Our last text addressed inflation, and even if not directly related it really made me think about another defining aspect of any given economy, namely how innovative it is. Innovation is as broadly misunderstood as it is important. Far from an academic article aiming at scientifically proving impacts of innovation on an economy, this text is made in simple terms for common people. If you do not understand why there is such a buzz around this concept, from startups all the way to high-profile politicians, this can hopefully give you some insight.
What is innovation
According to the dictionary, innovation can be defined as “the introduction of something new or a new idea, method or device”. This definition is of course extremely vague and would encompass things such as a method or device that will never be used, an idea that will not be pursued or even something new that is introduced for the wrong reasons and has no clear reason for existing, some of which surprisingly actually gets produced and offered to the public.
The assumption when a serious organization raises the topic, however, is of course that the novelty is useful, one that might have some degree of success by proving itself useful to a number of people. Transposing this to economic terms, this relates to a new value-adding concept, as such able to replace the current method or device.
This better-than-previous aspect is important because what today is more or less obsolete was at one point innovatively replacing the previous best available device or method. Examples of this range from a horse-pulled carriage to good old cash. Sure, in the case of money, there is a lot of controversy around its future. Whereas a conservative old-schooler might think cash so fundamental that it’s not going away, I don’t think any reader can argue in 2018 that cash is still innovative. To give some perspective, I took a look at what the oldest central bank is studying at the moment, and was happy to see they are looking at an e-currency to potentially replace paper-based cash.
How does it translate in concrete terms
Innovation can come in different forms and its interpretation will differ whether you ask a banker, a politician, an industrial, a charity or a startup. My difficulty with the banking or political perspective is the tendency to overfocus on the financial or political ramifications of the innovation spectrum, with little regard for anything that cannot generate gains in the respective fields. To talk about a given innovation to professionals in those fields, explore how much money it is capable of generating, or the implications to society in the current politial climate.
Industry has in my view an utilitarian perspective of innovation, which implies that the novelty needs to be applicable to their domain to generate interest. Matchmaking between patent-creating innovation and industry is in this sense very important since the various segments of industry might not exchange between one another nor with the source of innovation, and bringing the most efficient-enhancing innovation to an industry is therefore key.
In the third sector there is some ambivalence in regards to innovation. On one hand, charities and class associations have an extremely strong state-of-the-art discourse in regards to public policy. They often advocate strongly for new legislation or for novel business practices within their domains. From this perspective, the third sector is a great place to discuss and propose innovation. On the other hand, internal practices in many charities suffer greatly from lack of resources, focus on how best to deal with the cause they advocate or simply with inappropriate internal organization and discipline, such as the recent scandal involving a British charity in Haiti exemplified.
Startup scene’s role
Last but certainly not least, small companies in general and startups in specific are the organizations with the biggest potential to promote innovation. This is their most important advantage while facing bigger market players. Counting on their small size and ability to reinvent themselves, startups are the most able to innovate meaningfully, and the fact they have no legate systems enables them to create solutions based entirely on novel systems.
Startup ecosystems are extremely valuable to support innovation, simply because the path between a new idea and a business is in most cases as rocky and uncertain as it gets. Sure, statistically most startup will not be around in a few years time, but a significant proportion of new companies created have an interesting purpose, and have therefore the potential to add value even if they are not around to reap the benefits of their creation.
Continues on part 2…