Is now the moment to be thinking about innovation?  After all, we are still struggling to climb out of the Great Recession which was in part caused by innovative financial products which turned out to be ‘toxic’. 

Yes, indeed! 

Over half of the companies on the 2009 Fortune 500 list began during a recession or bear market. Downturns can breed innovation and entrepreneurship, and spark new and much needed sources of growth to pull us out of recession.  And innovative approaches are necessary for tackling pressing global problems like climate change, infectious diseases, food security, clean water, and poverty.  These are some of the messages of the new OECD Innovation Strategy. 

In the end, human ingenuity and the entrepreneurial spirit are the essence of innovation.  What role can government play?  Fundamental R&D is mostly undertaken and funded by governments, and provides the foundation for future innovation. Science is vital to innovation, especially to generate “step changes,” such as the invention of the transistor or the first vaccine. The development of the Internet also owes much to public investment. 

But there is much to innovation than R&D.  Innovation depends on a cocktail of factors.  For example, people should be empowered to innovate by education and training, an entrepreneurial culture, and opportunities for consumer participation.  And innovation should be unleashed through open and competitive markets, access to finance, and a risk-taking culture.  Innovation increasingly involves collaboration between different enterprises, sometimes in different countries, with people from different professions participating – sometimes even artists.

Innovation is not in any way restricted to advanced countries.  The emerging world is becoming a hotbed for innovation with the $3000 car, $300 computer, and $30 mobile phone.  Such ‘frugal innovation’ is a dynamic new trend as ideas emerge when trying to make products affordable to low income people.  Many innovations are also finding unexpected benefits.  Mobile phone banking is enabling microfinance to expand financial inclusion to vast numbers of previously unbanked people most notably in the Philippines. 

Some innovations bring risks such as innovative financial products today and trains that crashed too frequently in the 19th century.  The appropriate response is to reduce and manage those risks -- not to stop progress. 

Centuries ago the great Indian strategist Chanakya said ‘arth karicheya vidya’ which means ‘create wealth from knowledge’.  This should still be a great source of inspiration to us all today!

Reference:

OECD Innovation Strategy

http://www.oecd.org/pages/0,3417,en_41462537_41454856_1_1_1_1_1,00.html