The McKinsey Quarterly just published a new report "Where Innovation Creates Value."  I think the consultant got paid by the word for this really long article, which boils down to a simple argument.  It doesn't matter what kind of innovations are developed, or where innovations are created.  What does matter is who implements them.  The implementers gain the vast majority of the value from innovation.  More than the patent holders or the countries where inventors live.

Historically America has been a hotbed for trying new things.  America was advantaged over Europe because it didn't have the regulations and other innovation testing roadblocks.  America was advantaged over Africa and much of South America because it didn't have a legacy of dictator governments and corruption that kept things from moving forward – blocking innovation.  America was advantaged over China and India because it's per capita GDP has been very high, meaning there were ample resources to invest in trying new innovations.  Thus, America has historically been an innovation testing grounds that has paid enormous dividends by keeping its companies on the leading edge of competitiveness.

But there is cause to worry.  Recently I blogged about how companies were blocking employee access to social networking sites ("Letting the Bogeyman Hurt Your Business").  Concerned about employee efficiency, managers were blocking these sites so employees kept their fingers on the keyboards performing designated, approved tasks.  Sort of Taylor-ish sounding, don't you think?  In today's economy the value of smart employees is pretty high, but how do you know if they are smart if you block their access to tools.  Is success more about how fast they do the tasks, or if they can figure out a better way that is inherently cheaper?  Do you want employees doing the same thing better, faster, cheaper – or do you want them developing new solutions that are more competitive?

Consider the smart phone market, led today by the iPhone.  And the new publishing media like Kindle and Sony's eReader.  Soon we'll have plenty more of these products available that will increase knowledge access and speed of information flow making those who are connected even more competitive.  According to SeekingAlpha.com, "Verizon's Droid is the Real Deal."  New phones from Motorola with Google's Android operating system (get that, an operating system for your phone.  Does that phrase not surprise at least a few people – some of whom might remember when phones had no intelligence – not even a dial tone?) will have an explosion of new applications and uses raising productivity and results. 

Yet, how many companies are providing these devices and data access for employees?  Most of the early adopters I see are paying for this out of their own pocket.  The obvious concern is that American companies will remain focused on efficiency in this downturn.  They will block access to parts of the web, and avoid technology investments for employees and customers.  Meanwhile competitors in countries growing at 6-8%/year like China, India and Brazil will make these investments.  If so, they become the early innovation implementers.  And if that happens….. well that could be a very serious game changer.  We can't assume the American economy will recharge if we don't apply innovations, and we can't assume competitiveness if companies from other places increase their adoption rates to exceed America's.

I don't see a lot of Disruption or White Space in America right now.  Even top economists are bemoaning how businesses keep cutting employees and costs while the overall GDP does better.  Business leaders seem stuck trying to Defend & Extend past business practices which aren't producing better results – and won't.  They remain focused on cutting costs rather than innovating new solutions.  But what we know is that the greatest return comes from a willingness to Disrupt and open up White Space to implement new solutions – in the process of making your own business a market disruptor that can grow and achieve superior rates of return.