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Is innovation sufficient?

Governments, business theorists and business media are obsessed with innovation. Vast sums of money are expended on government-sponsored research. Something’s bound to pay off with a ground-breaking new technology that will increase jobs, wealth and foreign-exchange earnings, won’t it? However, innovation is only the start of the process. We’ve got plenty of innovation, and we aren’t short of new businesses either. The problem is creating better, larger businesses that can foot it internationally (with full overseas operations, not just exporting).

The Economist explored the same issue, reporting on those who question the fear of US companies being overwhelmed by technological innovation coming out of India and China.
So does the relative decline of America as a technology powerhouse really amount to a threat to its prosperity? Nonsense, insists Amar Bhidé of Columbia Business School. In “The Venturesome Economy” ... he explains why he thinks this gloomy thesis misunderstands innovation in several fundamental ways.
First, he argues that the obsession with the number of doctorates and technical graduates is misplaced because the “high-level” inventions and ideas such boffins come up with travel easily across national borders. Even if China spends a fortune to train more scientists, it cannot prevent America from capitalising on their inventions with better business models.
That points to his next insight, that the commercialisation, diffusion and use of inventions is of more value to companies and societies than the initial bright spark. America’s sophisticated marketing, distribution, sales and customer-service systems have long given it a decisive advantage over rivals, such as Japan in the 1980s, that began to catch up with its technological prowess. …
I’m an enthusiastic encourager of product and service design and development, and I disagree with Bhidé about the importance of technical graduates; I’ve argued often for greater support of STEMD subjects (science, technology, engineering, mathematics and design) and development of a technology-competent leadership cadre, However, if push comes to shove, I’d rather own a business with a great brand and business model ahead of great products. You can buy innovation:
… as GE’s Mr Immelt likes to say, his firm is not great at invention, but it is outstanding at “turning $50m businesses into billion-dollar businesses”.
First posted November 28th, 2008