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Book Review

Charting a course toward innovation

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Business Book Review / August 10, 2008

Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back
By John Kao
306 pp., Free Press 2007

Global competition is fiercer than ever as countries race each other to be the innovation leader. The United States has long held this role, but other countries are encroaching on its status. In "Innovation Nation," John Kao outlines the challenges the United States faces in the areas of venture capital, research and development, and talent acquisition. He also details the successes of some of the hot spots of innovation, describes how the United States can learn from its challengers, defines the role of both the public and private sectors, and provides a national agenda for how America can regain its place as an innovation leader.

Currently the United States faces an innovation challenge. Other countries, such as China and Singapore, are challenging American dominance in key economic areas such as venture capital, research and development, and talent acquisition. Reversing this trend will take nothing less than a significant commitment of human and financial resources in order to develop "a compelling vision and a blueprint for action that will reinvent the way we educate children, marshal resources, pursue research projects, and communicate and share discoveries."

Defining innovation is critical to charting a course toward innovation. America's understanding of innovation will shape how it is measured. If innovation is defined as intellectual capital, then counting patents might be the way to measure it; but if innovation is defined as infrastructure, then counting broadband networks may be the best form of measure.

The perception is that innovation is all about science and technology. But, this is proved untrue by the rise of social innovation. The author cites microlending as an example of an innovative approach to fighting poverty. Muhammad Yunus, an economist, gave a woman in the village of Jobra, Bangladesh, $27 from his own pocket. She used it to make bamboo furniture. Yunus realized that entrepreneurs like this woman were actually very good credit risks and he formed the Grameen Bank in 1976. The bank has loaned more than $6 billion to over 7 million borrowers, earning Yunus a Nobel Prize in 2006.

Other social innovations, while not as dramatic as Grameen Bank, include impartial consumer testing of products, carpool lanes on highways, and carbon-offset opportunities. Kao also cites Southwest Airlines as a company successful in launching nontechnological business innovations. The company is built upon the idea of short-hop flights, no-frills service, and a simple low-cost fare structure. In addition to its own success, the company has changed the business of US air travel.

Kao asserts that political and business leaders in the States must open their minds to new ways of thinking. The United States needs to deal with innovation by immersing itself in the challenge. Innovation is more than the ideation and development of new products. It can include new services, experiences, and processes. Innovation occurs when mind-sets shift and when it is woven throughout the fabric of society, resulting in new business models and new opportunities being recognized. Kao argues that today the threat to America's lead in innovation is not obvious, and he terms it a "silent sputnik." He asserts that the danger is in viewing the symptoms piecemeal, and when considered individually, these threats do not appear to be terribly alarming. However, viewing them as a whole is a different story.

According to Kao, innovation is always in a state of evolution. It evolves along with ideas about what the desired future is. Innovation has changed as the United States has changed. Globalization has ended America's monopoly on innovation. Countries all over the world are now looking for their own sources of comparative advantage in the arena of innovation.

Business Book Review provides hundreds of summaries of business books online for a fee. For full summaries, go to businessbookreview.com.

Innovation Nation

How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back, by John Kao, 306 pp., Free Press 2007

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