Innovation is top of mind for many public- and private-sector leaders today as they seek out means to thrive in an increasingly complex and connected world. Those leaders will quickly discover that world-class innovation does not take place in a vacuum. It requires a corporate culture that rewards experimentation, is tolerant of failure, and is nimble enough to quickly adopt superior ideas, even if they’re disruptive. On a national level, it requires policies that promote competition and transparency in the marketplace and respect for intellectual property.

Companies that come out of the downturn in top shape will be those that can use innovation to drive growth and productivity. My research shows that business leaders must lead the creation of innovation-friendly corporate cultures. Successful firms will be characterized by a high level of investment in research and development; an environment that encourages risk taking, promotes learning, and tolerates failure; a widespread presence of cross-functional teams and networks that lead to significant cross-pollination; and open and transparent information flows, with ample opportunity for informal communication and tolerance of diverse opinions.

Creating an innovation culture is just the first step. New ideas lie at the heart of innovation, but ideas alone are not enough. Innovation requires translating ideas into value-adding products and services. That means that as companies innovate, they will also have to sense shifting market demands, reconfigure their internal capabilities, and execute on their plans flawlessly. Bridging the gap between an idea and its beneficial result is the crucial step in innovation. Although some companies achieve this particularly well, others—even those with enormous reservoirs of human capital—still struggle.

Similar lessons hold true on a national level. Countries that wish to foster innovation will have to adopt policies that create supportive market conditions. Research shows that countries with strong track records of successful innovation make significant investments in research and development and give high priority to investing in human capital. Leading innovators also formulate stable macroeconomic policies that reduce economic risk and create stable and predictable regulatory environments that support intellectual-property rights and encourage competition. The most successful countries also seek to open their markets and reduce barriers to new business models and services.

There’s another important trend that has implications for successful innovation. Increasingly, innovation is going global. For example, Asia currently has a middle class that is a billion strong and growing. They’re tech-savvy and hungry for innovative products and services. Indeed, to find the leader in broadband and mobile-Internet services, don’t look to America. Look to Asia. Today, Korea boasts the most sophisticated broadband culture in the world, and technology companies—coming in droves to Asia—are taking notice. They’re opening facilities not just to sell their wares but, most important, to innovate and create new products and services for tomorrow. China already has more than 300 research centers, second only to the United States, and this number is increasing steadily. The challenge for successful corporations will be to find ways to tap into and leverage the emerging global locomotives of innovation.

Success in these challenging times will be predicated on responsiveness and the ability to recognize and realign strategies to maximize competitive advantage over time. For most individuals, firms, and governments, simply intensifying current strategies, tactics, and policies will not suffice. Success will demand a greater ability to quickly close the gap between the generation of an idea and the creation of its value. A recent report from America’s Council on Competitiveness sums up this sentiment nicely: “Where once we optimized our organizations for efficiency and quality, now we must optimize our entire society for innovation.”

Back to top