articles by xbridgers
Business Money, April 2006
The World Economic Forum ("WEF") recently released its annual report naming the world's most IT-effective nations. That the United States once again garnered the top ranking was no surprise. What is astonishing is that since 1995, the rate of growth in economic productivity of the world's largest economy has steadily accelerated.
The report, co-authored by INSEAD, directly attributed the US acceleration in economic productivity with the country's ability to participate in and benefit from developments in information communication technologies. The US scored impressively higher than the other smaller nations that followed in the rankings - including Singapore, Denmark, Iceland and Finland -- confounding the usual notion that size slows agility. Interestingly, these are the same "top 5" nations named by the WEF last year. Sadly (as I am now proudly a citizen of this 'fair isle') the UK only managed tenth place.
Prosperity is now linked at least as much to investments in human capital and technology as it is to investments in physical assets and infrastructure. The UK government knows this but has not executed its policies to promote such investments in people and technology as well as those of smaller nations and the US. The WEF report cited three key reasons why US continues to lead in technological innovation:
Management practices. US firms are managed differently than their non-US peers. Management techniques that the WEF cited that helped US companies generate a much greater return on investment include: stronger decentralised management practises, a culture of stronger worker incentives, smarter targets and leaner manufacturing.
Venture capital. The availability of venture capital in the US, and early-stage venture capital in particular, is unmatched by other economies. This is a key contributor to the success of new start ups pioneering innovative new technologies. In comparison, British venture capitalists lend one-fourth as much as their US counterparts relative to each country's GDP. More poignantly, the combined membership of the British Venture Capital Association fund only about 150 of 450,000 UK business entities that start up every year.
Higher education. US universities don't just lead in technological innovation; they actively seek to enable the commercialization of their innovations. The WEF report cited unmatched levels of cooperation between US institutions of higher education and the US business community. Innovations move swiftly from university labs into business models for young, innovative companies. Hewlett Packard, Yahoo!, and Google were all founded by students at a single American university (Stanford).
As an entrepreneur doing business in both the US and UK, I would cite one additional factor: a fundamental difference in the attitude towards change between the US and Europe. More US companies have adopted innovation as a foundation to create and maintain competitiveness. How many UK companies outside of the pharmaceutical or technology industries have the word "innovation" in their core values? How many have management systems in place for accelerating innovation and systems for rewarding employees for new innovations?
Enhancing one's competitive advantage isn't just about investing in physical infrastructure. It starts with developing a culture that embraces and champions change.