Innovation Nation

Barack Obama's inauguration was a reminder that Americans are hungry for change. Can you blame them? Our nation is mired in an economic slowdown, the cumulative result of financial markets in disarray, a credit crisis, a housing correction, a mounting trade deficit, a retail slump, and an energy market tied to the political stability of a volatile region. In the business world, the old ways have not been working.

Sander Flaum

Take the auto industry. Perhaps the best thing we can say about the rescue package for Detroit is that it appears frugal compared to the $700 billion bailout of the financial sector. Not only did the government spend $17.4 billion to keep two terminally ill companies afloat, but it stipulated that a "car czar" act as liaison between the automakers and the federal government. Why a self-destructive industry deserves representation in the White House is beyond me.

We need more than just a refurbished Cabinet; we need all new furniture. It's time for the federal government to make a sincere commitment to innovation.

Makeover Nation

In December, New York Times columnist Tom Friedman noted that a flawed system has hijacked the country's brain trust, creating radical new investment vehicles instead of, say, radical new motor vehicles. "We don't just need a bailout," wrote Friedman. "We need a reboot. We need a build out. We need a national makeover."

The Obama administration has taken the first step toward that makeover with a $1 trillion stimulus plan designed to create 3 million jobs by 2011, in part by reinvesting in our national infrastructure. If this sounds familiar, it may be because Franklin Roosevelt did the same thing about 75 years ago. Back then, we called it the New Deal.

"We won't do it the old Washington way," Obama said of his spending plan. "We won't just throw money at the problem. We'll measure progress by the reforms we make and the results we achieve—by the jobs we create, by the energy we save, by whether America is more competitive in the world."

These are admirable goals, but one must at least raise an eyebrow. An explicit distaste for "the old Washington way" is pretty common in Washington, and a focus on rebuilding things that are already falling apart could well be a step in the wrong direction. Let's make every one of those trillion dollars count.

Stocking the Cabinet

Obama recently won acclaim from the Industry Advisory Council, a group of information technology contractors, for the decision to tap a chief technology officer. The trade group also recommended that the President form a Government Innovation Agency to serve as an incubator for ideas and a repository for best practices.

The Obama administration could demonstrate its commitment to innovation by naming a Cabinet-level Secretary of Innovation. It's an aggressive idea, but for a President who campaigned on change in a nation dealing with a recession, it could meet little resistance.

The first Innovation Secretary would have three primary goals: 1) assemble a regular summit of economists, academics, and innovators to get input on the state of industry; 2) help author and support legislation to create financial incentives that favor entrepreneurs and drive new ideas; and 3) develop a Web site that will serve as a suggestion box for innovations (in the style of Procter & Gamble's site).

Of course, creating such an agency won't be an easy sell with the federal government. There is a bias, particularly during difficult economic times, toward sticking to the conventional business model. But that's counterproductive thinking. According to a November article in Knowledge@Wharton: "Given the high failure rate of innovative projects, companies are smart to develop an array of possible situations and contingencies, rather than pin all their hopes on one plan." The article cites Paul J.H. Shoemaker, research director for the Mack Center for Technological Innovation, who says firms should approach innovation with a shotgun, rather than a rifle. That is, try as many different approaches as resources permit, and hope that you hit something.

Funding and rewarding innovation will require new ways to assess success. If the US continues to ignore national sponsorship of innovation, we risk falling behind the curve and losing ground to countries that dedicate resources to meaningful technological advancement.

That's change you can believe in.

Sander Flaum is managnig partner of Flaum Partners and chairman of the Fordham Graduate School of Business, Leadership Forum. He can be reached at sflaum@flaum-partners.com