protect them.

The concern though is the ill wind we all feel, blowing in from the east and its global competition effect requires us to become more productive to compete. We can’t stagnate. We can’t simply tread water.

We need a clear set of growth strategies not just stimulation packages

For a growth strategy, needed for attracting new jobs it is going to be tougher, far more politically unattractive. Many of the bigger organizations recognized within our economies are already part way into a risk-adverse approach, not really experimenting or pushing aggressively for new growth opportunities that involve higher than normal investments.

Talking around a number of different issues and opportunties recently with Drew Marshall of Primed Associates (http://thinkprimed.com), he further confirmed that it seems ‘Scarcity’ has become something of a touchstone conversation with organizations recently; even those sitting on large capital reserves are framing all their innovation efforts in this context.

Large ‘chunks’ of the economic stimulus being announced in different countries presently will go into these organizations, to further strengthen their balance sheets but to create new jobs is more questionable. Scarcity can be viewed in many ways- of markets, of opportunities, of qualified people, of fresh capital, informal panic, reacting to worrying news by reducing activities.

There is a strong argument for a more dynamic growth distribution.
Innovation calls for strong experimentation, for investment, for seeking out new bolder opportunities. If we lose this real investment appetite for innovation, we lose our business dynamism and productivity growth.

Economies become increasingly ‘static’, the organizations that were inefficient either have to change their ways to expand their current capabilities, or shrink and exit.

It is the increased competitive pressures of a ‘stalled’ economy in the West, increased global competition that will create this further disruption.  If everyone hangs-in and settles for a shrinking share of the markets we simply lower the productivity growth as investments get cut back, saving are sought out and then offers of economic stimulus support are gratefully taken to help in this.

All of this ‘negative’ activity creates longer term prosperity problems. We ‘play’ into someone else’s’ hands who are making appropriate investment and we simply can’t afford to do that.

Creative destruction comes in many different forms

• Policies that support ‘selective’ industrial policies skews existing producers interests even more and often at the expense of the consumer. In a global economy others that are better equipped, more modern, more efficient can make a more competitive offer.
• If your selections for support are really subsidised favours you often don’t improve the competitive climate, only ‘healthy’ competition really does that. If you don’t invest in advancement and keep active in offering consumers improvements (not necessarily lower prices) you lose market share…..eventually. Others see these times as opportunities and invest appropriately.
• Ploughing increased investment in R&D also has a very limited short term effect. The horizons from research are longer in distance than the immediate need. By offering for example economic credits to R&D has value in the longer term but less for immediate impact.
• It is the value of deepening the intangible capital that need the focus but ‘stimulus packages’ don’t target the specifics just often the generalities.
• When we invest and support a number of our less than dynamic industries we are passing up the chance to invest in the future. New high growth firms account for a disproportionate share of job creation and can have up to a 2.5 multiplier effect over three years.
• Of course these firms are contributing small economic share to the economy but are the very seeds of our future. We need to accelerate the entrepreneurial climate, not hold it back by starving it of capital or its share of any stimulus package. Policies tend to favour the ‘mature’ not the young at heart.
• The more we can support organizations willing to invest in innovation activity, the more the uneconomical ones in the same industry shrink, this adds growth and new economic activity that is a much healthier position. This enables organizations to withstand and re-equip for this increased growing global competition but this does comes at a price of disruption.
• We need a greater ‘selective’ survival of the fittest otherwise we prelong the organizations that actually create a drag on the industry they operate within. We do need real Darwin-ism here not prelonging inefficiencies.
• As increasingly more calls will be made for deeper structural reform and reducing barriers to trade even further, you will get growth but at a cost, the cost of destruction of many of the existing organizations. Greater disruption and increased uncertainty.
• This has its ‘knock-on’ effects, the ones that become even more politically unpalatable; the shifting job market where people and their families get uprooted, in search of a new job.
• Society is facing a tough set of challenges- if organizations do not innovate, create new growth, new products and compete effectively we fail to get what some call ‘creative destruction’.
• It is the need for rapid diffusion of new technologies, new methods and designs that facilitates ‘creative destruction’ as it equips those that invest with the ‘capital’ to compete better.
• Livelihoods, established communities, institutions and economic security all get caught up in these tough decisions that have an inevitable occurance for many, at some time.
• Seeing destruction is extremely hard when it has these very personal impacts on our lives and politicians often get caught in the middle.

Subsidies, tax credits and lower taxes it is argued never quite generate the solutions promised.

There can be both ‘productive’ and unproductive churn taking place.

The need of any crafting of policy in times like these, is to look well beyond the ‘knee-jerk’ effect, we need to have clear job creating purpose underlying economic stimulus. Innovation needs to be clear, is it the means to economic ends?

More jobs, better jobs, greater productivity. The answer is yes but the real-world trade-offs do have higher destruction than we often want.

Sometimes innovation in the short term is neither giving us societal or economic good.  I recall recently an article by Michael Schrage where he suggests innovation has a “perverse and unpredictable impact on nations and employment.” He points out “innovation comes with risk and costs attached.” Innovation ensures creative destruction.

We seemingly need innovation in all its different forms and we need to continue to invest in it, otherwise we reap the cost for even more destruction. We are facing much uncertainty as we see these job losses continue from many less than ideal organizations simply shedding to survive.

It is through appropriate investment in innovation productivity we can see the rise and potential for growth. We are travelling down a hard road at present with social and political costs.

Managing innovation investment correctly today is critical but it has to be continued, even with all the disruptions it provokes.

As Michael Schrage poses in his conclusion in his article “what kind of growing economy do we want to have?”

We sometimes pay a high price for innovation.

The post Seeking Innovation Productivity through Creative Destruction. first appeared on Building Your Innovation & Ecosystem Intelligence.

Braden is the author of “Stoking Your Innovation Bonfire” from John Wiley & Sons and is also the editor of Blogging Innovation (http://bit.ly/d2c9aW ).
Braden picked up on an article lamenting the seemingly poor state of Canada’s innovation efforts (http://bit.ly/fdLeI5 ) with the view that “Innovation is literally hitting a wall”.

Braden has also commented about the recent US approach to resolving their innovation approach and believes it is limited in its understanding and appreciation of innovation.

Here in Europe we are certainly going through the same crisis of confidence with innovation, it is not producing the wealth and growth expected and needed to fuel our economies.

The EU commissioner for innovation, Máire Geoghegan- Quinn, the EU’s first innovation commissioner, has started to created a lot of positive energy around some exciting new initiatives but are they enough? My answer is simply no.

For a very thoughtful article on the EU and innovation (http://bit.ly/hCZWdO ) published in www.innovationmanagement.se by Ann Mettler, Executive Director of think tank The Lisbon Council and here she gives her take on policy and innovation.
Ann Mettler comments “One needs to distinguish between policy levers and policy drivers such as competition. It is about levers versus drivers. One key here is to look at the money and how the EU chooses to spend. Current spending priorities are the antithesis of innovation. If we continue to spend the largest proportion of the budget on the common agricultural policy we cannot with a straight face claim to prioritise innovation”.

Braden states the same within the article he was picking up upon, written  by University of British Columbia economics professor James Brander. (http://bit.ly/fdLeI5) that explores this sobering possibility of “hitting a brick wall” in a new study published in the Canadian Journal of Economics.

Branden concludes that the pace of innovation is slowing dramatically in four key areas: agriculture, energy, transportation and health care. The consequences could have a profound impact on our lives if these are slowing down. Others will pick up any slack.

For me reading about Europe and its innovation policies it does seem Europe faces an “innovation emergency” because its businesses are falling behind its US and Japanese and now China as rivals in terms of investment and new patents, graduates and investment start ups. We are facing many challenges that seemingly the Commission cannot get the necessary momentum behind to reverse some frightening trends and quess what, the developing world is rapidly catching up.

A good understanding of the policies emerging from the approaches to be taken for EU innovation can be read here (http://bit.ly/gFZ6EF ) in a series of interviews written by Haydn Shaughnessy.

So I do agree, we are actually in crisis. I also agree we really do need a new era of innovation as the old one has clearly not worked. It has to be bolder, more radical and more reflective of what innovation is providing for us.

The realization is innovation cannot be contained within borders, it needs to be encouraged wherever it goes, and the Governments need to work on ensuring they keep a stake in it. Presently this is not as good a stake as we need for the level of growth, jobs and economic prosperity.

Innovation policymakers need a better understanding of innovations parts.

• Any innovation policy is a formidable task, innovation by its nature and understanding is very broad. How can policy guide and stimulate innovation differently?
• Braden is right in his article, the heavy emphasis on applied science and investments in research and technology as the keys to innovation is not the complete answer but it is part of it, of course.
• Increasingly within the EU there is a growing realisation that all this research effort that is being heavily supported through grants and funding is falling very short in the commercialisation of inventions. There is a shift to measuring impact on society, in the delivery of benefits and that is important.
• There is an increased realization on bringing new services and products to market and this comes through the SME. This is where it becomes harder to administer and develop levers for the SME to thrive. Often the argument for Governments is to simply get out of the way and let the market manage this. In the EU, the dispersion of grants or funds will still have bureaucratic strings attached to it, so this is unlikely to happen.

The new recent US & EU initiatives on innovation
With the announcement of new initiatives on both sides of the pond I still get the distinct impression the policymakers are simply re-arranging the deck chairs on the Titanic- to do something that will soon be overtaken by events, or that contributes nothing better to the existing solutions to our current problems and that is a worry.

We do need something more radical. Policy needs to be bolder. We simply don’t need just another Sputnik moment, a realization others are beating us, we need to put that man on the moon to make sure we mobilize society around innovation.

The real challenges needed to be faced.

• The first big challenge to innovation is really a management challenge, not a research challenge, and it is not clear how the latest policies will succeed on this front. We do need to recognize managing innovation is rapidly changing the way we need to work. Is this being fully accounted for within new policies or pushed more? Remaking management to innovate is essential to deliver through.
• Innovation has fragmented; today’s ‘innovation’ means what? We do need to understand the different ‘types’ of innovation needed to perform the specific task. I am not sure the policymakers understand the really important differences between open innovation, needs-based innovation, service-dominant innovation or where Business model innovation fits for support or development to name a few. This needs to change by rethinking innovation. Break it down more. It is not an internal event; it is an external collaborative event beyond a few PhD scientists to deliver innovation. Innovation needs to engage society more, not at the end but throughout the whole innovation development process.
• There is a greater emphasis on innovation partnerships as innovation comes about at the intersection of different disciplines and relationships, so this is very positive. Bringing a diversity of people and what they can contribute together is positive. I’m not sure yet if this will be understood enough this includes the final consumer with this.
• 70% or more of GDP comes from services. Many service areas don’t depend on research; they rely on ‘gut feeling’ instinct and quickly spotting ‘breaking’ opportunities, they utilise and combine knowledge more than product alone. Speed to market or first mover advantage can be much more important and how do you account for this in policy? We need to find better ways; we need to push more of the levers that help in this. We need to develop more knowledge platforms that combine knowledge to make better intelligent products.
• I do share this opinion expressed by Ann that there is still just too close a relationship and political patronage of certain sectors that are leading to a kind of inbred relationship between government and companies, leading to lagging performance in terms of international competitiveness and protective positions that are not actually creating new jobs,  they are simply sending jobs away.
• US economist Tyler Cowen argues, there are huge economic implications if innovation stagnates. This is what lies behind what he calls The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. What underpinned the great postwar boom was the industrialisation of inventions made between 1910 and 1940. The goods that poured out of the west’s factories between 1950 and 1975 provided employment and rising real wages for the mass of the US’s and Europe’s citizens. But the “low-hanging fruit” that delivered such benefits is disappearing, he argues.

So are we actually stagnating? So perhaps the era of current innovation activity is over. We are clear of the importance of innovation as a driver of growth and the imperative to exploit it. Perhaps if Innovation was left to look after itself a little more, it could really flourish and provide real breakthroughs that did alter our lives as in the 20^th century very radically, that seemed unfettered far more.

I very much liked Ann Metters’s final comment in her article. “The biggest problem, however, is that we don’t appear to respect the process of innovation itself in the EU. Innovation is not unidirectional. It does not lead to success nine times out of ten. It is by nature experimental, disruptive and unpredictable. We have no formula for it. We can’t control it top down.

And that’s hard to accept, particularly if a lot of money and institutional reputations are at stake. So we create our formulas around R&D, shy away from risk and expect success. But it really doesn’t work that way”

So for me, the battle of ecosystems becomes the necessary innovation platform.
Great advances do exist and many are still out there hanging on the tree. We do need to get past the low hanging fruit but to do this we do need our institutions to step back and provide a new ‘enabling’ infrastructure, we need to build the scaffolding to pick this new economic fruit.

Government need to stick more to their basic knitting, focusing upon developing the conditions for building the ecosystem in which innovation, experimentation and investment can really flourish. We need supportive innovative management or investment ecology not micro-management through administrating funds.

If we want to step up the pace of invention, there has to be a huge shift in the way we think and who does what. We are all presently trying to do each other jobs, often we are falling over each other, we duplicate effort, dilute innovation competition by accepting incremental innovation as the end result.

We can’t continue that way, we all need to be bolder, to realize we are in crisis and where bolder innovation (and invention) can provide solutions.

The government needs to design markets and build institutions that promote innovation and let the markets build their individual ecosystem on which innovation, experimentation and investment come together on platforms that provide broad benefit to all that participate.

Let the market fund these, let Government encourage the enabling platforms, the brokerage to bring these together and ensure it anchors part of that for its society.

Are ecosystems and platforms the global answer to innovation acceleration? I think the more the Governments promote innovation platforms, and provide the levers, infrastructures and technical backbone to allow this to happen, the better.

I think we can see rapid acceleration of ecosystems and then innovation by encouraging these platforms and new business models that can dramatically transform many industries.

Scale and scope will be seen differently, these are global, not country-specific. Individual Governments need to help to build the global cake and ensure they get a slice of it.

It will often be messy, unclear and not as well defined as policymakers would like but that is the nature of innovation.

Focusing more on building different ecosystems becomes mainstream for innovation delivery and we usher in a new era of global innovation. We need to move beyond today’s innovation thinking so a new era of global innovation can emerge.

The post The beginning of a new era for innovation, truly global. first appeared on Building Your Innovation & Ecosystem Intelligence.