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Tuesday, October 23, 2012

Entrepreneurship Trumps Innovation

I am very concerned about America’s future for many reasons, but here’s a big one: The country’s leadership has a misguided understanding of what will get us out of the current economic mess. While leaders understand that America is in an all-out global war for good jobs, they think the key to competing and winning is innovation. “Jobs will come from innovation,” many of them seem to say, “so let’s bet the country’s future on that.”

They’re wrong. A great innovation is wonderful, but it has no value whatsoever until it creates a customer. For a recent example, look no further than the Internet, which was a brilliant, U.S.-government-sponsored innovation. We wouldn’t even be talking about the Internet today if America’s great risk-taking entrepreneurs hadn’t turned it into a colossal economic engine, creating millions of customers and jobs, and changing our lives. One of the great economic bull runs in history was spurred by entrepreneurs commercializing the Net.

The bottom line is this: Entrepreneurship matters more than innovation and America’s leaders really need to know this.

Now, sometimes people will say, “Well, innovation and entrepreneurship are the chicken and the egg.” Wrong analogy. Innovation and entrepreneurship are the cart and the horse, and entrepreneurship is most definitely the horse. The cart that is innovation just sits there until it is harnessed to a great business model and a supremely talented entrepreneur.

Right now, I see America as the best in the world at intellectual development, and we're highly intentional about this. Our country has tests to find stars at early ages and enroll them in accelerated programs -- first high school and then scholarships to the best university system in the world. This works, and it has led the United States to be a global leader in innovation.

But America must become even more intentional about developing entrepreneurship. This would mean finding high-potential entrepreneurs at a very young age, testing them, and building rigorous entrepreneurial curriculum through high school and college, with world-class internships and mentoring programs. Until America does this, its economy will never again grow enough for the country to remain the leader of the free world.

Originally posted on LinkedIn. Follow Jim Clifton on LinkedIn’s Influencer network.


Dr Gene Nelson said...
October 24, 2012 at 1:26 AM  

As both an innovator and entrepreneur, your perspective fails to capture some important nuances.

First, the evolution of the internet into the dynamic engine of economic growth that you describe was the result of the inputs of a large number of innovators and entrepreneurs following the initial innovation called ARPANET in the late 1960s.

Second, access to capital is a necessary condition. I chaired and organized a conference in conjunction with the Ohio Academy of Science in 1991 on technical entrepreneurship. Even with the assistance of the Ohio Department of Development, there was a huge funding gap because the investment community did not understand software development ventures at that time in northern Ohio.

keepingitsimple said...
October 26, 2012 at 12:37 AM  

I would whole heartedly agree with this article.

We tend to look at entrepreneurship as companies getting started. If we reflect upon established companies, this statement becomes more significant.

In large companies with tons of R&D funding, innovation happens but bueracratic nature of the large organizations stifle entrepreneurship. Hence most of these products don't see the light of the day...

Anonymous said...
October 26, 2012 at 2:12 AM  

Logical fallacy that because entrepreneurs have created many jobs, that they can necessarily continue to improve our economy from where it is today. If entrepreneurs could solve all our unemployment and economic woes, they would have done so by now, for no one is stopping them. Unfortunately, entrepeneurs can only succeed where there is demand. We need to warm to the idea to that this country is passing into a new "semi-eutopic" era in which it has everything it needs and much more, and it can have it all despite only fully employing about 70-80% of the working-age population of the country. Technological advances allow for this. We have not adapted to our new situation. High employment can still exist now, but only if we understand that it will most likely have to be government's job to create those jobs which capitalism could not. It will need to be a societal investment to create jobs which have high value, and yet no one individual will pay for. Recognize the value of the scientist who decodes the human genome and uses it to pinpoint and remove undesirable mutations. Entrepreneurs won't pay for these types of endeavors. They cost too much and the risk is too high. It makes perfect sense for society to pay for them though, because the alternative is for a portion of our work force to sit idol. Wasted.

Gregory Bogosian said...
October 28, 2012 at 10:51 PM  

Anonymous, you are forgetting one of the first principles of economics, that human beings have unlimited wants. We may very well have all that we need and much more, but we will never have all that we want, or all that we are willing to pay for. Ergo, there shall always be demand, and thus there shall always be room for more entrepreneurship. Also, to say that "no one is stopping them [entreprenuers]" is highly misleading when you consider the ever increasing number of federal, state and local regulations and our compromised financial system.

Anonymous said...
October 30, 2012 at 10:10 AM  

Our entire school system from elementary through college is designed around preparation for a "job". Gone are the days when school provided entry points to trades such as plumbing, carpentry, auto repair and the like. However entreprenial "talent" does not need to be identified per se, but allowed to blossom. Those who will succeed in such endeavors will do so given opportunity, not mentorships, elite boosting in college etc. They may not even belong in college in the first place. States then need to get out of they way of entreprenurial development. Try starting a business in California, and even the most brave hearted will shudder. Kick out politicians who tax, tax, tax business and we will open the door to entrepreneurs to blossom.

Sanjiv Karani said...
November 2, 2012 at 5:10 PM  

The entire article highlights Jim's limiting view of what 'entrepreneurship' and 'innovation' really is. His statement "A great innovation is wonderful, but it has no value whatsoever until it creates a customer" totally misses the underlying premise of innovation.

Innovation is practical translation of ideas into new products, services, processes, and/or business models that create true and tangible value for the customers. Without real customer and real value creation, there is no innovation, it is still an idea or invention in search of real customer(s).

Entrepreneurship on the other hand is the pursuit of opportunity by anyone without regard to risks and resources currently controlled. Peter Drucker pretty much drove this point home when he said, “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth”.

In summary, entrepreneurship does not trump innovation, entrepreneurship breeds innovation and innovation breeds entrepreneurship.

Anonymous said...
November 6, 2012 at 3:39 AM  

Responding to Gregory Bogosian: The fact that all people have wants is true, of course, but a want is not a demand. If you are unemployed and have no money, you can't have anything you want or need, and so you're not creating demand. Perhaps the most efficient way to stimulate the economy is to give money to the poor. They will immediately spend that money to meet their needs and wants and the money will then circulate through society as intended until it inevitably finds itself trapped in a large bank account where it can do no more than cause inflation. I didn't say that there's nothing impeding enterpreneurs. I just said nothing is stopping them. Wherever this is demand, someone will step forward to create the supply. To say that entrepeneurs create jobs is really what's misleading, because it implies that supply precedes demand. The opposite is true. We as a society need to create enough demand to employ our entire work force. Your point about unlimited wants becomes highly relevant if we decide as entrepreneurs to bend all of our efforts to provide for the wealthy. We could use our unemployed to fulfill all the desires of the wealthy rather than employ them in places where they may create widespread value. This would indeed be a tragic and debasing regression of society. A modern example of this type of behavior is telemarketing. Well understood to be an almost completely useless service, it usually insults both the caller and the callee. Nonetheless, it is a service that wealthy corporations routinely pay for when they have more money than they know how to wisely spend.

Anonymous said...
November 9, 2012 at 2:52 AM  

I have a limited knowledge of economics outside of a couple of undergraduate university courses; my field is psychology. I love to learn about this content, and i find reading these discussions thought provoking. With my disclaimer complete, a comment: it seems these discussions moved away from the primry ecology. As I recall, principles of economics are not always generalizable to different cultures. I don't mean between western and eastern so much as I mean the diversity within the nation (the statistically validated statement comes back to me, "there is more diversity within a nation than between nations."). India, without a doubt, surpasses a million times in reality my precept of their diversity. What I am interested in hearing more about is whether you think the general recommendations of the author, and your own comments can really benefit the majority of Indians, and would this trickle down effect really make it to the slums, the minority religious groups, the provinces, etc. I recognize that the didactic relationship of innovation and entrepreneurship is functional at most, if not, all levels of society (hindered greater at some status), but surely there is an in-sustainability due to social, financial, and other hurdles will exist for so groups over others. This aside, I still believe a discussion more about the context of all the specified people at hand if worth considering.
Regarding telemarketing, shhhh... You may just cost another few thousand Indians' their offshore jobs. Thanks for your comments

Anonymous said...
November 9, 2012 at 2:59 AM  

Stupid smart phone, or rather me the user, I commented on the wrong article.

Dmitri Likhachev said...
April 11, 2013 at 6:16 PM  

I agree that economic growth relies mostly on entrepreneurship rather than innovation, but, as Ray Bradbury mentioned, it is because of this excessive striving to commercialize every new idea that the manhood still hasn't visited Mars. There should be a sensible balance between entrepreneurship and innovation. Otherwise we will end up encouraging those gifted children to think up ways how to make money out of air.

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