In academic, government, and media circles it is fashionable to speculate why business fails to innovate. It is trendy to propose government driven solutions. Excluded from these chic conversations is the entrepreneur, the engine of innovation.
Buckets of studies conclude we lag on innovation. It is not unfair to suggest that these studies are nothing more than public platforms supporting handouts and tax breaks to dominant firms in the automotive, aerospace, pharmaceutical, telecommunications, information technology, pulp and paper, and manufacturing sectors. The studies set the table for a feast at public expense.
Typically, the studies disconnect innovation from entrepreneurship. They fail to acknowledge, innovation is driven by entrepreneurs found in a start-up or a corporation. The studies ask “What public policies does government need to endorse in support of innovation?” rather than, “What creates sustainable long term innovation?” They are asking the wrong question! In thirty-five years of working with Entrepreneurs I do not recall one saying “If only we got a tax break for R&D we could innovate and take this product/service to market.”
The innovation debate widely misses the mark. Capitalism is an expression of human creativity, driven by ambitious aspirations and individual effort. It begins with the start-up entrepreneur or the corporate entrepreneurial CEO who has ambitious aspirations for his firm. Entrepreneurs, as Peter Schumpeter claims, are the agents of innovation and creative destruction. Think of Josiah Wedgwood, Henry Ford, Alfred Sloan, and Thomas J. Watsons as models of entrepreneurial innovation. These men invented entire industries. We must also include Ted Rogers, Bill Gates, and Steve Jobs as modern day engines of innovation. Each of these men had ambitious aspirations for their organizations. Aspirations based on bringing new products and services to market for which customers were willing to pay. In the case of Jobs, he did not create anything new but by his tenacity discovered what others did not see.
These men did not subscribe to the collectivist ideas of Princeton Economist Paul Krugman. Collectivists encourage the expropriation of the productive individual, the innovative entrepreneur. They are the enemy of entrepreneurship and innovation. These intellectuals support government intervention in the economy. They like the idea of government bureaucrats picking winners and losers by allocating government grants, creating targeted tax incentives, and bailouts.
There is not one scintilla of evidence demonstrating that tax incentives or grants result in sustainable long term innovation. Government needs to abandon tax incentives, targeted grants, and dirigiste public policies as tools to promote innovation. To prosper we must encourage entrepreneurship, the engine of innovation. As a society we must support values which encourage entrepreneurship over collectivism and dirigisme. The advantage of this approach is it eliminates the need to spend billions on government grants, tax incentives, and bailouts. We simply need to change what we value.
The opportunity to innovate is at our door step. A generational global economic tectonic shift is occurring. The Big Shift has brought major change to the organization’s external environment. Change brings opportunity. To capitalize on opportunity, leaders must lead the transformation of their organization. To affect their ambitious aspirations they need to create an organization whose culture and reward system supports entrepreneurship and innovation. They must rethink its vision, mission, and goals. They need to craft and execute a business strategy which supports the development and marketing of innovative goods/services that customers want to buy. This needs to be coupled with a corporate process to measure the success of innovative ideas and their implementation. No government bureaucrat with pockets full of grant money, tax incentives, and bailout cash can supplant the creativity of the entrepreneur to innovate and achieve the ambitious aspirations he has for his firm, its people, and customers. If we are lacking in innovation it is because the very values we espouse discourage entrepreneurship. The entrepreneur is the forgotten engine of innovation.
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