Innovations as possible solution to World’s risks and problems or Why innovations matter? (added material)

In this set of posts I’m discussing the importance of innovations to the world sustainable development. Last two posts were devoted to World’s problems and risks, Goals of the World, Meadows’s “Limits to Growth”, Solution to the challenges of the World (Post 1) and Why entrepreneurship could be a possible solution but we can fail even that? and ATMCA Toolkit (Post 2). The results of this posts could be summarized as follows:

  • The world obviously has many problems and current situation allows me to conclude that we are following the collapse scenario.
  • Possible solutions that governments are trying to apply: fiscal and monetary policies, regulations, economic growth, new technologies. The problem is that growth could be bad if it’s not controlled. Professor Edward D. Hess from University of Virginia Darden School of Business smartly noticed that “growth requires more   people, processes and controls.” Sometimes we fail to provide that. What is more important: growth should not be assumed; rather, it should be a decision made by weighing the pros and cons and the risks of growing and not growing.
  • We can fail entrepreneurial revolution due to ressitance to change, limiltless of our view and perception of the world, and cultural issues.
  • I proposed am ATMCA toolkit a 5-step model which must be applied in order to disseminate knowledge about current problems, forcing people to think about the future and acting accordingly.

Today I would like to speak about Innovations Managed Development. Before I will start I must notice that sometimes I use words entrepreneurship and innovations almost interchangeably. It’s true to some extent. One is almost impossible without other, and vice versa. However, I completely understand that there is a difference between these two terms. But this difference is not relevant to the following discussion.

Entrepreneurship and Innovations as a possible solution of World’s problems

Why innovations (or entrepreneurship) are important? What innovations can give to the world? Why they can be considered as one of the possible solutions to the world’s problems, especially to the “limits to growth” issues?

Innovations and entrepreneurship have several aspects that allow to conclude that they can be considered as a possible way for solving global problems. These aspects are:

Transformation potential:

  • Global system of human existence is incredibly complex system, it is actually the system of systems of systems … etc. As any system it has its own resilience, self-preservance, moment of inertia, existing dynamics. Thus, it can’t be changed with hand clap (if we consider only positive evolutionary development scenarios, not revolutionary ones). Innovations and entrepreneurship industry are to some extent the products of current economic (capitalism) system, which is a part of global system. Therefore, one the one hand they are the part of the system, on the other hand they have the potential to transform the system. Therefore, there is no need to start from scratch and build a whole new world (as it was done in Russia in the beginning of 20th century with communism experiment). On opposite, there is a possibility to alter current capitalistic system towards new one following the principles of Innovations Managed Development. This is my term and I would like to explain a bit what do I mean. Please see a text box below.
The Principles of Innovations Managed Development

The Principles of Innovations Managed Development

Informational, institutional, social and cultural changes:

  • World’s collapse prevention is impossible without changing a mindset of the humankind. Entrepreneurship process and innovations creation do changes people minds. Entrepreneurship requires focus, self-motivation, will, hard work, proactivity, personal internal changes. Innovations is also can be considered as a social elevator for every risk taking person. This means that if millions of population will be involved in the innovational process they will be changing their mindsets, lifestyles. Guided by an Innovations Managed Development paradigm they could transform a planet much faster than it could be done by politics, CEOs of MNCs, policy makers, etc. This is bottom-up approach. Combined with top-down approach it will bring results even faster. According to G20 Young Entrepreneur Summit (YES) and McKinsey & Company young people in many countries are struggling to find their place and are looking for new ways to participate in economic development (McKinsey&Co, 2011). This is a solution for millions of them.

 Creative destruction and technologies:

  • ‘Creative destruction’ (a term by Schumpeter) is a main characteristics of innovation. It means that innovations have a huge potential to change the processes, products and services in the world. This also can be applied in order to minimize the use of nonrenewable resources, prevent the erosion of renewable resources, use all resources with a maximum efficiency. Eventually it can also improve lives through creating a wealth, employment, and implementation of new technologies and solve some global problems.
  • Recent mini-trends (which became available due to innovations) could have very promising applications and could change the face of the economic system as well. They are:
    • Open innovation
    • Crowdsourcing and crowdinvesting
    • Virtual workplaces

Synergetic effect from new and existing technologies:

  • Early adoption of technologies and their synergy help societies to be more productive. Cross-country Historical Adoption of Technology (CHAT) project leaded for years by Diego Comin and Bart Hobijn ended up with several important findings. First, on average, countries adopted a new technology 45 years after its invention. Second, variation in adoption rates is larger than you might expect and accounts for 25% of differences in countries’ per capita income today. Third, adoption lags have shortened in recent years probably due to synergetic effects of technologies.

Early adoption of technologies since 1750 till 2012

I would like to conclude by saying, “We live in a times of ‘entrepreneurial revolution’[1].

Entrepreneurship has started with industrial revolution inventions. One and a half century later, it has evolved into a worldwide phenomenon, spanning from micro-entrepreneurs to visionary individuals who have created global companies in under ten years.

New paradigms like “open innovation” and “crowdinvesting” are created and actively pushed and pulled to/by the market in 2011/2012. They got support in the USA and UK through several laws and political acts.

Entrepreneurship plays important role in the rate of employment. It is noteworthy that the large U.S. Fortune 500 companies have lost five million jobs since 1980, but over all over 34 million jobs have been created. Small businesses (with under 500 employees) employ 53 percent of the private workforce, account for 47 percent of sales and 51 percent of private GDP. Interestingly, in 1996 small businesses created 1.6 million new jobs. Of these, the fastest growing firms (constituting 15 percent of total) accounted for 94 percent of net new job creation, and less than one-third of these firms are in high technology (Global Entrepreneurship Monitor Report, 1999).

“Technological progress, innovations and entrepreneurship are dramatically changing the global economic landscape. A dozen industrialized and innovation-driven countries consider these forces as main one that can solve problems and improve lives as far as they have the technical infrastructure and skills for major innovation.”  Javed Burki, former World Bank Vice-President, Dawn, May 2001.

Nowadays, it is becoming acknowledged by economists around the world that,

“Following the 2008-2009 crisis, now is an appropriate time to engage in a global debate about entrepreneurship as a growth, innovation and employment engine–particularly for youth–in the economy of the 21st century.

Schumpeter’s “creative destruction” theory applies more than ever, with its emphasis on entrepreneurs’ determining role in economic growth through innovation and change (new products and new productive techniques).” (McKinsey&Co, 2011)

In these turbulent times, entrepreneurs have a key role to play in fostering tomorrow’s growth, employment and innovation and strengthening their countries’ prosperity and social model. Therefore governments in both emerging and mature countries should adopt effective policies to support entrepreneurs’ efforts and risk-taking.

Thus, entrepreneurship could be considered as the main driver of country’s sustainable growth and it existed in all economies throughout the world and centuries as the main transformational force.

[1] A term appeared in HBR’s article by Daniel J. Isenberg, “How to start an entrepreneurial revolution”, 2010


2 thoughts on “Innovations as possible solution to World’s risks and problems or Why innovations matter? (added material)

  1. Vasily,
    This some of the best business incubation information I have seen on internet. I am in the process of starting a incubator with private and non-profit funding. Thanks for the post.

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