An Innovation Action Plan for Obama

The President must help the U.S. get back into the innovation game. Here's a seven-point plan he should follow

By Thomas D. Kuczmarski

President Barack Obama has jumped in with both feet to pull the economy and financial markets out of their sickening drop. At his urging, Congress has enacted a record economic stimulus plan. Obama has put together plans to rescue the nation's big banks as well as up to 9 million households overextended by their mortgages. But this is not enough. Obama needs to reignite the private sector.

The best way to accelerate growth, increase demand, and multiply jobs is to get management to make significant investments that will incur higher levels of risk but will also yield significantly higher returns. It's called investing in research and development, pursuing new business models, and launching new-to-the-world products or services—in short, innovation.

The private sector ultimately will determine when and how it will reengage, but Obama could institutionalize a set of concrete measures that would hurry business decision-makers along by providing incentives for risk-taking. Obama needs to hustle, too, before this task becomes even harder.

Admittedly, government investments in innovation would add to the already huge federal deficit. But we should get back even more. Successful innovators should outperform their competitors and generate a 30% to 40% return on their innovation investments over the next three to five years. To vouch for this, we will need to create a new metric—return-on-innovation—in order to track investment returns from these government programs as well as from private innovation efforts.

Here is my seven-point innovation plan:

Graduated Tax credits for R&D Investments

The more a company spends as a percentage of its sales on R&D, technology advancements, and other market-building activities, the greater the tax savings realized. By having this set up on a graduated scale, corporate taxpayers would have a strong incentive to invest more money in seed-planting today, a strategic practice that is often put off when companies are managing for the short term. Any U.S.-based company would be eligible for the break regardless of where its research is actually conducted. We'd still be better off for the added potential.

Innovation Booster Grants

To build enthusiasm for longer-term projects and the investment they require, companies large and small would be invited to compete for innovation booster grants of $500,000 to $5 million. Applicants would detail the business case for each new product/service or business plan. A review board would respond to each proposal within 30 days. Winners would have investment funds now as opposed to somewhere down the road, when credit markets again embrace risk. Quick decisions are essential, as is absolute transparency in grant disbursements. Even firms that don't get funded would come out ahead because they would have their best ideas ready to go when times get better.

Innovation Awards

There is nothing like competition to highlight the importance of innovation in economic growth. Each year 51 companies (one from each state, plus the District of Columbia) would be selected as national innovation award winners. Companies would submit their innovation candidate, which could be a new product, new service, new business model, or new process. Each would be graded by the consumer or customer impact of the innovation as well as its novelty and financial return. An annual celebration with Obama handing out the awards would cap the process.

National Business Incubators

Local governments have set up business incubators to help entrepreneurs develop ideas into businesses. The nation should sponsor incubators, too.

Business Exchange

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