Innovation is a popular buzz-word these days: Tough economic times tend to beg for new ideas, new products and processes to launch economies forward into a new growth phase.
In his recent State of Union Address, President Obama stressed his vision for a renewed commitment to investments in research and development. Public and private groups alike are using this “I” word when speaking of job creation and rising standards of living. Innovation is even being associated with things like immigration policy, tax policy and monetary policy. The Consumer Electronics Association, a Washington-based trade group representing more than 2,000 companies in the United States, went so far as to create an innovation manifesto called “The Innovation Movement” to foster these ideas and goals as the power behind a U.S. economic resurgence.
But innovation cuts a divergent path for U.S. companies: While small businesses are created almost daily thanks to innovative new product ideas, thereby creating employment and building the tax base, large companies use innovative processes to become more productive, which can often translate to less employment (doing more with fewer people).
And as countries around the world develop their own technologies and processes, or import the ideas spawned here in the U.S., they become more capable of taking U.S. service or manufacturing jobs.
Thomas Friedman’s landmark book “The World Is Flat” outlined that the free exchanges of ideas, thanks to the Internet and advances in information technology, can also become the free of exchange of jobs, capital, intellectual property and eventually wealth. Remember the old cliché about the rising tide? Think about what a rising tide does to a flat world.
So faced with these changes and the double-edged sword of innovation, what is an American small business to do?
At the macroeconomic level, small business is responsible for the great majority of employment in the U.S. and innovation is a key driver in developments in software, technology, services and even retail.
If we want more jobs, better paying jobs, a higher standard of living and a larger tax base, the United States needs small business to succeed.
But on a micro level, in the mind of the business owner, innovation is not about jobs, but more about fostering a competitive advantage which can result in building equity and creating wealth. We all want to create a company in our garage that becomes as valuable as Apple, or change the way people drink coffee (Starbucks) or improve the way people get and read books (Amazon).
But we want to innovate because it can make us rich and powerful, not necessarily for the greater good.
The story of innovation and American small business is really about being selfish — in other words being focused on the individual success of your own little boat. As a boat captain, you need to make your boat sleek, powerful, adaptable to changing conditions and efficient. The boat captain cannot and should not be responsible for the tide.
The greater good will happen when the tide goes up, as it always seems to, and all those little boats will float a little higher.
Paul M. Sabbah is president of Stamford International Inc., an export management company based in Stamford, Conn.