Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The Canary In The Coal Mine - America's Innovation Imperative Is At Risk

Posted by Tom Foremski - October 9, 2009

[Guest post from C. Josh Abend, founder of Innovation America, a consultancy established in 1976. He has worked with some of the largest corporations in the US.]


By C. Josh Abend

Many people relate to the story of how fragile canaries are used in the mines to warn of imminent danger of gas, fire, and explosion. When the canaries keel over, its time to leave.. The weakest and most fragile elements in the environment are the ones that signal catastrophe and are the first to succumb. Then we should take survival steps or perish. We are now getting such a national warning... and it is about innovation.

The canaries at risk represent our "secret sauce" of economic success. That is our vital, independent, start-up companies, created by passionate, entrepreneurs and innovators ; they represent Americas legacy of inventiveness, willing to put themselves at risk for a new idea.; and such ideas have contributed to our enviable economic assets and made us a world exemplar of innovation. Today every small business deserves, help, but to extinguish our entrepreneurial "innovation feed-stock" could inflict an irreversible wound at a time we will depend on this process more than ever.. One danger of neglect could be a domino effect inhibiting job creation, growth, and our global competitiveness. Some might consider that an implosion.

Why such a dire prediction?. Any small business if viable can create income and jobs for its owners and its local employees. But only an innovation derived business or technology, offers scale; when successful, it creates a much larger multiplier of opportunities and jobs in more than one location. It can produce new plants and offices, offer a new tax source, and it tends to seed a continuous birthing of new innovations and economic growth. Apple for example has been one such admired start-up for over two decades.. It is time industry officially elevated Innovation beyond its current buzz word status. It remains one the most powerful engines we use to create economic wealth, new products and services. Can we risk the possibility that this engine might sputter and stall-out? In today's economic rescue parlance, some industries are considered "Too big to fail". Doesn't bailing them out without a requirement for a measurable innovation policy and operational plan risk the failure of billions of stimulus dollars ?. The entire innovation community is waiting for the chance to help get that right.

Between a rock and ... no place

Start-ups are always challenging, but now viability is becoming more marginalized. Opportunities for capital are drying up; seedling companies have become ever more dependent on the venture capital community which oddly expresses little or no economic or social accountability, to its greatest (free) source for harvesting new opportunities. They are after all not the Salvation Army, so their mission is not to save, but to profit . Some VC's it appears have reduced or parked their funds ; but of course they still listen to pitches in the event another Google should turn up. To be fair however some do encourage and mentor student entrepreneurial clubs, but doesn't that make good sense for them?

Antique solutions

That now leaves the original source for entrepreneurial capital which is family, friends, fools, the mortgage, and the owners personal nest egg, if any. With the economy in free fall those sources are drying up or are have already vanished. What about SBIR and other federal programs? For one thing they mainly invite innovation for narrowly defined goals and technologies. They are pre-bail out solutions and work poorly when there is hemorrhaging that requires a rapid CPR response. They are more suited for savvy grant writers, and companies that can afford to wait months for working capital to arrive and they are often won by experienced contractors. Stimulus money might address that problem but name of the game now is finding the right fund which might otherwise be spoken for.

With out a score card, how can you tell if you are winning or losing?

The US, while endorsing innovation in every new initiative and stimulus program has yet to produce any official strategy or policy to protect or insure innovation and entrepreneurship. As long as start-ups pay their taxes most governance views are one of benign admiration; but that simply means they while unfettered they are left free to "sink or swim" on their own.. Getting actual numbers on how many belly-up annually compared to those that make it remains a guess. Some idea of the innovation, survival and death rate would at least give us a national innovation yardstick. No one seems to care enough to keep track of who swims, who sinks, how many, when, and why? I keep hoping to see those numbers in the "Wall Street Journal" or at least offered by our national economic watch dogs; am I the only one that regards it as strange, that we don't get a quantifiable innovation pulse ?

Beat at our own game?

Because the US has not developed a professional innovation policy for support and growth we have no mechanism for replenishment and maintenance. For example many, only associate the word entrepreneurship and innovation with youth. Yet we have an equal abundance of brilliant senior and 50 + innovators that cannot play in the game. The reason is simple; only youth are free enough to devote long periods of payless dedication and still be able to survive a financial melt down. China gets around that using our old incubator model, except theirs is bigger and better. They have built several hi-tech cities which have affiliated 4 story business incubator buildings, chock full of about 100- 200 subsidized small business. Those tenants do not have to worry about ever gambling away their mortgage; (they don't even own a house). The central government must see this as a good investment in innovation factories that will insure generating future technology and economic returns. By using an aggregation of multiple brain- power, it doesn't even have to be so selective which leaves room for more winners to emerge. More innovators will produce a higher yield of new innovation-based business and technology; placing more bets on the table means a higher percentage of winners is assured; its simple arithmetic. Keep in mind China's boastful claim in 2006 that they would take world innovation leadership in 15 years. That leaves us about 12 years to get in a race that may have more consequence than our loss to Sputnik.

Our innovation policy, if it can be called that, seems based somewhat on a national sense, of competitiveness. Only one innovation entry gets to win the big prize and that winner is expected to demonstrate extraordinary financial fortitude and bravery. OK for John Wayne, but does it make sense when we need more winners, not less? Why are we so painfully-selective in seeking one assured high stakes winner. Is it our craps-table culture of winner takes all, and everyone else throws down their cards and goes home empty-handed? VC's cherry pick for very highest returns leaving the rest to expire or go on to life in "death valley". The not so lucky founders may ultimately get lucky, but more likely they will run out of cash, and then join the ranks of the unemployed.

The canaries in the coal mine are sending a clear message. That message is we are playing a losing and reckless game without realizing its hazards...and we really don't have to. There are truly better innovation models and systems we can explore and can create today to maintain US innovation leadership and trump global competition.

Who in government, and business is out there, that can we count on to step up to the plate?


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