Michael Mandel writes in his June 3rd cover story for Business Week that “During the past decade, innovation has stumbled. And that may help explain America’s economic woes”. From Facebook to flat-screen televisions, we’ve been lead to believe that we’ve entered into a new age of innovation unmatched by the past.
But like Mandel, I disagree. I think we’re spinning our collective wheels. Biotech, alternative energy, health care, and in almost every other industry, has produced little impact on the innovation front. While we’re all still enamored with the Internet, social networking, and cloud computing, old and inefficient systems in other key industries have remained in stubborn place. The US government owns 60% of GM as a result. This is one example in a sea of many sad cases.
Then there is the problem of rebranding. While I believe that corporate America has had opportunities to make real impact, they’ve taken the straighter path to profits by rebranding old models and technology. Cereal, automobiles, and financial products come to mind.
Perhaps motivation and risk tolerance have taken a hit. The dot-com burst, 9/11, Enron, and the housing crisis are all black-swan type of events that have the ability to change the way people think and do business.
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After the dot-com bubble burst, investors steered clear of companies that had no product, no customer base, and no real ROI plan (ok, this is a good thing). Where would the speculators place their efforts next? Housing?
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After 9/11, US foreign policy became a sticking point for many foreign investors, who perhaps don’t like to be told “us or them”.
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Enron led to Sarbanes-Oxley, an innovation choker that had (and has) the potential to punish organizations for taking R&D risks. But Enron and other failures of its time exposed some serious flaws in how US companies are allowed to run their finance departments.
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And while people were making money in the late 90s and in the early part of this decade, banks were lending to anything with a heartbeat. The Fed was a major facilitator, keeping interest rates too low. The resulting foreclosure rate today is unbelievable (how many on average per minute?). Investors — including banks — will be far tighter with credit, stifling innovation even more.
Moving Forward
I would like to see the US — and other nations — create an Office of Innovation. I would like to see companies (private and public) free to explore new R&D projects. I would like to see universities continue to get large grants for scientific study and research. And I would like to see more kids enter the fields of science and mathematics.
I would also like to be alive when quantum computing becomes reality.
Things are generally slower in mainland Europe (as I can attest), so the EU has to double their efforts on the innovation front. While the European Commission has a good innovation policy, and has recognized that the EU has great potential, there is still a lot of ground to cover.
I hope to talk more about this in the coming months.
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