The Innovation Buzzword is Killing Us
The Swiss Bank UBS estimates that to fulfill the UN’s sustainable development goals (SDGs) by 2030, it would require trillions in capital per year. The Gates Foundation has roughly $40 billion in assets; the top 10 foundations in the world have $80 billion. This seems daunting if we’re to get anywhere close to achieving the SDGs by 2030.
Partly as a result, people appreciate the need for fresher and more efficient models of tackling social issues — ‘innovative’ models that make a dollar go further. Innovation has certainly become a fashionable word.
But wait a second: what IS innovation? Many people throw this buzzword around without any clear indication of what exactly they mean by it. Many large firms have innovation officers, innovation units, innovation workshops, and so on. A few years ago, I published research with the CD Howe Institute on measuring the types of capital that drive innovation (it was later cited in the Canadian Federal Budget to support ending a wasteful policy). In it, I quantified the level of innovation in a given province during a given time period by measuring new patent filings that were ultimately successful — an imperfect measure but one that at least gets past the fluffy buzzword toward something measurable.
After attending a social entrepreneurship conference where I tried to count the number of times I heard the word ‘innovation’ (I failed… I lost count in the first few minutes), I happened to visit a friend who works at Google’s HQ in Mountain View, California. After being introduced to various researchers biking around the campus (working on AI, Robotics, and other things), I posed a question to him. “Do you ever use the word ‘innovation’ here?”
He paused and thought about it. “We don’t really use the word that much. People don’t talk about innovation… they just, you know, do stuff.”
Shortly thereafter, I posed the same question to an ex-McKinsey Partner who had just finished a stint running a large philanthropic foundation. He summarized it more directly, with specific reference to non-profit funders and governments: “The more a big foundation uses the word ‘innovation,’ the less they’re actually doing it.”
The overuse of the word may sound harmless, but it’s not. First, it may be a waste of resources. It’s all fine and well to fund innovation conferences, innovation teams, innovation officers, and the like, but not if it comes at the expense of what actually creates innovation: funding innovators.
I can’t tell you how many times I’ve seen an innovation prize or competition where most of the funding goes to the actual process and the winner gets next to nothing. Half a million dollars to fund an elaborate innovation conference and multi-round contest with judges where the winner gets… $10,000? I don’t need to do the research to know that that won’t create much measurable innovation. (But it sure is fun!)
In the worst instances, it can waste the time of folks actually building more efficient new processes and products. The international development space is notorious for this. Many of the large global aid agencies have actually gotten together to create a ‘fund’ to specifically support innovation. It’s largely staffed with their own employees, basically seconding them into this new ‘innovation’ fund that was designed to, of course, promote innovation in international development.
Now in the finance space, it’s generally recognized that smart people (i.e. human capital) represent the most important asset. The value of a good venture capital firm is both the “selection effect” (they’re skilled at picking the right innovations that work and can scale) and also the “treatment effect” (once they invest, they serve on the board, help with sales and connections, coach management and helping design strategy, etc). Indeed, this is why my CD Howe research paper concluded that private VC firms create more measurable innovation per dollar spent than government-backed venture capital.
Unfortunately, with this conglomerate fund, they’ve put the word ‘innovation’ on it, and placed the same folks from large government aid agencies into it. To the investment world, this would be like JP Morgan Chase creating a new fund with ‘innovation’ in the title, seconding their commercial lending team into it, and expecting that it can compete with Andreessen Horowitz. Why? Because innovation is the point of the fund AND in the name of it too, that’s why.
This is not to knock the quality of such teams. They’re surely good at what they do: funding established programs and monitoring them to ensure impact and efficient delivery. Just like JP Morgan Chase commercial lenders are good at evaluating and lending to more established businesses with operating track records. But neither of them suddenly become skilled at the fine art of funding fresh innovative ideas simply because you dropped them into a new fund, put the word innovation in the title, and asked them to start funding innovation. And this means that they can actively waste the time of organizations that apply for funding in hopes that the fund is capable of evaluating risky, new ideas — when it’s actually ill-equipped to evaluate them and just as risk-averse as ever.
Innovation can mean many things to many people. It can occur in different ways in different industries and companies (big and small). The world does need more of it, especially on the social side of things. But that requires taking real risks and funding innovators promoting ideas that have never been done before. Repeating the word over and over, without meaning something more substantive by it, unfortunately won’t get us very far.
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