Making Innovation Flourish

The failure of market failure: Towards a 21st century Keynesianism

This morning saw the launch of a new NESTA provocation by Will Hutton and Philippe Schneider on The Failure of Market Failure: Towards a 21st century Keynesianism.  The provocation updates the age-old debate about the efficacy of state intervention versus laissez faire, and in so doing is fiercely critical of economic frameworks used to inform policymaking in the UK. The primacy of the concept of market failure in policymaking - the view that state intervention can only be justified when it can be demonstrated that free markets cannot do better - comes in for particular criticism.
 
The provocation updates the debate in two ways: first, by reference to developments in institutional economics, psychology and behavioural economics which the authors see as jarring with the behavioural and motivational assumptions traditionally made by policymakers; and second, by interpreting the current financial crisis as prima facie evidence that markets need government ('markets fail more often than they do not'). If the UK is to successfully innovate, the authors argue, policymakers must recognise the importance of the government and the private sector working together, not falsely pitch them at opposite sides.
 
At this morning's policy breakfast to launch the Provocation, Will Hutton argued that a number of crucial policy interventions in the UK have been sacrificed at the alter of market failures. For those working on policies to support future innovation and creativity, where well-defined market failures are by their nature difficult to anticipate and evidence, this is a sobering thought. Will finished his comments with a call to the British academic economics profession among others to respond to the thesis set out in his Provocation. Going ahead NESTA looks forward to playing its role in facilitating the debate.

Tim Berners-Lee on the future of the web

Just finished listening to Jonathan Freedland interviewing Sir Tim Berners-Lee live on stage at the Innovation Edge conference.  It's always odd seeing your heroes, and for once, he didn't disappoint.  TBL was charming, self-effacing, and more importantly, made interesting and intelligent points on the future of the web.  NESTA has helped fund the Web Science Research Initiative which he has set up, and he outlined most of his reasons for setting this up in an all-too brief video linkup.

What lessons can be learnt from the way he developed the web?
You need to give people space and time to find solutions.  Give them a chance to try and see the bigger picture, to find the generalised solution where possible.  And if you are asking or funding someone to develop a solution then don't micromanage them.  Specifically, if you tell them what to produce in too much detail  you'll end up with the same old ideas you had. 

And bear in mind that the end destination can come from left field - he quotes a possibly apocryphal story of Einstein's 'if we knew what we were doing it wouldn't be called research.'.

What are his hopes and fears for the 'adolescence of the web'?
Berners-Lee was very keen to point out the distinction between the people who use the web (and therefore the society that this creates or reflects) and the technology, or 'substrate' as he calls it, that underpins the web. 

Fundamentally, he sees the web as 'humanity interacting' or more prosaically, as 'humanity connected'.  Technology should not get in the way or dominate.  So, the web should be neutral, enabling new ways of democracy, new ways of doing science etc...
 
What is the rationale behind web science?
"We found that people doing interesting things tended to fall between various stools - computer science, psychology, economics etc.  The web needs to be thought of less as a series of connected computers to 'humanity connected'.  There are more web pages out there than neurons in your brain.   It's a very big system - one which we rely on - and it is not obvious what its properties are?   Will the blogosphere keep a check on the press?  Or will the blogosphere turn into a rumour mill and spread hatred etc - as part of a cultural revolution?
 
Is the web stable?  TBL is arguing that we need a science to understand this.  And we have a duty to understand it, so that we can take care of it.  He spoke of the unexpected or unintended effects of the micro leading the macro - eg ebay's role in driving down the prices of new items.

How fragile is the web?
Commenting on the 'megalapse' or the potential for the web to meltdown.  TBL argues it's more subtle threat than this.  Will the web be a force for the good?  The web may work fine but the society may not be one you want to live in, eg the use of email has arguably passed the tipping point of spam usage.

Is the future of innovation about collaboration?
The world is full of groups working and making their 'own language' .  The web should be making this more transparent and enabling more people to contribute.  Challenges in medical advances can only be done collaboratively, the problem is simply too big for an individual to keep in their head.  How does this work when one person's head has half the idea and if another has the other half.  How can the web help enable this solution?

Well, how can it?

*Update - podcast now online here

The Innovation Manifesto

Suw Charman's recent exploration of the sources of innovation touches on a lot of the same themes as my earlier post and issues a warning about the current way in which people & businesses think about innovation. In reading through Suw's post, the key messages start to feel like tenets of an Innovation Manifesto (if such a thing existed*). Julia Styles summed these up nicely in her comment:

Innovation does not have a size...it can be a small change that helps solve a big problem.

Innovation is not in a vacuum, and anyone might have a solution, including young people and customers.

Innovation will succeed in business when the business accepts innovation as part of their corporate culture.

It's important to stay connected to technology and what's going on in the outside world and new media if we want to really be innovative.

And finally,
"Innovation is not a buzzword to be repeated in meetings, it's an action, a culture, a day-to-day activity."

While I agree for the most part, I'd adapt this one slightly: "Innovation will succeed in business when the business creates a corporate culture where innovation can thrive."

It's a small change, but important I think. Creating a climate that's conducive to innovation has to come first (only then will you be able to accept innovation as part of the culture). In my mind, the single biggest hindrance to innovation within a business is a culture that is closed, or overly hierarchical, or one where the pressure to perform means people can't see the forest for the trees.

I'd also add a few of my own tenets to the manifesto, namely:

• Innovation cannot be forced, and often not even planned.
• Innovation isn't always about creating something totally new. Adapting, combining and applying existing ideas in new ways can be just as innovative.

Do you have any other principles to add to the manifesto? What's your take?

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* Turns out a few others have already made a stab at their own Innovation Manifestos, including John Kao, who made his into a book (I'd be interested in your review of this if you've read it). Of those freely available online, my personal faves are this one (for its pure idealism) and Matthew May's Elegant Solutions (for its practical advice and applicability). It's also worth a look at Mind of the Innovator, another PDF from Matthew May on the eternally-inspiring site ChangeThis.

Net taxation could kill collaborative innovation

Soon the US government will decide whether the ban on taxation of internet access should continue or not. If the ban is lifted, Americans could be taxed per access or amount of bandwidth used instead of the current blanket per month fee for broadband. Not only is this a backward step for consumers (remember dial-up?), this clearly has societal implications, allowing only the moneyed classes to readily access high-bandwidth content such as video, or to stay online for long periods in Second Life or MMORPGs. But there's so much more at stake than missing out on YouTube or online games. The entire economy of the internet would change. Would you do your banking, grocery shopping or check-in for flights online if you had to pay extra to do so?

The rise of cheap broadband also opened the door to exponential growth in online social networks and collaborative tools such as Basecamp and Central Desktop, not to mention online meeting tools and VOIP. There are millions of people online every day, collaborating on projects and ideas, sharing knowledge in ways that weren't possible before, and just plain getting things done. People from oppostie sides of the world can collaborate in real time without ever leaving their chairs. Taxation such as that being debated could kill these kinds of online collaboration. Without cheap & easy access would projects such as the IBM InnovationJam thrive - or even exist?

If the US were to lift the ban, other countries could be inspired to follow suit - I only hope that those of us who live our lives online can make sure this doesn't happen. It also highlights the fact that many of the factors in creating a climate where innovation can thrive reach way beyond 'innovation policy' or personal  entrepreneurship.

From lightbulbs to 3D TV

Please note : This post has moved

Last week I was fortunate to spend a day at the High Tech Campus in Eindhoven in the Netherlands. The site itself is very impressive and hosts around 5000 engineers working on new technologies with ‘Open Innovation’ as their motto. And yet as recently as 2003, the site used to host just one big company, Philips.

Philips made a very deliberate decision to open up the way they operate, and the way they innovate. A clear indication of how things hare changed in a short space of time is the fact that there are now hosts over 40 businesses academic research institute and network called MiPlaza where companies share equipment and services such as cleanrooms. As a symbolic move, in 2005 they even removed the Philips sign at the entrance to the site, despite the major historical connections with the site.

We were fortunate to hear their Chief Technology Officer talk about their approach to open innovation. They now realise that it is much easier to sell successful businesses than it is to sell new technologies, and so they active spin out companies or technologies in the same was as many Universities.

I always find it fascinated to see how organisations re-invent themselves but this was made blatantly clear when we saw how Philips has moved on from starting out in lighting, progressing into Consumer Electronics, and now with a major focus is on Healthcare. The best ‘I want one of those’ moments came when they showcased a pretty spectacular 3D TV – like 3D cinema but without the cardboard red and green specs.

I am struck by the desire and ambition of companies like Philips to engage with ‘the outside world’ in a proactive way, and the opportunities for smaller companies, universities or individuals are significant, though it’s not always easy. Therefore, the theme of corporate open innovation is one of the three core themes that we will investigate through NESTA Connect launching in 2 weeks tomorrow and we’ll post again on this subject over the coming months.

No wonder there's no UK-born Facebook or Flickr

I attended a presentation by my colleagues from NESTA Investments on Monday, and I have to say I never realised the gravity of the sad state of investment in tech startups in the UK. According to Paul & David, the overall amount of money invested by venture capital in the UK is £10billion. Of this, only £1billion is invested in early-stage companies. Of this pot of early-stage investment, only £160 million goes to tech startups. That's just 1.6% of the total. Sheesh. It's no wonder UK tech startups are struggling. I wonder what the comparative figures are for US venture capital?