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Innovating to Recovery

From the editor.

A flood of innovation will soon hit the United States, Europe, and Asia. This outpouring will be essential to ending the current global recession.

As we all languish under the specter of war, terrorism, layoffs, and accounting scandals, the technology sector is being especially hard hit-so hard hit that many say recovery is at least two years away. However, I believe a turnaround could come in half that time.

I make this assertion partly because my colleagues and I visit regularly with technology leaders. I know the innovation machine-doing real stuff, not fluff-has never let up. And more fundamentally, smart high-tech leaders know they can’t simply economize out of recession. Instead, they must innovate to recovery. As Intel CEO Craig Barrett said last spring at a software development forum, “The only way out of a recession is basically to bring out new products, new technology, new capability, and make the end user excited about what you have to offer.”

This story is part of our December 2002/January 2003 Issue
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If anything, the commitment to innovation has intensified during these years of slow growth because innovation is what tough conditions demand. Contrary to popular thinking, the Internet boom was not a period of explosive innovation in computers and telecommunications. That recent epoch is better characterized as a time of imitation-when almost anyone who parroted the hype about the Web and e-commerce could get funding.

The real technological innovations occurred years earlier-many of them born out of (or made marketable during) the slowdown and recession of the late 1980s and early 1990s, when people got serious about adding value. Few companies responded to that crisis better than IBM. Around 1991, IBM almost saw its research wiped away. But within a few years, it had produced a wave of innovations, especially in semiconductors and storage technology, which quickly exerted their impact on the bottom line. Retired IBM vice president for science and technology John Armstrong once told me, partly in relation to Big Blue’s volte-face but also in regard to similar stories at other companies, “People have been so shaken up by the corporate trauma that they realize that they can independently be successful only if they’re all successful. Adversity brings people together.”

Hard times force companies to shed waste and concentrate on what is truly important. The fresh focus that started a few years ago and continues to guide smart companies today will set the stage for growth in the next few years and beyond-and will give innovative companies the ability to distance themselves from competitors.

For a snapshot of the creative work afoot that will propel the economy in the coming years, take a look at our latest R&D Scorecard (see R&D Scorecard 2002), which tracks spending at 150 top companies in 11 technology sectors. Many organizations have reduced their spending, generally reflecting the wise strategy of focusing resources and doing more with less. But let’s look at the wingspan of R&D funding in a given industry: which companies are cutting deeply and which are keeping investment high? In telecom, Cisco and Ericsson stayed strong while the other top two spenders-Lucent and Nortel-cut outlays by around 30 percent. By nurturing their technological bases, Cisco and Ericsson ought to be better positioned to innovate out of the recession.

These numbers, of course, are only a guide. And numbers alone do not reveal what, specifically, companies are doing with their technology. In this issue, we’ve profiled a few cases where corporate labs are pursuing breakthrough projects-long shots that could have enormous impact if they pan out. Keep reading Technology Review, though, and we’ll fill in more of the blanks, identifying the best emerging technologies and what they’ll mean for your business, your life, and society. We have plenty to write about.

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