Disruptive Absence of Innovation

A couple of articles about the impact of innovation on the economy drew my attention this week – Both articles show how disruptive weak innovation can be, the first one below highlights some interesting recent trends.

According to a Business Week article this week there is growing evidence that the innovation shortfall of the past decade is not only real, but may also have contributed to today’s financial crisis.  The article argues that the commercial impact of breakthroughs fell short of expectations (e.g., gene therapy, broadband, and alternative energy economics).  The journalist uses among proof points stock prices and trade balance results:  The stock index that tracks the pharma, biotech and life sciences companies  in the S&P 500 dropped 32% from the end of 1998 and 2007.  Trade balance in advanced technology products went from a surplus in 1998 to $37B deficit in 2007.  An innovation shortfall may have weakened the country’s underlying productivity group.  Many economists are skeptical about placing the blame of the recession on an innovation shortfall preferring to focus on problems on Wall Street and in Washington – admitting that the US may not be as innovative as it believes is a step that remains difficult to take.

The other article is the transcript from a more conventional Deloitte executive conversation,  “Reshaping the Future – the Risks and Rewards of Innovation in a Changing World”.  It shows that innovation should be a key element of adaption for companies at a time of disruption.  Adaption takes a very narrow focus on just what can be done within your own company.  The key is to figure out where the disruptions are and then take into account the larger related opportunity.