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Ideas Roundtable: Advancing the Conversation Around Topics that Shape Our Lives
 
Content provided by GE
Ideas Roundtable: Advancing the Conversation Around Topics that Shape Our Lives

Improving the Bottom Line by Increasing Innovation

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From starting three companies and working with startups for over a decade, I've learned a fair amount about the sources of innovation. My experience has shown that:

  • An organization has an innovative moment
  • Creates something that people want
  • Then builds an efficient business around it

If they want to survive, they do all of that again -- in perpetuity.

Innovation is simply an improvement to the efficiency of doing business. It's about being able to do more with less, whether you're talking about a business process or a physical product. 

Most companies get started because of one core innovation that they figure out before the competition, and they grow by doing this one thing well that is very different than what the incumbents are doing. Bigger companies can innovate too, but they have a harder time because they are focused on what they've already done. 

Almost every country in the world is currently hell-bent on trying to encourage business innovation, but I'm not sure that is the role of government. Great entrepreneurs will innovate with or without the government's help. 

Innovation will always be entrepreneur led, and investors rarely make decisions on whether to invest or not based on incentives that the government might see fit to offer. No angel investors that I know invest because they can get an angel investment tax credit. In fact, often I have never sought the angel investment tax credit because the paperwork creates a burden for my companies.

It would be better to have the government focus on:

  1. Enhancing the education system
  2. Using their power to make heroes out of our entrepreneurs by shining a light on what works

The role of government is to not hinder innovation. The government should be there to set the ground rules of what is legal and just, but that's about it.

Now, all companies try to innovate -- but not all have the core competency to do so. Maybe their culture is not an entrepreneurial one. They don't hire for it, or don't have it in their budgets, but let's be fair too - innovation is hard. It is easier to believe you have the right people running innovation, but they may not actually get it and they may not accept enough risk to develop the innovations they may really need. 

When it comes to innovation, large organizations need a culture where you have permission to spend part of your time to come up with new ideas and to develop them. Employees have a lot of great ideas and the organizations that provide the flexibility and resources to employees to develop promising ideas will inevitably increase their innovation speed and success.

Startups are the lifeblood of innovation in this country. Smaller companies are generally more innovative than bigger companies, and they tend to create more valuable innovations. Part of the reason that bigger companies are less innovative is that innovation can become a nice to have in the minds of some executives in successful organizations, not a must have. 

Because big companies often struggle to innovate as quickly (or as well) as startups, big companies need to look at a lot of different funding models for innovation. For example, Microsoft is now working with my company TechStars to fund an accelerator that we're involved with.

So, if you're running a company and you would like to see it continue to exist and grow, you must invest in innovation and you must finance it a number of different ways so that you have a number of different idea crops to harvest. 

The bottom line depends on continued innovation investments and that means continuing to invest in keeping the entrepreneurial spirit in your organization that drives innovation. Do that and you have a chance to defend and extend your bottom line both now and into the future.

To learn more about the state of innovation around the world, explore the above Innovation Barometer 2012 data visualization »

David Cohen - David Cohen is the founder and CEO of TechStars, a mentorship-driven seed stage investment program for Internet startups. David is an active startup advocate, advisor, board member, and technology advisor who comments on these topics on his blog at DavidGCohen.com. You can find David on Twitter @davidcohen.

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