When we must need innovation, it is not there

nearshore innovationIn times of crisis, innovating becomes even more important for technology companies, and proportionally more challenging as well. Where do good ideas come from? The methods traditionally used for ideas to be developed may continue happening the same way as usual, but maybe the researchers cannot count on the same funding they used to have in the past. How to innovate without spending?

GE recently released (during the World Economic Forum in Davos) a global report of how companies have seen innovation in the past year. Based on a survey of 2,800 business leaders from 22 countries worldwide (see each of the countries at the bottom of this post), the results show that the world economic downturn has had direct impact on how companies decide their innovation strategies: nine out of ten of the executives consulted indicate the current crisis has a negative impact on the innovation capacity of their business.

The reasons for so much pessimism among those who should be the first ones to consider innovation as a way of getting out of the bad scenario is the difficulty of access to external financing and a conservative turn regarding risks appetite. The research shows that 88% of the executives have felt a harsher environment for seeking risk capital (either from private investment or from government funding lines), while 77% have seen a reduction or revaluation of the disposition of their own companies to take risks.

Risks are, literally, part of the business  – and assuming them becomes even more important when the companies are from the technology, services, and software development industries, simply because they are the ones supposed to build the steps for other companies to grow. Therefore, in theory at least, they would be fighting together to get out of a phase that draws closer and closer to stagnation.

"Innovation in an important weapon to fight the challenges of a world in expansion. It allows us to use resources in more efficient ways, produce more with less and to deliver better technologies to help markets to boost the economic development and a better quality of life,” says Beth Comstock, global marketing director at GE.

Of her words, four of them are particularly important considering the whole economic downturn we are living with today: "produce more with less."

That might sound quite simple and not news to many business people. But if almost 80% consider that it is not the right time to "assume risks,” and we have banks that don't "trust" the capacity of the return of the funds invested in  innovation (those 88% who said they had difficulty being funded), well, then we have a much bigger problem than initially thought: an economic crisis that is giving basically no chance to those who might be the creators of solutions to its end.      

A few other details: 92% of the ones who responded to the survey said that innovation is the most MP900443027
important ingredient for the development of a more competitive national economy, and 86% agreed that innovation is the best way to create jobs in a country.

Still, it is hard to get funded.

The local governments end up having part of the responsibilityfor the downturn in investments in innovation in times of crises. In a qualitative analysis, the research has shown that the internal investments of the companies, designated to R&D of new products and business strategies, are particularly at risk when the corporate community recognizes a negative change of positioning by the government, or the deterioration of the governmental politics toward support of innovation. In fact, 71% of the managers said they have cut R&D budgets after changes of priorities regarding innovation by the government.

"The cuts done today will reverberate over the economic and social progress in the next few years, and will seriously damage the competitiveness of the companies. Governments and companies need to do their part to reinforce the fragile innovation ecosystem,” Commstock said. Indeed.  

Look Who's Satisfied

Curiously, one of the countries that has grown the most after heavy investments in innovation after World War II is on the bottom of the list when it comes to satisfaction with current levels of internal innovation.

Maybe not coincidentally, Japan is also facing one of its worst economic periods in decades - without considering the consequences of the natural disaster of 2011. You would imagine this is the right moment to boost the economic environment of the country by doing something they`ve always known how to do well – but no. They are not the same innovators they used to be.

Along with the Japanese on the list of those who are least satisfied with the current levels of innovation are Russia, Poland, and France. 

On the other hand, at the top of the list, or those most satisfied with how things are going regarding innovation, are Israel, United Arab Emirates, Sweden, and Singapore.

Here are the 22 countries that participated in the research: Algeria, Australia, Brazil, Canada, China, France, Germany, India, Israel, Japan, Mexico, Poland, Russia, Saudi Arabia, South Africa, South Corea, Singapoure, Sweeden, Turkey, United Arab Emirates, United Kigdom, and the United States.