What does an “innovation economy” really mean?

We have entered the knowledge economy, but are only dismally realizing its tremendous potential for accelerating human progress and prosperity. While we acknowledge human talent as the chief resource of the 21st century, we fail to utilize the creative potential for a majority of the workforce. In fact, the portion of the employed workforce which utilizes independent judgement has remained stagnant for decades [see Nilofer Merchant]. Regarded from this angle, our state of the art economy is only marginally efficient at turning knowledge into innovation. Progress is only achieved painstakingly and convolutedly. The lost opportunity cost is tremendous [see David Nordfords].

Innovation, arguably the main actor in human progress and economic prosperity [see W. Brian Arthur], comes chiefly from the private sector. Under a proverbial microscope, innovation in fact comes from individuals who exercise independent judgement and in so doing, pose open-ended questions and challenge assumptions. This is the very basis of progress. One key economic effectiveness indicator should therefore be the extent to which the global workforce, particularly the knowledge workforce, is engaged in highly autonomous thinking and action. But are our employment systems and the larger socio-political context conducive to independent judgement?

The long shadow of the Industrial Revolution, where production efficiencies required scale, extends firmly to our modern times. We have not only inherited the systems of policies, laws and education that favor compliance over open-ended, “validity” thinking, we have inherited the mindset as well. Our current employment memes favor rigid bounds to human thought and action for all but a privileged few at the top of enterprise hierarchies (or those lucky Harvard drop-outs). The mindset extends to small enterprises as well. By and large modern collective human enterprise compromises the most vital trait of the very resource it claims to value most: the inexhaustible human generative potential. The net effect is value creation cannot keep up with general demand for progress. Politics gets in the way by favoring short term, zero-sum solutions over generative ones. Furthermore, politics finds fertile manipulative ground in those who have long forgot how to exercise independent judgement. Frustrations are collected and amplified (and in some perverted cases reinforced) into zero-sum, combative political debates that sideline the generative, non-zero sum nature of progress and prosperity. The quality of the political debate is noticeably sinking. In some cases, talent itself is chastised [see Roger Martin]. Progress is at risk.

A re-framing of the notion of work and organized enterprise may be one way to redesign our economic systems for extraordinary progress, to qualitatively rehabilitate our political system. A new Theory of the Firm is perhaps called for in the context of a knowledge economy [see Ronald Coarse]. How do we reshape the very construct of organized employment such that democratization of individual freedom for professional thought and action is achieved? What is the policy, legal and educational implications? Can we redesign key societal systems for prosperity while minimizing frustrations and preventing their focusing into derogatory debate and societal tensions?

Liviu Nedelescu, CEO, Avansys