Innovation in a Tough Economy

Even in a tough economy, entrepreneurs and businesses need to be finding ways to continue creating, inventing and innovating. After all, these are the strengths of the U.S. economy.

I came across comments delivered by Microsoft CEO Steve Ballmer earlier this month to the U.S. House of Representatives Democratic Caucus Retreat in Williamsburg, Virginia.

One can argue with and debate some of the points Ballmer made. But the following is important to keep in mind:

The good news is that the U.S. economy is still the world leader in innovation. Our universities are the envy of the rest of the world. The American workforce is the best on the planet, and U.S. companies continue to drive technological progress in almost every industry. But the time has come when we need to renew our innovation capacity.

We went back and studied what innovation companies did during the time of the Great Depression. One company that stands out, if you study the Depression, is RCA. Now, the fact that RCA is not around today, this has nothing to do with their behavior during the Depression. There's probably good learnings for a lot of technology companies in that. But during the time of the Depression, RCA was probably the most broad-based R&D-centric company in America. And while it cut costs certainly to survive the Depression, it never retreated from its commitment to core research and development. And as a result, after the Depression had ended, it really led and the U.S. led TV technology developments for the next 25 years.

That was good for RCA; it was good for America.

In my view, American companies aren't going to be able to weather this economic downturn just by cutting costs either. You may have heard that Microsoft, our company has decided that we need to reduce 5,000 positions. What you may not know is that at the same time we've decided we'll also create two to three thousand new jobs -- mostly in the US -- as we continue to push into new areas that require investment.

In addition, despite the tough economy -- I might even say because of the tough economy -- our company will continue to invest more than US$9 billion a year in R&D, because we think it's that R&D spending that will cause us to remain strong.

Indeed, the firms that keep their eye on innovation will emerge from these current economic doldrums in far better shape, and our nation’s economy will be the better for it.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council