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INNOVATE

What's Wrong With How We Innovate?

Can we learn from China's R&D? Plus, Europe's start-up ecosystem is maturing, U.S. "buy local" efforts are working, and more of the day's news.
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Each day, Inc.'s reporters scour the Web for the most important and interesting news to entrepreneurs. Here's what we found today:

The truth about American innovation. Sure, it was positive that President Obama used the word "innovate" so many times in his State of the Union Tuesday, for example, saying "we need to out-innovate, out-educate, and out-build the rest of the world." But Bruce Nussbaum's day-later reaction in the Harvard Business Review argues "harsh truths" President Obama omitted include that very little actual innovation takes place within big business, that the U.S. innovation policy is misguided, and that China's "Fast Follower" policy is superior to ours. After a R&D survey showed that only 9 percent of U.S. companies had any product, service, or process innovation between 2006 and 2008, economist Michael Mandel observed, "you can't be an innovation economy if only 9 percent of your companies are innovating."

Where are the women founders? Y Combinator co-founder Jessica Livingston tackles the age-old question of the start-up gender disparity. Part of the problem, she posits, is that most young women don't even know starting a company is an option. Livingston fell into that category herself, so she gives her 25-year-old self some advice (takeaways include avoiding debt, learning about start-ups, and learning how to program). She admits that many investors have a bias against women—or at least a preference for men. Still, Livingston offers hope: "while your ability to reach customers may be limited by the difficulty of getting funding, the customers themselves don't care. So if you work on something that doesn't require lots of money to get started, you really do have a level playing field."

The real "Buy Local" effect. A new survey of independent businesses from the Institute for Local Self-Reliance finds that small businesses actually do benefit from the "Buy Local" campaigns that are spreading in cities throughout the country (via GOOD). Encouraging consumers to "think globally, act locally," the campaign helped small businesses grow an average of 5.6 percent in 2010. In cities without such a campaign, businesses reported an average of 2.1 percent growth. The campaigns are currently running in 140 American cities, and this is the fourth year in a row that the survey has proved the power of buying local. And there's reason to keep that cycle spinning: "Spending your money at independent businesses begins a cycle in which those businesses then spend their money at local shops, and so on," GOOD writes.

Europe's start-up ecosystem grows up. At least that's what a piece by David Langer, co-founder of GroupSpaces, in TechCrunch contends. He says while journalists and U.S. entrepreneurs scoff at prospects for European start-ups, "since 2004, eight of the 30-or-so technology companies that went public or were acquired for at least $1 billion were European, including Skype, Betfair, and TomTom." Not to mention the hundreds that have more than $10 million annual revenue. In Langer's model of a start-up friendly Europe, London is Silicon Valley, where founder-networking events abound, and venture capitalists congregate. He writes: "If you speak with the founders of Songkick, Playfire, Conversocial, Branient, Spoonfed, Smarkets, or any of the other fast-growing London-based start-ups, you will hear similar stories of a maturing European ecosystem satisfying their needs."

...but the occasional growing pain persists. Skype, the Internet-phone juggernaut is holding off on its initial public offering until the second half of this year. Volatility in the IPO market and the surprise hiring of a new CEO last fall have slowed the offering process, according to The Wall Street Journal. The Skype IPO saga began nearly three years ago when eBay announced it would spin off the firm. Although Skype is still eyeing the public markets, "investors have raised concerns about its ability to generate revenue and profit from its vast user base."

The death of free Web TV? Since 2008, Americans have enjoyed watching free content on Hulu, one of the pioneers of Internet video. But that could soon change. The Wall Street Journal is reporting that internal discussions between Hulu's owners, NBC, News Corp., and Disney‚ reveal tensions about whether offering free online content cannibalizes on other lucrative revenue streams. "Worried that free Web versions of their biggest TV shows are eating into their traditional business, the owners disagree among themselves, and with Hulu management, on how much of their content should be free," the Journal notes. Research suggests that more than a quarter of a million people cancelled their cable services last year, effectively "turning off the spigot of monthly fees that have helped support TV for over 30 years." Hulu is already charging a subscription for some content. Stay tuned to see how that strategy pans out.

Sony ups the ante. In an effort to keep up with its gaming rivals, Sony announced it will be releasing a new handheld game device, called "NGP" for Next Generation Portable. The New York Times reports the NGP has a 5-inch organic LED screen, two sets of control buttons, motion sensors, 3G network access, and a touch pad and camera on the front and rear. The device, scheduled for sale at the end of the year, is supposed to put Sony back in the gaming market with Nintendo and Apple. But the Times notes that "in February, Nintendo plans to introduce in Japan the 3DS, the next model in its popular DS line of portable game players."

Can social networks make us sad? Does logging into Facebook put a smile on your face? As long as you resist the urge to check the status updates of your friends and colleagues, you're in good shape, research suggests. A study in the January Personality and Social Psychology Bulletin found that observing chipper status updates and exciting photos posted by friends seemed to make college research subjects feel worse about themselves. Why? "If we only wanted to be happy it would be easy; but we want to be happier than other people, which is almost always difficult, since we think them happier than they are," one Stanford researcher said.

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Last updated: Jan 27, 2011




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