This claim by Barack Obama, US president, in his State of the Union 2011 address could be repeated the world over, albeit by changing the population’s identity, as countries try to maintain growth rates historically boosted through relaxing credit controls and encouraging borrowing.
Obama said: "Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik, we had no idea how we would beat them to the moon … But after investing in better research and education, we did not just surpass the Soviets, we unleashed a wave of innovation that created new industries and millions of new jobs.
"This is our generation’s Sputnik moment … We will invest in biomedical research, information technology and especially clean energy technology."
Obama said the US’s free enterprise system was what drove the country’s innovation, but, because it is not always proftable for companies to invest in basic research, governments have provided scientists and entrepreneurs with support to create the internet, global positioning system and semiconductors.
Though many commentators over the past few months have focused on the fundraising and potential fotations of online companies Facebook, Groupon and LinkedIn for their rapid growth and relatively high valuations, there have also been concerns about the narrowness of the types of companies backed by venture capital (VC) frms. A free enterprise economy can struggle to fund innovative ideas by itself and does not operate in a vacuum.
Instead, a healthy innovation ecosystem requires different elements to work together, from governments to companies through to VCs, angel investors, and society as a whole granting permission for something to happen.
One of the earliest and biggest examples of this ecosystem coming together, not just in one country but globally, to kick-start a new industry has been Plastic Logic, a US-based company making organic and hence fexible semiconductors.
The news about its agreed $700m deal is online (news report) and included in January’s deal table but a full profle will be in April’s issue of Global Corporate Venturing as well as that month’s Wired magazine.
Developed after more than a decade’s groundbreaking research at Cambridge University’s Cavendish Laboratories, Plastic Logic was seeded by VC Amadeus Capital Partners, Dow Chemical’s corporate venturing unit and the local tech-nology transfer offce before opening factories in Germany and shortly in Russia.
That the UK and US governments have chosen to support some clean-tech companies, such as Tesla, rather than others has left third parties unclear about what its position is.
Light-touch fnancial regulation has also left bankers chasing short-term rewards through property gearing, and using securitisation and derivatives to offset risks and circumvent capital adequacy rules but avoid lending to companies to invest in capital-generating projects.
The dereliction of duty by banks in their failure to understand the changes in business and economies, primarily the shift from manufacturing and agriculture to services – this month’s main feature analyses the most influential corporate venturing units in the sector – has been both cause and compounding effect of a substantial fall in the rate of investment that has led Obama to describe his country as being at a Sputnik moment.
As John Plender in the Financial Times said by quoting management consultancy frm McKinsey’s recent Global Institute report: "The investment rate (investment as a share of gross domestic product) of mature economies has declined signifcantly since the 1970s, with investment from 1980 through 2008 totalling $20 trillion less than if the investment rate had remained stable."
Rather than try to recreate the large and relatively inefficient internal research and development laboratories in order to boost the investment rate and as a way to scout for disruptive technologies and services, corporate venturing offers an opportunity to collaborate and build an inclusive social model to tackle the innovation challenge every person, company and country now faces.
If Obama truly wants his Sputnik moment to lead to real improvement in the American economy, understanding the wider innovation ecosystem and corporate venturing’s role in it would be a good start.
This issue, among others, will be the subject of the International Business Forum’s annual conference this month, in which Global Corporate Venturing is a media partner with a seat on its advisory board. This topic will also form part of a seminar and awards event hosted by Global Corporate Venturing in mid-May.
Contact me at jmawson@globalcorporateventuring.com for more information.