in Innovation

Who’s innovating?

While pretty much everyone everywhere is freaking out about the future rich country status of China and India (can you say self-fulfilling prophesy?), the ability to innovate is what will keep the rich countries rich. So who’s innovating? According to this EU report, the innovation leaders are

  1. Sweden
  2. Switzerland
  3. Finland
  4. Japan
  5. Germany
  6. United States
  7. Denmark

…in that order. But of course it’s the most shocking sound bite that has gotten all the attention: “…would trends for the 25 EU Member States remain stable, the gap with the US will not close within the next 50 years.” But focusing on the US generates the wrong metric. I tend to find everyone I know — in the US and Europe — underestimates how the EU influences European prosperity. It’s rarely ever discussed here in the US, but Europe is gradually building the kind of large, diverse trading environment that exists in the United States, trading not only goods but knowledge and expertise. A metric I’d like to see is the amount of innovation before and after EU initiatives, and how trading labor costs for knowledge across borders can bring innovation from the high innovation areas to the low innovation areas.

  1. Yes, but how then do we integrate these diametrically opposing soundbites? Here is the snippet from Geoffrey Moore’s post after Davos,

    “namely the commoditizing impact of global competition driving the need for a more innovative enterprise. Surprisingly to me, this appears to be a predominantly American idea. Europeans tend either to deny the need for a radical response or shirk the issue because they know their country cannot mount the political and social will to embrace such change. Meanwhile, the Americans are scared witless, don’t mind saying so, and are casting about for more effective alternatives.”

    While I find merit in what you point out, Victor, it seems to me that perhaps the reason for the lack of discussion is due to not wholly understanding that Europe is not equal to the EU. Europe is a continent composed of nation states, which I believe is what is being referred to the snippet I quote above, but the EU, what you are referring to, is a community of trading partners, whose synergy leads to the ‘whole’ being greater than the sum of the parts. Certainly there’s a lot more trading of knowledge and labor as barriers fall between nation states – common currency certainly helps as well.

  2. Right, and I think the EU is a force of change for the member states (albeit slowly) when the state governments won’t or can’t.

    I also think there’s a failure to imagine different kinds of change. We’re stuck in a “globalism=more money, less native culture” equation instead of asking, “Which parts of our culture do we want to preserve? How do we participate in the global economy while preserving those cultural elements?” Those are serious constraints requiring serious imagination… sounds like a design problem to me.

  3. Having just spent a year in business school in Europe, I feel that I can add *some* value to this conversation.

    First, I believe that you are correct, Victor, in saying that the EU is building a “diverse trading environment.” It is clear that the movement of goods, people, and ideas is gaining steam in Europe, even in the face of language barriers. I did find an unfortunate tendency to default to English as the common language, but in general the free movement of all kinds of capital (currency, people, ideas) has begun to show dividends.

    I think that another relevant metric would be the relative change in innovation, year-on-year. Countries like Portugal, whose level of innovation was near-zero in years past, are starting to realize the benefits of EU membership in terms of innovation and, consequently, in terms of GDP.

    The common currency is a nice thing for trade — but the ECB is a potential innovation killer, in my opinion. Since the EU is made up of so many disparate economies, in different economic upturns and downturns, a single rate mechanism for the euro can quash investment in R&D for countries who really need innovation, while causing inflation in countries with unnaturally low interest rates.

    There are two other major innovation issues that need to be addressed by the EU. First, the retirement age in some of the EU’s larger economies is hampering investment in R&D by forcing governments to invest in pensions as opposed to research. Second, the tendency to work less (protected by law in some countries) is perversely causing unemployment. Don’t get me wrong, I love the European lifestyle and culture — but there are tradeoffs for this lifestyle in terms of growth and innovation.

    Maybe not as much value as I would have liked to add — hopefully there’s *some* food for thought.

  4. Victor, I must agree with you here and I personally believe that the situation today that you describe so succinctly is the direct consequence/ hangover of the ‘heydays’ of globalization, exemplified by Theodore Levitt.

    One would fear, then, that 20 years from now, there will be consequences of the current obsession with ‘design thinking’ if you were to use that same analogy – one reason for a more cautious evaluation of ‘the next big thing’ in any context.

    Though, and I’m sure you’ll agree, the basic fundamentals of design, if truly understood, preclude that, because it doesn’t claim to have easy answers to problems.

    Grady, interesting point about the other side of having a common currency. thanks

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