Governments – From Innovation Leaders to Laggards

Governments - From Innovation Leaders to LaggardsWhen I was a kid in the halcyon 60s and the crazy 70s, we knew that while there was a “Cold War” the US Government, and many European governments were active, working to protect us from the Communist threat. Millions, no billions of dollars, pounds, francs, marks and other currencies were expended in scientific and military research that formed new offensive and defensive weapons. Much of that research made its way into the public sector, where it became the basis for new electronics, new semiconductors, new medicines and other new innovations.

Once, in the not too distant past, faced with threats from clearly identifiable and significant enemies, our governments invested heavily in R&D. After the end of the Cold War, a “peace” dividend was declared. Many countries in Western Europe and the US decreased military spending, which led to lower rates of government sponsored research. Further, aging populations and the demand for improved services from the populations led to shifts in investments and budget allocations. Primary R&D, a key driver for many innovations, has taken a back seat to many other government programs. Our NATO allies, fighting a war with Libya, have admitted that in the next 30 to 60 days they will have exhausted their armaments. Many European governments leading the air war in Libya will have to decide how to continue to fund the air battle, as many have allowed their militaries to atrophy. Britain, once the most powerful naval force in the world, no longer has an active aircraft carrier. While the peace dividends may be welcome and the specter of war diminished, at least large scale land war, the downgrading of military research and the fall off in government R&D has left governments as innovation laggards rather than innovation leaders.

Some will argue that this is what “should be” – governments should not dictate industrial policy or pick and choose challenges to solve, technologies to promote and so forth. However, few organizations do long term basic research better than governments, because they can take on problems over a much longer span of time than private enterprises, and can invest in challenges that may not attract funding or investment from private organizations. Yet much of the basic R&D work a government does leads to new innovations and new products once the ideas are commercialized. The knock-on effect of basic research is tremendous.

We risk losing a significant portion of our longer term research as national governments in Europe, the United States, Japan and other countries focus increasingly on other investment priorities – improving medical care, caring for their aging populations and so forth. Everyone benefits from strong governmental R&D funding as those concepts filter out into the market as new products, new services and new capabilities. While I have some concerns about the overt focus on sustainability and green technologies that the Obama administration favors, we in the US need to continue to support R&D investments in all phases of our government spending, and seek new methods to convert that research into new products and services, which will create new jobs.

Europe is waking up to this problem. Witness the latest report from their Innovation Union, which points out many of the problems the European Governments face from an innovation perspective. While the EU is in fact larger than the US and creates more PhDs, it lags the innovative power of the US, even as the US is losing its innovative edge to places like China.

It is almost inevitable that in these dire economic times that funding for the military and for basic research across the board will be cut, and basic government R&D has fallen over 5% just in the last few years. This lack of investment has a knock-on effect, as private industry is also suffering through some difficult years, and new policies make investments in private R&D less attractive. Large enterprises in the US currently have stockpiles of cash that should be translated into new research, but we need new tax incentives and less regulation to encourage these firms to get that cash working on new research. As the US government continues to shift its focus from R&D investments to cash payments for medical care, health care and other benefits, private industry must step in and take up the R&D slack, working with universities and research institutions. A significant engine of prosperity is slowly fading away with little to replace it. Something must step into the breech, or innovation in the US will suffer. The European commission report is a wake up call for all taxpayers in the US and in Europe. Basic research drives innovation, which drives new products and new job creation. Don’t let government R&D die, and press to extend private enterprise R&D tax credits.

Required reading for Congress and Obama if they are serious about fostering innovation

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Jeffrey PhillipsJeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of “Make us more Innovative”, and

Jeffrey Phillips




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No Comments

  1. Paul Hobcraft on June 23, 2011 at 3:22 am


    You strike the right chords. We are caught in a downward spiral and finding the appropraite way out of this is going to be difficult. I don’t think the US for sure, or even (parts) of Europe have any real peace dividend, this all seems to be going into smart bombs that cost US 1m to 2m a pop just to wipe out a bunker or a tank. We are draining any developed country dividend in supporting ideals (good or bad) and a social structure where outflows are exceeding inflows (pensions, retirement plans, medical costs). We have provided banks, and business to enjoy incredibly low tax exeptions but receive no investment dividend back for creating this.

    A wholesale rethink needs to take place. It is not just our governments that are laggards it is our societies that enjoyed what this gave them- a ease of access that they took advantage off in excess. Reality dictates, the world order is shifting and how much we don’t like it, we seem unable to ‘let go’ of what we have gained.

    We have built ‘complexity’ into the system and that has a very high price to service and undo.

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