Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back

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9781416532682: Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back
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Not long ago, Americans could rightfully feel confident in our preeminence in the world economy. The United States set the pace as the world's leading innovator: from the personal computer to the internet, from Wall Street to Hollywood, from the decoding of the genome to the emergence of Web 2.0, we led the way and the future was ours. So how is it, bestselling author and leading expert on innovation John Kao asks, that today Finland is the world's most competitive economy? That U.S. students rank twenty-fourth in the world in math literacy and twenty-sixth in problem-solving ability? That in 2005 and 2006 combined, in a reverse brain drain, 30,000 highly trained professionals left the United States to return to their native India?

Even as the United States has lost standing in the world community because of the war in Iraq, Kao warns, the country is losing its edge in economic leadership as well. The future of our prosperity, and of our national security, is at serious risk. But it doesn't have to be this way. Based on his in-depth experience advising many of the world's leading companies and studying cutting-edge innovation "best practices" in the most dynamic hot spots of innovation both in the United States and around the world, Kao argues that the United States still has the capability not only to regain our competitive edge, but to take a bold step out ahead of the global community and secure a leadership role in the twenty-first century. We must, though, take serious and concerted action fast.

First offering a stunning, troubling portrait of just how serious is the erosion in recent years of U.S. competitiveness in innovation, Kao then takes readers on a fascinating tour of the leading innovation centers, such as those in Singapore, Denmark, and Finland, which are trumping us in their more focused and creative approaches to fueling innovation. He then lays out a groundbreaking plan for a national innovation strategy that would empower the United States to actually innovate the process of innovation: to marshal our vast resources of talent and infrastructure in the particular ways that his studies of innovation have shown lead to transformative results.

Innovation Nation is vital reading for all those Americans who are troubled by the great challenges the United States faces in the ever-more-competitive economy of our twenty-first-century world.

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About the Author:

John Kao is a leading expert on innovation. He taught a popular course on the subject at the Harvard Business School for fourteen years, has also served as a visiting professor at the MIT Media Lab, and as Distinguished Visiting Professor of Innovation at the U.S. Naval Postgraduate School in Monterey, California. In addition, he is the founder of Kao & Company, which advises top-tier Fortune 500 business leaders as well as government leaders around the world. He has specialized in instructing organizations in the methods for making innovation happen. Dubbed "Mr. Creativity" by The Economist, he has started several companies, in areas as diverse as biotech and innovation management, and he is also a Tony-nominated executive producer of theater and film, including Sex, Lies, and Videotape. He is also an accomplished jazz musician and lives in San Francisco, California.

Excerpt. Reprinted by permission. All rights reserved.:

ONE

BRINGING INNOVATION TO INNOVATION

Do something. Do something to that, and then do something to that. Pretty soon you've got something.

-- Jasper Johns, painter

Not long ago, while prepping to deliver a speech at Google headquarters in Mountain View, California, I decided to eat the company's cooking and Google the word "innovation." Though I expected to see a lot of hits, I had no idea just how popular the word would be in the Googly universe of "all the world's information at your fi ngertips." Wham, the search came back -- 330 million references to innovation.

Those of you who, like me, constantly scan the new arrivals in the business section at your local bookseller may be aware of a similar phenomenon. Innovation -- or at least the notion of innovation -- is hot. The titles tell the story: Open Innovation, The Art of Innovation, Fast Innovation, Customer- Driven Innovation, The Innovator's Dilemma, The Innovator's Solution, Dynamics of Innovation, Seeds of Innovation, and so on. New titles appear nearly every month in an endless proliferation of arguments, a debate about innovation that is itself symptomatic of our core problem with innovation.

I'm not exaggerating when I say that the biggest obstacle to developing a national innovation agenda is not how many Ph.Ds or how much venture capital or how much wireless capacity we have. Rather, it's our level of knowledge about innovation that counts. And the ways we currently define it do not, for the most part, fit new global realities. Neither comprehensive nor specific enough, the plethora of defi nitions actually masks an underlying lack of consensus. In short, we know everything and nothing about innovation.

I know firsthand that there is confusion about innovation because I constantly receive calls from people -- some quite nervous at first -- who identify themselves as some version of a new "innovation process owner," meaning they are in charge, somehow, of innovation in their organization. My first question is typically, "What do you mean by innovation?" The variety of responses I've received over the years would fill a very long list, but it would be as short in internal consistency as it is abundant in quantity.

Neither is experience a guarantee of expertise. When I teach senior executives about innovation, I sometimes use a slide showing a number of management terms scattered across a page. Innovation is among them, as are strategy, creativity, transformation, and leadership. I ask the executives to define innovation and describe how the various concepts relate to one another. Their responses are typically as scattered as the words projected on the screen. Is strategy part of innovation or innovation part of strategy? How far in the future should innovation initiatives be targeted? Is innovation about being creative or is creativity about being innovative?

I believe we are in what might be called a pre- Copernican period with regard to innovation. It's as if we don't yet know which heavenly bodies revolve around which others. We don't even know where all the planets are located, nor do we have a viable theory of planetary motion. We rely on metaphors and images to express an as yet imprecise and unsystematic understanding.

Little wonder that one of the fi rst tasks I set in my teaching days was to ask my students to defi ne innovation, prompting more than a few of them to mutter under their breaths about "semantic hell." No matter. The importance of being as clear as possible about the journey on which you are embarking, whether as an inventor in your garage or a scientist in a federally funded lab, can scarcely be overstated. Your understanding shapes, in turn, how you measure innovation and what you decide to do about it. If innovation is equated with intellectual capital, you'll count patents; if it's an educated workforce, you'll count Ph.D.s; if it's infrastructure, you'll count broadband networks and bits per second; if it's culture, you'll count pieces of public art and symphony orchestras.

Many of us assume that the tools and methods of innovation are mature, simply waiting to be deployed. The truth is otherwise; we have few if any mature standards for how to practice innovation and measure the effectiveness of our efforts, let alone for how to train people to become master practitioners.

In contrast, consider the mature discipline of accounting. The need for audits became necessary as organizations became more complex, and a management technology was developed in response. If you wanted to know where a company's money came from and where it was deployed, you could find the answers by going to the accounting department, talking with the chief financial officer, looking

at online financial data, consulting Generally Accepted Accounting

Principles (GAAP), and scanning annual reports and 10Ks. But

when it comes to innovation, most organizations lack anything like a

comparable level of tangibility or management method.

What is more, there is an aura around innovation that clouds our perspective and often introduces an emotional component to the rational. Hmm, over in this corner is the sexy, expeditionary, wealth-generating, cool stuff, while over here is the structured, bureaucratic, legacy stuff. Which of these is more moi? We can safely assume that nobody wants to be known as un-innovative. But if innovation is seen as just another management mantra, another synonym for "good," then the cause is lost. The truth of the matter is that innovation is hard work, and it has passed through many incarnations and many attempts to explain it over the years.

Probably, the most widely shared misconception about innovation is that it's all about science and high tech. The rise of microlending, one of the most powerful innovations in recent years, shatters that notion.

Economist Muhammad Yunus came up with the idea of microcredit in 1974, after giving a woman in the village of Jobra, Bangladesh, $27 from his own pocket to help her make bamboo furniture. Previously, women in a village like Jobra either had no access to capital or they had to pay usurious rates to local loan sharks. Realizing that poor women were actually excellent credit risks and that giving them small loans could transform an entire local economy, Yunus formed Grameen Bank in 1976 to institutionalize what he called microcredit. The bank has now loaned more than $6 billion to more than 7 million borrowers, and Yunus took home a Nobel Peace Prize in 2006 in recognition of his innovative efforts.

Microlending is not the only social innovation of recent years. We can also cite the advent of impartial consumer testing of products, carpool lanes on busy highways, carbon-offset schemes, and a thousand other examples.

Nontechnological innovations abound in business as well. The classic example is Herb Kelleher and what he's accomplished at Southwest Airlines. Built on the simple idea of short-hop flights, no-frills service, and a clear, low-cost fare structure, Southwest has achieved phenomenal success and changed U.S. air travel in the process. Or how about John Bogle, who invented the index fund for individual investors and built the Vanguard Group of investment companies? Dov Charney proved with American Apparel that clothing could be manufactured in the United States by workers enjoying good wages and benefits. And what about W Hotels? Who would have thought a hotel chain could be hip?

These examples are not intended to discount the vital role of science and technology. Indeed, breakthrough technologies regularly set the stage for staggering waves of innovation. We're in the early stages of one of these transformations now that has been enabled by Internet-related technology. It is also easy to agree with analysts who reckon this century will see explosions of innovation, thanks especially to the revolutions in life sciences, nanotechnology, and clean technology. And there is an increasing amount of discussion on the innovation potential of our fast-evolving understanding of the brain and consciousness.

The point is not that technology isn't crucial -- it is -- but that we must think more broadly. My own defi nition of innovation is both integrative and aspirational. I defi ne it as the ability of individuals, companies, and entire nations to continuously create their desired future. Innovation depends on harvesting knowledge from a range of disciplines besides science and technology, among them design, social science, and the arts. And it is exemplifi ed by more than just products; services, experiences, and processes can be innovative as well. The work of entrepreneurs, scientists, and software geeks alike contributes to innovation. It is also about the middlemen who know how to realize value from ideas. Innovation flows from shifts in mind-set that can generate new business models, recognize new opportunities, and weave innovations throughout the fabric of society. It is about new ways of doing and seeing things as much as it is about the breakthrough idea.

Seen in this way, innovation is always in a state of evolution, with the nature of its practice evolving along with our ideas about the desired future. That is why innovation has meant different things at different periods in our nation's history, a state of flux that has made it difficult to fashion a consensus around any one meaning of innovation itself.

Version 1.0 of our national innovation capability, for instance, featured individual visionary inventors. Central casting gave us Benjamin Franklin and his kite, what we might call the artisanal model of innovation.

Geniuses in their workshops and garages, men like Thomas Edison and Henry Ford, later came up with inventions that inspired large-scale enterprises, ushering in version 2.0 -- the industrial model of innovation. Business requirements gave rise to mammoth, centralized corporate research groups that reached their zenith in such venerable institutions ...

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