As we struggle to come to terms with the economic crisis and the changing economic landscape, one word that is on many people’s lips is ‘innovation’. There is a belief that if we are to emerge successfully from our current problems, we need to be a country in which innovation thrives. This is a view that I share. But when we come to consider what ‘innovation’ actually means, it is somewhat more complex.
Most modern thinking on innovation as a tool of economic regeneration are linked to the idea, espoused in particular by Michael Porter of the Harvard Business School, that competitive advantage is secured in particular through adding value to products and services on a ‘value chain’, in particular through research and development, and design. The location where this particular type of value is added is likely to have significant competitive advantages in the global market. This is what is meant (or what should be meant) by a reference to ‘moving up the value chain’ (the lower levels of which are mainly concerned with production).
In Ireland right now, moving up the value chain has become an imperative, and indeed this has been part of the language of economic and trading policy for the past few years. Innovation has been consistently mentioned as a national objective. But has it been widely understood what that means?
In a report issued by the OECD in 2007 (Moving up the Value Chain) it was noted that developed countries were running the risk of losing competitiveness in the traditional sense – i.e. losing ground in relation to labour costs, material costs, energy costs and infrastructure – without gaining a sufficient advantage in the ‘new’ competitiveness of knowledge and entrepreneurship.
But there is a particular challenge here for these turbulent economic times: the new innovation-based competitiveness is not cheap and requires very significant up-front investment. It needs a super-charged education system at all levels, a world beating technological infrastructure, a legal system that supports and protects innovation and intellectual property, and an environment that promoted entrepreneurship at every turn. Right now we are facing the temptation to cut costs everywhere, and there is often no adequate distinction drawn between costs and investment. The truth is, we need to invest in innovation like crazy. The things that brought us the Celtic Tiger are gone, and cannot be recovered even when the global recession disappears. And if we hold our investment in innovation until then, we will be too late.
We are standing at a crossroads, and we are in peril. And if we hesitate now, we are doomed. But if we do the right thing, we have every opportunity before us.
In fairness to the current Irish government, it has understood all this, and many of its moves are the right moves. But it needs to explain it better, and to help people to understand that this is everyone’s future, not just that of a few academics. The innovation ecosystem of the universities will, directly, create very few jobs (and I think Trinity and UCD were very unwise to promise 30,000 jobs in their recent programme); but it will establish the setting in which Ireland Inc will create and sustain hundreds of thousands of jobs and a realistic level of prosperity.
We have no choices now except this: to be an innovation economy. We need to understand what that means, and we need to move with determination. Innovation, properly understood, should now trump everything.
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