Corner Office-Innovation = Jobs
By the time this article is printed, the midterm elections will be history, so it will be time for the newly elected politicians to start fulfilling their campaign promises to increase jobs. Trouble is, the sustainable answer to unemployment is not a simple remedy that fits into a 30-second soundbite, so I’m not really sure whether any of our political leaders have a good solution.
It’s just not the same world it used to be, is it? When we endured past recessions, workers were laid off for a while. When the economy started to recover, we went back to work, if not at the same company, at least in the same industry.
This time, there isn’t enough demand to get everyone back to the jobs they had before. New businesses are not springing to life, and existing businesses are limping along on life support, recovering slowly. As I’m writing this column, the jobless rate is at 9.5 percent and is expected to creep up to 10 percent by the end of 2010. Some think it will take at least five years to recover the 8 million jobs lost in the recession.
Unemployment is a complex problem that will require complex solutions. Contrary to common political rhetoric, my sense is that the real-life reason why U.S. unemployment is not abating quickly and jobs are continuing to disappear is a systemic problem that has developed over the past decade. In short, we have lost our focus on innovation.
Ever since the birth of the United States, we’ve led the world in innovation—new ideas, new forms of government, new ways to build an economy, new ways to improve the standard of living, new industries, new products and services, new technologies, new entertainment, and the newest breakthroughs in science. For the past 200 years, we’ve invented “it” and the rest of the world has bought and copied “it.”
However, we are now at a time in history when the rest of the world has not only caught up, but is passing us in some critical areas.
Fewer Science Grads
The intellectual equity of a nation is its competitive advantage, and the ability to create that advantage depends upon the higher education of its citizens, especially in the areas of math, science, and engineering. Probably the most credible measurement of that intellectual equity is the number of doctoral degrees in science and engineering. For the U.S., the trends don’t offer much encouragement.
According to the National Science Foundation’s Division of Science Resource Statistics, at least 16 countries have a higher ratio of first-time university degrees in natural science and engineering relative to college-age population that the United States does. This fact, the foundation says, “may eventually translate into a corresponding shift in research capacity, scientific output, and innovative capacity.”
The foundation’s research also shows that the number of doctoral degrees in science and engineering in Japan has doubled in the past decade. Developing Asian countries, which started from a very low base in the 1970s and 1980s, have increased their doctoral output several times over. By the late 1990s, students in China and South Korea earned more PhDs in science and engineering than did students in the U.S.
European countries also have focused on strengthening their science education. France, Germany, and the United Kingdom have almost doubled their doctoral degree production in the past two decades.
Meanwhile, according to the World Bank, U.S. spending on research and development has been slowing down. The world’s richest country now ranks seventh in the world in terms of total research and development spending as a percentage of gross domestic product. Put simply, other countries are passing us in R&D expenditures relative to their GDP and are supplanting the U.S. in innovation. How do we expect to innovate if we don’t invest in research?
Another roadblock is a continued reduction in patent filings and venture funding. I mention these two issues together because they go hand in hand.
According to a 2008 Berkeley Patent Survey, three-fourths of executives at venture capital–backed start-ups say that having patents was vital to getting financing. As Paul R. Michel (a former patent appeals judge) and Henry R. Nothhaft (a technology firm CEO) noted in a New York Times op-ed last summer, not all patents create jobs or new industries. But I’d be willing to bet my dog (whom I really like) that the number of jobs that would result from successful patents would be more than the 8 million jobs lost during the recession.
In my view, business executives must lead the charge by focusing on innovation and investing in R&D. It’s my experience that innovation becomes part of the company culture when an organization can invent a combination of strategies and metrics that fit its operations and capabilities.
There is no cookie-cutter approach to innovation. According to a 2007 Forbes article by innovation consultant Stephen Wunker and George Pohle, then the global leader of IBM Business Strategy Practice, companies’ innovation practices generally match one of the four following models:
• Marketplace of ideas (the Google model) Companies hire bright, creative minds who seek out ideas from many sources, including close interactions with customers and partners. Ideas are tested quickly internally within a decentralized system of trial and error, with a preference “for validating ideas in the market rather than with detailed upfront analysis.”
• The visionary leader (the Steve Jobs model) These companies are led by executives with insight and creativity who motivate their employees to pursue a vision shared in common. The innovation processes at these companies are built around well-understood procedures in order to carry the vision forward into daily duties.
• Innovation through rigor (the Samsung model) Led by executive focus and prioritization, these companies create new ideas through formal processes designed to produce systematic results. These companies invest a lot of resources in research and development and create innovative new products through a rigorous process of rapid and thorough testing of prototypes.
• Innovation through collaboration (the Vodafone model) This model relies on partnering with outside firms to evaluate opportunities, quickly select ideas to test, and implement the ones deemed best to pursue. These companies excel at understanding customer needs and seek out solutions wherever they can through those relationships with other firms.
Creating jobs isn’t as simple as hiring people back to do the same old work in the same old economy. We now have a global economy with emerging leaders other than the U.S. The only viable way to create sustainable job growth is to use the collective intellectual equity of our educated citizens, to be imaginative and creative in order to achieve innovation that results in new products and services.
As business leaders, we need to insist that our government, especially our newly elected politicians, takes a longer-term view beyond campaign rhetoric. We must place a higher priority on the intellectual equity of our country by developing an education strategy and then properly funding it. That’s how we can truly turn the negative trends around in a sustainable manner and assure that the next generation of U.S. citizens prosper and succeed in the global economy. It’s our patriotic duty to accept this challenge.