More than half of the people in the world use cell phones, including this boy in Mali who charges his off an auto battery.

Innovation is invention plus introduction, and it is increasingly seen as crucial for economies and governments alike. Expanding economies no longer produce more of the same products, but rather ever more new products with additional value. David Nordfors is co-founder and executive director of the VINNOVA-Stanford Research Center of Innovation Journalism at Stanford University.

Innovation is today the most important driver of economic growth. It relies upon a social climate supporting entrepreneurship within a culture of economic and intellectual freedom. Wise policymakers understand the need to encourage this kind of “innovation ecosystem.”

Invention creates something new. Innovation is more than that: It introduces something new. Innovation is invention plus introduction. It is not easy to introduce something new. Anybody who has had a bright idea about how to improve his or her workplace will know this. People say they want progress, but they resist change.

Communities and organizations are often more resistant than the people in them. Even if all individuals in an organization want a change, the organizational culture might not permit it.

Making innovation happen is a craft and an art; understanding how it happens is a science. Innovation is grounded as deeply in psychology and culture as in science and technology.

We are becoming better innovators, and the resulting products, services, and processes play a growing role in the lives of citizens across a growing swath of the globe. Large parts of the world have moved into the innovation economy; the rest are rapidly following.

In a traditional production-oriented economy, growth is driven by producing more of the same. Wealth has been about growing more wheat and building more traditional houses and opening more traditional factories this year than last year. In the innovation economy, growth is about doing more new things this year than last year. That is a fundamental shift, one clearly visible to people around the world in their daily lives.

Targeting Short-Range Success

The rapid acceptance of the mobile phone illustrates how innovation works and how it changes our global culture. The first hand-held mobile phone call was made in April 1973. The first cell phone networks were rolled out in Sweden and Finland only a decade later. By the end of 2008, people had more than four billion cellular subscriptions, according to the International Telecommunication Union. That is more than half of the total world population! Compare that to literacy: The art of writing was invented many thousands of years ago, and it was only some decades ago that more than half the world population became literate. Cell phones have spread a hundred times faster than literacy!

How can change happen so fast? The key lies in focusing on innovation instead of focusing on producing more of the same.

If mobile phone business competitors were not constantly racing to take the lead with their next innovation, cell phones would have remained expensive, clunky, battery-draining contraptions only for rich people. Not many people would own them today.

Competition for the next big innovation is breaking down traditional corporate structures. No longer do successful companies separate research (R&D) from business development. Companies under pressure want to avoid expensive research that is not buttressed by a business plan. Investing a lot of money to develop technology that does not contribute to revenues can bring a company to its knees. Technology development and business must be done together. Today the technology people and the marketing people work with each other. The traditional analytical thinking, where each group of experts thinks within its box and send the result to the others in the form of a report, can be replaced by “design thinking,” where different types of experts mix, combining empathy, creativity, and rationality to meet user needs and drive business success.

This is increasingly the case with information technology. Today’s computer, mobile phone, or similar product is not expected to be on the market for more than a year or two before it is replaced. This is becoming true even for traditional products with longer life times, as in the food and paper sectors. According to researchers at the McKinsey & Company consulting firm, product lifetimes are today a third of what they were 40 years ago. This too, reflects the shift from the “more-of-the-same” economy to the “introduction-of-something-new” economy.

Vision to Reality

While the public imagination often links innovation to technological advance, innovative techniques have spurred improvements in such diverse fields as micro-loans, which enable people in developing economies to start new low-cost businesses; new ways of organizing companies; and new ways of learning.

The word “innovation” can refer to a novelty — a new gadget, for example — but it can also refer to the process that created the novelty. This might be primarily commercial — the “process of creating and delivering new customer value in the market,” as suggested by Curtis Carlson and Bill Wilmot at the contract research institute SRI International — or driven in whole or in part by social needs. Social innovation and commercial innovation often drive each other. Micro-loans and open-source free software produced by non-profit communities — for example the operating system Linux or the Firefox Internet browser — are good examples.

Many people link innovation to the world’s wealthy economies, but today low-cost innovation is increasing, and this makes it possible for the innovation economy to expand to nearly every part of the globe. Little money is needed to create new innovative services on the Internet. Students at Stanford University started Yahoo! and Google with very little money. The big investments came after these companies were already up and running. The threshold for setting up innovative companies in certain fields, such as Internet services, is low. In principle, there is enough money in many places around the world to start such companies.

 

Doug Engelbart holds up his prototype computer mouse.

As the Internet is spreading and communication is improving, global markets are becoming more responsive as well. It has become easier in traditional societies to prompt people to replace traditional tools and methods with new ones. Innovative inexpensive water pumps, new cost-effective ways of improving traditional agriculture, new ways of organizing the care of ill people in villages: These are all important fields of innovation with great promise at potentially little cost.

Consider California’s Silicon Valley — the most successful innovation ecosystem in our time, and one highly dependent upon the cross-pollination of ideas among its many technological and other innovations. There, in 1968, Doug Engelbart demonstrated the first prototype of a modern personal computer system. The demo featured the first computer mouse the public had seen. It introduced interactive text, video conferencing, teleconferencing, e-mail, and hypertext. (The demo is available on YouTube; search for “the mother of all demos.”)

Engelbart did not call the demo “a new personal computer system.” Instead it had the peculiar title “a research center for augmenting human intellect.” Engelbart’s device was not about making smarter computers; it was about making smarter people. What is more, these personal computers were to be connected to each other so that people could work together on solving problems. They would form a collective intelligence that could solve much more difficult problems than people could solve without networking their computers. It was a wild idea at the time. Few people understood it. With the Internet, cell phones that are small personal computers, and social-network applications, the vision has today become reality.

The People Connection

We are coming to understand that innovation and collective intelligence are a pair. An intelligent, creative person can be inventive; collectively, intelligent communities can be innovative.

But connection alone does not suffice. The key is dissemination of information about how innovation happens. Journalists can play an important role here. If they convey to readers a sense of how innovation happens, our collective understanding of the process may increase. But if journalists do not themselves understand innovation, they will misrepresent it in the public discussion. One likely result would be to discourage innovators or else encourage them in unconstructive directions. The VINNOVA-Stanford Research Center of Innovation Journalism at Stanford University has invited journalists and researchers from several countries to come to Stanford to improve their expertise in covering innovation. This training will help journalists increase the collective intelligence around innovation ecosystems in their home countries.

Innovation requires entrepreneurs, and they in turn need a supportive environment: an “innovation ecosystem” of business and finance people, educators, and regulators who together create a climate within which new and established businesses can innovate and thrive. In good innovation systems, entrepreneurs with good ideas can find investors and partners, build their companies, and in some cases grow them from very small concerns to multinational corporations.

In Silicon Valley, this is everybody’s dream. Innovation is the region’s main industry. In Sweden, another leading innovation economy, there is even a government agency dedicated to developing good innovation systems. Tellingly, it focuses more on strengthening and innovation-friendly environment than on supporting any given innovation.

Hidden Dangers

In more-of-the-same economies — until now the norm in most societies — innovation, whether of products or ideas, is not a desirable vocation. The risk of failure is high. It is easy to get into trouble for trying something new. Many people would rather not try.

Dr. Ignaz Semmelweis, a Hungarian physician, discovered in 1847 that the occurrence of childbed fever was drastically reduced if doctors delivering babies washed their hands. Semmelweis managed to all but eradicate childbed fever in clinics where previously more than 1 in 10 women had died during childbirth; he produced statistics proving beyond doubt that hand washing had saved their lives. But the medical community rejected his ideas; because this discovery came before Louis Pasteur proved the existence of germs, there were no theories supporting Semmelweis’s results. Some doctors were offended to be told to wash their hands. Semmelweis managed to antagonize his colleagues, who ridiculed him. Semmelweis lost his job and social stature.

The danger of being an innovator in the more-of-the-same economy applies also to political leaders. In his 1513 book The Prince, Nicolo Machiavelli described methods that an aspiring prince can use to acquire the throne or an existing prince can use to maintain his reign. Here is what he had to say about innovators:

We must bear in mind, then, that there is nothing more difficult and dangerous, or more doubtful of success, than an attempt to introduce a new order of things in any state. For the innovator has for enemies all those who derived advantages from the old order of things, whilst those who expect to be benefited by the new institutions will be but lukewarm defenders. This indifference arises in part from fear of their adversaries who were favored by the existing laws, and partly from the incredulity of men who have no faith in anything new that is not the result of well-established experience. Hence it is that, whenever the opponents of the new order of things have the opportunity to attack it, they will do it with the zeal of partisans, whilst the others defend it but feebly, so that it is dangerous to rely upon the latter.

Clinging to old norms and habits that stifle innovation is no longer a recipe for political or economic success. The society that censors the free flow of information, or prevents people — men or women, old or young — from contributing fully to civic, social, and economic life is not using its full ability to compete in the global innovation economy. Better, many understand, to encourage cultures and systems that embrace and master innovation. South Korea, India, and Israel are among the growing number of economies that are succeeding with this strategy.

Mastering Change

Shifting from a traditional to an innovation economy requires real social change, openness to new best practices, and a commitment to developing the diverse skills required to produce a society of innovators.

In the past, schools have taught children how to solve known problems with known methods, a process that encourages them to reason in established ways. Now schools need instead to encourage children to master change, discover new problems, and devise new solutions.

Instead of encouraging uniformity, the innovation economy encourages diversity and creativity. Banks and investors must redefine risk to appraise more accurately the path breaking, innovative project. Public decision makers who focus on regulating businesses producing more of the same need to refocus on how to reap greater benefits by letting the new continuously replace the old. It is all about looking at the next big thing instead of focusing on more of the same.

Improving innovation is about increasing our creative collective intelligence. It is a grand opportunity for all decision makers, be they individual entrepreneurs building businesses or political leaders running countries.