INNOVATION Perspectives for the 21st Century Innovation: Perspectives for the 21 st Century InnovaTIon Perspectives for the 21st Century For this third book in the BBVA series, we have chosen innovation as the central theme. It was chosen for two fundamental reasons: the first was the decisive importance of innovation as the most powerful tool for stimulating economic growth and improving human standards of living in the long term. This has been the case throughout history, but in these modern times, when science and technology are advancing at a mind-boggling speed, the possibilities for innovation are truly infinite. Moreover, the great challenges facing the human race today— inequality and poverty, education and health care, climate change and the environment—have made innovation more necessary than ever. Our economy and our society require massive doses of innovation in order to make a generalised improvement in the standards of living of nearly 7 billion people (the number continues to grow) compatible with the preservation of the natural environment for future generations. The second reason for choosing this theme is that it is consistent with BBVA’s corporate culture. Our group’s commitment to the creation and dissemination of knowledge ties in directly with the vision that guides every aspect of our activity: “BBVA, working towards a better future for people.” People are the most important pillar of our work, and the work we do for and on behalf of people is supported by two other pillars of our culture and strategy: principles and innovation. Index 10 Innovation for the 21st Century Banking 107 Culture, values and the long waves of Industry capitalist development Francisco González Francisco Louçã 23 The Roots of Innovation 129 Technological change and the evolution Alex Pentland of the U.S. “national Innovation System”, 1880 – 1990 33 The archaeology of Innovation: lessons for David C. Mowery our times Sander van der Leeuw 143 Mapping Creativity in the European Union: Edward Lorenz and Bengt-Åake Lundvall 57 Innovation:It is generally agreed that science shapes technology, but is that the 163 Innovative organizations: whole story? Structure, Learning and adaptation Nathan Rosenberg Alice Lam 73 Two Knowledge Dynamics for Innovation 181 Innovation by Users Hiroyuki Itami Eric von Hippel 85 Innovation Inside and outside the Company: 199 The Power of Creative Freedom: How Markets for Technology Encourage open Lessons from the MIT Media Lab Innovation Frank Moss Alfonso Gambardella 211 Creating abundance through the application of a discipline of innovation Curtis R. Carlson 229 Designing Radical Innovation 333 Innovation and Climate Change Harry West Edward S. Rubin 241 Innovation: Behind the Buzzword 351 Life Innovation with Therapeutic Robot, Paro Pascal Sobol Takanori Shibata 255 Innovative Culture: values, Principles and 367 Innovation: Changing the Face of Disability Practices of Senior Executives in Highly Hugh Herr and Ernesto Martinez-Villalpando Innovative Companies Joaquim Vilá 383 The City to Come Carlo Ratti and Nashid Nabian 269 Economic development revisited: How has innovation contributed towards 399 Future opera for Robots and People Too easing poverty? Tod Machover Manuel Mira Godinho 409 Biographies 287 Innovation and the Service Economy Ian Miles 415 List of artists 305 Financial Innovation: a Balanced Look Robert E. Litan 321 The Financial Industry and the Crisis: The Role of Innovation Xavier Vives Innovation for the 21st Century Banking Industry Francisco González Chairman of BBVA This book, Innovation: Perspectives for globalisation, which today deeply affects the 21st Century, is the third in a series of every aspect of people’s lives. annual publications by the BBVA Group. In order to give the collection a sense of The motivation behind these publications continuity, we have chosen innovation as is to publish expert knowledge on the key the central theme of this third book. It was issues shaping the future course of the chosen for two main reasons: the first was 21st century and relay this knowledge to the decisive importance of innovation as the society. To this end, we seek out leading most powerful tool for stimulating economic researchers and creative minds from around growth and improving human standards of the world and ask them to address rigorously living in the long term. This has been the and objectively the latest developments case throughout history, but in these modern in knowledge and the ongoing debates on times, when science and technology are research and artistic creation in their own advancing at a mind-boggling speed, the fields, using a language and approach that possibilities for innovation are truly infinite. non-specialised readers can understand. Moreover, the great challenges facing the The first book in the series, Frontiers of human race today—inequality and poverty, Knowledge, was published in connection with education and health care, climate change the institution of the Frontiers of Knowledge and the environment—have made innovation Awards granted by the BBVA Foundation. more necessary than ever. Our economy It focused on recent breakthroughs and and our society require massive doses of key challenges in each of the eight award innovation in order to make a widespread categories: biomedicine; ecology and improvement in the standards of living of conservation biology; climate change; nearly 7 billion people (the number continues information and communication technologies; to increase) compatible with the preservation economics, finance and business of the natural environment for future management; development cooperation; and generations. the contemporary arts. The second reason for choosing this The second book offered a comprehensive theme is that it is consistent with BBVA’s overview of the complex phenomenon of corporate culture. Our group’s commitment 10 to the creation and dissemination of to make these solutions available to more knowledge ties in directly with the vision that and more people. Innovation is a vital tool; guides every aspect of our activity: “BBVA, with it, our daily efforts can achieve the best working towards a better future for people”. results, and BBVA can become, as we want it People are paramount in our work, and the to be, the best universal bank worldwide—in work we do for people is supported by two other words, the bank that offers the best other pillars of our culture and strategy: and most varied solutions for people and for principles and innovation. companies. BBVA’s principles can be summed up in I will return to this later, but first I would the belief that ethics are not only desirable like to say that the undertaking of publishing but also profitable. Acting in accordance these books over the past three years has with strong values of honesty, integrity and been an extremely gratifying experience. transparency is essential for establishing a Each year we have been privileged to work close and lasting relationship of trust with with some of the world’s leading experts on all our stakeholders: our shareholders, truly fascinating subjects. The opportunity suppliers, regulators and, above all, our to interact with them and their ideas has employees and our customers. enriched us all. This ethical commitment extends to all This year, again, I am very proud of the the societies in which we operate and to calibre of the authors who kindly agreed to society as a whole because we believe that participate in our project. The book boasts economic development and social stability texts written by a select group of the world’s are the keys to ensuring BBVA’s continuous, best and most prestigious experts in their profitable growth . For this reason, BBVA respective fields. Some are repeating the is actively involved in a variety of social experience—like Professor Rosenberg, projects, with a particular focus on promoting who contributed a magnificent article on education and knowledge. This is the context globalisation to last year’s publication— that has inspired the publication of these which constituted a great honour and books as well as a host of other initiatives, show of support for our project. Others such as the Frontiers of Knowledge Awards have collaborated with BBVA on different and the different activities organised by the innovation projects, or represent institutions BBVA Foundation, in addition to ambitious with which we have signed agreements or educational programmes launched by the established partnerships in this field. And bank in every country in which we have a all have made valuable contributions that presence. give us a glimpse of the “state-of-the-art” in However, although these actions are innovation.1 1 Here I would like to offer a undeniably important, at BBVA we believe we I wish to express my gratitude and that of special tribute to the memory make our greatest contribution to improving the entire BBVA Group to all the authors for of Professor Chris Freeman of the University of Sussex, one of people’s lives through diligently performing participating in this book entitled Innovation: the pre-eminent contemporary our daily activity. The banking industry, and Perspectives for the 21st Century. On reading experts on economic cycles and the economics of innovation. the financial industry in general, carry out it, I trust that all of you will find a rich, His untimely passing this tasks essential to people’s everyday lives and varied and thought-provoking discussion summer precluded the possibility of recruiting him for to economic development and social stability. of innovation--a complex phenomenon of this project, in which a number BBVA strives to offer its customers a wider paramount importance for the society and of his colleagues, collaborators st and disciples have participated. and better range of solutions each day, and economy of the 21 century. FRanCISCo GonzáLEz 11 an oPEn, PLURaLISTIC vIEW oF InnovaTIon to be introduced into the market. This is why Innovation is extremely hard to define.