Recently another Hollywood Video store closed in my neighborhood. I searched the web for the latest news on this company and found, on their website at hollywoodvideo. com, the following message:
Thank you for visiting hollywoodvideo.com. The company is in the process of exploring new ways of delivering entertainment to you and we anticipate that this website will be under new ownership shortly.
We know the story quite well. Hollywood Video could not sustain its business model. Netflix replaced them as the household name in entertainment. Hollywood Video failed to reinvent itself, and as a result new owners will come to the rescue.
Time and again, we have witnessed similar stories of obsolescence. In 2005, a colleague of mine estimated that the average life expectancy of an S&P 500 company was about 10 years, compared to 65 years when the S&P was founded. With the recent financial crisis, it's likely to be less than that today. I was fortunate to have spent 33 years with Procter & Gamble, a company that has been around for 173 years. P&G has survived because P&G has stood for Passion & Guts, along with the necessary rigor to drive change over the years. When a company, brand, or country, for that matter, loses the passion to reinvent itself and the guts to make the hard choices to lead the change, it will not long survive. Ability to operate the current businesses with professional management is no longer sufficient to sustain growth in today's global economy. To compete effectively over the long term, a corporation needs goals and an innovation strategy to deliver on those goals. Without a guiding strategy, the company wastes resources and tends to focus on short-term churn to satisfy shareholder requirements.
In this fast-moving, global economy, nations face similar challenges. Like a corporation, a nation must utilize its internal resources wisely to increase the overall GDP year after year, just as corporations pursue increases in earnings. That can result in a short-term focus that misses the big picture and strands the country economically and politically. The United States is in such a critical phase of its life cycle; our dominance has been challenged economically, demographically, technically, and politically in recent years, and the last recession has exacerbated the situation. Like Hollywood Video, the nation needs concrete goals and an innovation strategy to sustain its leadership position and maintain the standard of living for its citizens.
And like Hollywood Video, which is still figuring out what its "new ways of delivering entertainment" will look like, the United States has so far failed to create the next major industry to drive the economy in this century. The manned space program and the Star Wars program created innovations and new industries that fueled growth in the second half of the twentieth century. In the 1970s and 1980s, we declared war on cancer and HIV, sparking another round of innovation. In the 1990s and into the 2000s we had a boom in Internet businesses, mobile computing, and social networking. But no equivalent catalyst has yet emerged for twenty-first century innovation. Allocating budgets for education, science, and technology without a comprehensive, holistic innovation strategy is no longer sufficient. And we cannot rely on the private sector to lead the national innovation strategy without incentives to take the massive risks required. It is time to focus national science and technology policy to propel the economy for the next century.
So what should the U.S. innovation strategy look like? Although this discussion will ultimately require the engagement of business leaders, policy makers, educators, economists, and politicians, I'd like to suggest a few broad areas for emphasis.
Where to Play
In devising a national innovation strategy, we must pick the platforms that have the greatest potential for job creation, leverage our talents and natural resources, and fill major national and global needs. These are the areas that will yield sustainable economic advantage. I believe these platforms are energy, city and building design, and agriculture and aquaculture.
Energy
Energy is quite literally the fuel that drives the nation's economic engine. Energy falls into two categories: energy required for transportation and energy required to power industries, homes, and personal needs. Secure supplies for both elements are critical both to our national security and to our continued economic prosperity. Achieving energy security requires collaboration and coordination at every level to support a wide range of initiatives, ranging from developing alternate means of transportation and implementing conservation practices to developing diverse energy sources, together with developing and installing a smart grid that can move the power to where it's needed.
As a nation, we have become dependent on gasoline and diesel fuel for transportation, and about 90 percent of our electricity is generated from fossil fuels. In both cases, the key is to reduce our dependence on fossil fuels by reducing consumption and diversifying sources. To accomplish this, we must implement regional policies to develop geographically appropriate alternate energy technologies such as nuclear, solar, and wind power. At the same time, we need to develop alternate battery technologies, such as sodium-based batteries, to enhance battery storage and longevity, so that wind and solar energy can be more efficiently stored, transported, and accessed.
Government should also encourage and incentivize the continued private-sector exploration of other possibilities for energy conservation and generation. Promising areas that are being explored around the world include:
* Shale-oil and gas extraction practices that minimize environmental impact;
* Microorganisms that turn trash into fuel and clean contaminated soil and water;
* Cheaper technologies to liquefy coal and natural gas;
* Engineering innovations that allow excavation of high-sulfur coals with minimal environmental impact;
* Wireless transmission technologies to move power more efficiently from its source to an electrical load;
* Better forecasting techniques to make wind power more practical; and
* Storage and maintenance technologies to reduce the cost of solar power.
All of these technologies--and many others--are in various stages of development. We should not as a nation pick energy favorites. We need every source we can muster, along with more aggressive conservation measures.
City and Building Planning and Design
Many of our cities are being left behind in the wake of the industrial flight that has accompanied globalization. This is happening even as more and more responsibility for economic development and social well-being is being returned to state and local levels. Urban renewal is a key challenge for cities struggling to revitalize flagging economies and provide opportunities for growth while tax revenues and city payrolls shrink. The design of space--whether it's a city plaza, a high-rise building, city traffic layout, or a green park is a key element of urban renewal and a strategic platform for innovation.
We have seen, in the past several decades, a number of advancements in space and city/building design, mirroring social, scientific, and technological evolutions. From mid-twentieth-century designs that relied on insular spaces to facilitate command and control to a proliferation of shared spaces allowing for productive collisions of people and ideas, our work and living spaces have evolved, and the process is continuing. Today, we have offices; tomorrow we'll work from home or from timeshare desks in different buildings. Architecturally, we'll need to develop the flexibility to adapt to these changes through simpler and more flexible space design and smart deployment of IT infrastructure to connect people to their environment and to others. Accomplishing this will require architects to look to new sources of inspiration for their designs; for instance, an architecture inspired by the design of integrated circuits could enhance connectivity in unexpected ways. Whatever its inspiration, the new architecture will combine with technology advances, such as systems and sensors that monitor and react to energy consumption patterns, to produce buildings that reduce consumption and create better living environments. Thoughtful design and engineering of city plans will also help conserve energy by optimizing foot traffic, creating better mass transport options, and allowing for more spontaneous networking among residents while building on a city's cultural heritage and resources.
Many cities around the world are already experimenting with such a vision. In King Abdullah City in Saudi Arabia, residents, workers, and visitors can take advantage of smart infrastructure-related services that foster entirely new, connectivity-driven experiences for residents and promise to achieve optimal productivity in a sustainable manner. In the United States, we need an advocate for "cool cities," a network to stimulate the sharing of ideas and experiences between cities, and we need to incentivize cities to drive change in their communities.
Agriculture/Aquaculture
The science and business of agriculture has changed tremendously in the twentieth century. Farmers now must feed 10 to 20 times as many people per farmer as they did a century ago, and the multiplier is growing as the world's population rises. Fortunately, we have had many advances in technology to help farmers produce more food per acre. Going forward, however, achieving the needed productivity will require more advanced technologies to improve seed quality; robotic tools to control pests and do the work of planting and harvesting; and sustainable farming practices, such as "meticulous agriculture," a system that uses advanced sensor technology and surface mapping to tailor the application of seed, fertilizer, and irrigation to soil conditions, improving sustainability and reducing cost.
We also need to consider how food is moved from farm to consumer. Shipping produce across the country consumes energy and compromises the quality of the food. We need a vision for growing perishable foods near Walmart parking lots and city centers rather than concentrating agriculture hundreds or thousands of miles away. This can also create opportunities for urban renewal. I have heard of plans to turn vast areas of the city of Detroit into farmland, both to have crops near people and to provide employment. I wonder how many more parcels of land are available that can be turned into farmland to support the food needs of local communities.
Sustainable aquaculture can also play a key role in the transition toward safer, more environmentally and economically sustainable food sources. By offering a viable and sustainable alternative to fishing wild stocks, aquaculture can bring strong economic benefits. We need innovation in the fast-growing areas of aquaculture, including genetically modified fishstocks and aquatic remediation to increase productivity in fish farms. The task is to develop domesticated lines of aquatic animals for farmed production, improving aquatic animal health and growth efficiency, conserving water resources, and developing novel diets and feed ingredients.
How to Win
Unfortunately, simply pouring money into R&D will not ensure a flow of innovation. We need the right investments, not necessarily more dollars. We need to focus our financial resources on innovation priorities, rather than entitlements and earmarks. Realizing our innovation goals will require hard work in a variety of areas, including education, funding for basic research, and tax policy.
Education
A comprehensive innovation strategy is driven first by human brainpower. We need to ensure that we have the right talent pool to do the work that enhances our productivity. We can compensate for needed technical talent by importing it, but we must also develop our own talent because we now compete for technical talent with the world. To ensure a secure supply of technical and scientific talent, we must fix our woeful K-12 education morass. We need to be prepared to explore radical solutions to improve our education system, without eliminating any possibilities that might improve outcomes.
Support for Basic Research
Corporations seldom fund basic research because it produces few bottom-line benefits in the short term, although it clearly leads to discontinuous positive outcomes in the long run. Government-supported basic research can help bridge the gap, producing the basic knowledge that forms the foundation for game-changing innovations. A government research program needs to focus on critical opportunities in key areas, such as those I've outlined. We already have over 100 federal laboratories staffed with brilliant scientists; we need to find a better way to create university-federal lab-industry partnerships so that fundamental research, applied research, and exploitation of the opportunities are carried out in a methodical manner and the benefits are shared by all the parties. It's not about turning dollars into knowledge; it's about turning dollars into knowledge that the private sector can turn into jobs and dollars through innovation.
Regulation and Taxes
Producing a steady stream of innovation will require a nurturing environment, framed by clear, minimally invasive rules and appropriate tax structures. Regulatory structures must be transparent and limited to those required for environmental protection and worker safety. At the same time, education programs could help alleviate fears and illuminate opportunities for further innovation in such controversial areas as nuclear energy and bioengineered products.
We should also explore how tax structures can be used to shape behavior. Some have argued, for instance, that a mileage tax would both encourage energy conservation and drive down greenhouse gases by changing driver behaviors. Unfortunately, the R&D tax credit, a major tax program to spur innovation, has been implemented in a way that encourages a short-term focus; the pattern of expirations and extensions leads companies to plan incremental R&D projects to match the incremental, short-term approach of the tax credit. This approach cannot lead to disruptive change. The system of R&D tax credits should be overhauled to match incentives to the need for more and more open innovation. Thoughtfully implemented, such tax credits could incentivize both start-ups and larger corporations to focus on the kind of discontinuous innovation that creates jobs for the long term.
Innovation Networks
Beyond providing regulatory and tax structures that encourage and support innovation, government can also act to create an environment that nurtures innovation by providing resources to catalyze the kinds of interactions that produce innovation. Open innovation, which brings in ideas and expertise and outsources noncritical activities, has had a major impact on innovation in the corporate world. Government can learn from this approach and help to expand it. For instance, government reach and resources can facilitate multilingual innovation networks that help major corporations connect with entrepreneurs, problem solvers, and innovative small businesses around the world. Such networks can harness the world's diversity of thinking to drive faster, better, and cheaper innovation. At the local level, schools, governments, and corporations should use social networking and other connectivity tools to reach stakeholders and facilitate problem-solving.
Government could also help to create another network to help support innovation. A network of retired (or downsized) senior leaders could become a talent pool to help develop a new generation of innovation masters and guide us through the rejuvenation of our national innovation system. The YourEncore network is a good example of how such a network might function. Another is Innovate Nevada (IN), a small group of recently retired executives with backgrounds in many different areas. We have developed a charter, and are on a mission to help the state reinvent itself by developing an innovation strategy.
Conclusion
The future is full of dilemmas, and there are few absolutes. In this volatile, uncertain, chaotic, and ambiguous world, both companies and nations need to be very clear about where they are going--and very flexible about how to get there. If our nation is not to go the way of Hollywood Video, we need to make the hard choices required to return us to a free-flowing and rapidly innovating society.
The alternative is stagnation and decline.
DOI: 10.5437/08953608X5403003
Nabil Y. Sakkab retired as senior vice president of corporate R&D and a member of the leadership council and innovation committee of the Board at Procter & Gamble. During his career at P&G, he had several assignments in Cincinnati, Ohio; Brussels, Belgium; and Kobe, Japan, leading innovation for both developed and developing regions on a variety of businesses. He joined P&G in Cincinnati in 1974,following a PhD in chemistry from the Illinois Institute of Technology and postdoctoral studies at Texas A&M. He is the author of several scientific and innovation management publications, a co-inventor on 27+ patents, and an honorary professor at Tsinghua University in Beijing. He served on the IRI Board from 2000-2004 and was awarded the 2007 IRI Medal for Leadership in R&D Management and the 2007 Holland Award for best RTM article published that year. Nabil is currently serving on the Board of Directors of Altria Group, Inc., and chairs the innovation committee of the board. He is also a board member for Givaudan, Aplion Medical, Biowish Technologies, Creata Ventures, and Deinove. In addition, he is active in various nonprofit groups and has a passion for fostering innovation, developing innovation strategies, and organizing for fast, global execution and collaboration to drive success. nsakkab@me.com
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