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Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back Hardcover – October 2, 2007
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From Publishers Weekly
Alarmed by the lack of innovation in the United States today, former Harvard Business School professor and current consultant Kao diagnoses the situation, describes best practices, explains how innovation works and puts forth a strategy proposal, all in an attempt to squirt ice water in America's ear. Kao-who has been an entrepreneur, a psychiatrist, an educator and a pianist for Frank Zappa-is clearly passionate about his premise. Aimed primarily at policy makers and legislators, his three-pronged agenda is designed to help the government create a culture committed to constantly reinventing the nature of its innovation capabilities. However, his authoritative and history-rich book is not necessarily useful to the everyday reader, as Kao includes few small-scale strategies. His one effort to bring this down to the citizen's level-in fictional short stories about the future-is a little contrived, jamming in statistics and leaning on flashbacks. But overall, the book does its job. The question is, will lawmakers look at it and follow its lead? (Oct. 2)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
"Tom Friedman sounded the alarm and gave us the big picture about the flattening of the world, and the decline of education and innovation in the U.S.A. John Kao gives us the specifics on exactly why and how the U.S.A. is losing our most valuable asset -- the ability of Americans to come up with great ideas, from light bulbs to PCs. Most importantly, Kao points in the direction the U.S.A. ought to go if it is not to become a global also-ran."
-- Howard Rheingold, author of Smart Mobs: The Next Social Revolution
"The arms race of the last century has been replaced by a new global brain race -- and the U.S. is in danger of unilaterally disarming. This inspiring book frames the challenge facing us and offers immensely practical advice on how to regain our place as innovation leaders."
-- Paul Saffo, Roy Amara Fellow at the Institute for the Future
"John Kao hits the nail squarely on the head. In an engaging and highly readable way he delivers a timely message with important implications for our future -- that the global race for innovation is on, the field is filled with highly focused competitors, and our biggest mistake would be complacency."
-- Sean Randolph, President & CEO, Bay Area Economic Forum
"A nation's capacity for innovation will determine whether it will be rich and powerful or poor and weak. In his insightful exploration of the world of innovation, John Kao makes clear the challenge that America faces as its own capacity for innovation erodes even as the rest of the world's abilities are growing. America's postition of power and wealth will be determined by whether it can rise to meet the challenge of the innovation agenda that Kao lucidly sets out."
-- Peter Schwartz, Chairman, Global Business Network
"It should be a surprise to no one that John Kao's new book is a highly innovative approach to innovation. He analyzes with crystalline clarity the challenges to U.S. innovation hegemony from ambitious and hungry competitors, China, India, Finland, and even Estonia. He does not shrink from advocating specific solutions, including the creation in the United States of 20 $1B Innovation Hubs and a National Innovation Advisor. His vision is not, however, American. He shows us how the whole planet needs to accelerate its capacity for innovation. For those of us who lead institutes dedicated to innovation this is a Bible and a Koran."
-- Reg Kelly, Chairman, Bay Area Science and Innovation Consortium, and Director, Institute of Quantitative Biomedical Research
"An insightful, and scary, account of the innovation challenges faced by the U.S... A very useful book that punctures America's complacency about innovation."
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'Green" has become the new red, white, and blue - yet, is blocked by lack of consensus on need, impact, funding source, etc. The U.S. ranks 17th among 30 OECD nations on R&D tax incentives.
Large-firm CEOs have lately deinstitutionalized innovation, instead eg. buying upstart biotech firms with valuable technologies - innovation by M&A instead of R&D. Even more recently - deliberate outsourcing and offshoring of R&D.
Robert Solow won the Nobel Prize in economics demonstrating that as much as 80% of GDP growth comes from the introduction of new technologies. Similarly, Boston Consulting Group, in a study for BusinessWeek, found innovative companies achieved median profit-margin growth of 3.4%, vs. 0.4% for the S&P Global 1200 median. Disruptive change (eg. introducing the Sony Walkman, the PC) is much more important to boosting GDP than innovative improvement (eg. adding to Oreo's brand extensions, 'me too' drugs). Opportunities abound for disruptive innovation - addressing global warming, education, communicable diseases and cancer, energy sufficiency.
Some assorted background facts contained in "Innovation Nation:"
U.S. students rank 24th in math literacy and 26th in problem-solving ability. In 2005-06, 30,000 highly trained technology professionals left the U.S. to return to India; similar trends involve the brightest of other nations.
By 2010 experts estimate that Beijing will have the world's largest nanotech research infrastructure, with 10X as many researchers in one location as any comparable U.S. facility; the second largest will be in Shanghai.
The U.S. ranks 16th out of 17 nations in the proportion of 24-year-olds with degrees in natural science vs. other majors, according to the National Math and Science Initiative.
Intel's Barrett says a chip-making facility in Singapore is worth $1 billion more over ten years than an identical one in the U.S., largely because of more favorable tax policies.
In 2006 the Dept. of Defense identified 42 leading-edge technologies it was interested in - 20 were based outside the U.S.
Foreigners represent half of all U.S. graduate students in engineering and 40% of those in physical sciences. However, their numbers are dropping due to increasing alternatives (eg. Australia, China), increased difficulty getting visas, and rising costs in the U.S.
These are all good points to help raise awareness of the need for change. However, Kao's recommendations are too much more of the same - eg. spend more money on education.
We already spend 5.3% of GDP, vs. 1.9% for China, 3.5% Japan, 4.6% South Korea and Germany, 5.6% U.K., 7.2% Norway, and have doubled our inflation-adjusted per-pupil spending in the last 35 years - w/o improving either our drop-out rate or NAEP scores for 17-year-olds. Thus, more money for education is not the answer.
Tax policy changes would probably help. However, the biggest factor is the much lower labor costs overseas - eg. $200/month for factory workers laboring 80 hour-weeks in China. Outsourcing production work quickly takes with it the need and opportunity for factory management and engineering positions as well. Finally, skills in current areas often provide the gateway to mastering new technology - eg. TV tubes -> LCD, plasma, and OECLD flat-panel displays -> nanotubes (?), etc.
The other major problem is the U.S.'s phobia about government intervention. China, Japan, and South Korea have all had strong government leadership shaping their direction; the U.S., however, has not, and we have ended up outsourcing so many capabilities that we increasingly appear to be a "paper tiger" service economy, dominated by the finance industry (about 40% of our GNP).
The U.S. mints about 4,000 new PhDs in biological sciences each year; Singapore creates about 500/year, and is targeting 1,000 by 2015 - despite a population only 1/70th that of the U.S. Foreign recruitment (about 75% of 'Biopolis' staff are recruited from abroad) is aided by a relaxed attitude on stem-cell research. Singapore's government added environmental and water technologies as targeted areas in 2006, as well as interactive and digital media - all seen as big growth areas in Asia. Funding for high-caliber PhD students in these areas is offered if they agree to work in Singapore for at least six years - recipients don't even need to be natives.
Bottom-Line: "Innovation Nation" provides excellent examples of what other nations are doing. However, Kao grossly underestimates the difficulties in improving U.S. pupil achievement overall - we've tried for at least 35 years, with little or no impact. The basic unaddressed problem is that American pupils simply don't work hard enough, compared to their Asian peers. (Other sources also conclude that Asians, on average, rank nearly one standard deviation above average Americans on IQ tests.) Kao also errs when suggesting that impressive new projects (eg. Spain's new Guggenheim Museum) will revitalize surrounding areas - this logic has been followed thousands, if not millions, of times in the U.S., failing to make significant impact in almost every instance. Finally, Kao misses the need to point out how excessive expenditures in American health care, defense, etc. starve innovation.
I imagine that Kao is generally right: we are poised at the fork on the innovation road, with a major decision to make as to which road we take - do we proactively marshall the ingenuity of this nation, the political will, and everything else that's needed to make the United States a co-leader in an Innovation World, or do we move passively along with the flow, hoping that our werewithal and past successes will help us thrive?
Kao provides ample evidence that the US is losing its innovation edge. I just don't know how realistic his proposed solutions are. It's one thing to rally the country and its resources around a critical goal, like the Manhattan Project, or a laser-focused goal, like landing a man on the moon. It's another to ask the same about a goal that is harder to get your arms around, and where the potential for conflicting agendas is not completely teased out. Also, to some degree not all Kao's models may be replicable - Singapore and Denmark may accomplish national innovation goals because of their small size and/or homogeneity; China, obviously huge, may be able to accomplish its goals because of the authoritarian government that can force everyone to march in lockstep.
I do think thought that Kao has done a valuable service by opening the discussion and throwing out trial balloons that may get key actors to begin moving in the right direction.