Ernst & Young LLP recently released a report during the Detroit Economic Club’s National Summit that highlights the vital importance of entrepreneurship and innovation in today’s economy. At a time when business leaders are struggling to balance short-term survival with long-term demand for growth, innovation and an entrepreneurial mindset is essential.
The new white paper, Entrepreneurship and innovation: The keys to global economic recovery, details the clear connection between entrepreneurship, innovation and economic growth. Drawing on academic research, leading business minds and real-world experience, the report shows how developing new products and services, revamping organizational processes or adopting fresh approaches to partnerships can enable companies to take advantage of the current economic climate. The full report can be downloaded at ey.com/innovation/.
“Entrepreneurship and innovation inherently thrive in downturns; in fact, some of the world’s largest companies were born during a recession,” says James S. Turley, Global Chairman and CEO of Ernst & Young. “In times like these, it’s especially evident that entrepreneurial thinking isn’t optional. It’s more than a buzz word – it’s a business strategy.”
Carrie G. Hall, Southeast Sub-Area Strategic Growth Markets Leader of Ernst & Young agrees. “Economically, entrepreneurship invigorates markets. In 2009, more than half of the companies on the Fortune 500 list were found during a recession or bearing market,” says Mrs. Hall. “The establishment of new business leads to job development and has a multiplying result on the economy.”
The white paper analyzes many aspects of the entrepreneurial debate, including:
• Recessions tend to favor the naturally innovative temperament of an innovative mind. Historically, entrepreneurs have thrived in recessions, and helped to bring about a return to economic health. According to a recent Ernst & Young survey, 67% of entrepreneurs are focused on pursuing new market opportunities brought on by the downturn.
• The market leaders of today are not necessarily the market leaders of tomorrow. Globally, all the major indexes turn over every five years. For example, the Global Forbes 2000 has experienced a 51% turnover; the HDAX (Germany), 50%; the FTSE 350 (UK), 50%; the KOSPI 200 (South Korea), 49%; and the Bombay 200 (India), 91%. Entrepreneurial-minded enterprises are growing with incredible speed and quickly entering the ranks of the world’s largest corporations.
• Innovation is often disruptive, yet it is critical to maintaining and sustaining market leadership. Strong organizations embrace this and make it a part of their corporate culture.
• Entrepreneurship is not about size; rather, it’s a state of mind. Large companies can and do build and sustain cultures that embrace the power of innovation.
• Government policies can play a big role in encouraging entrepreneurial growth. Free flows of capital, labor and ideas benefit innovators, as does an educated populace. Additionally, governments can create conditions that attract foreign investors and encourage or discourage innovation through the tax code.
“Those with an innovative mindset can unlock the hidden opportunities in this recession,” notes Mr. Turley. “New companies will spring up that will revolutionize whole industries, while mature companies will build innovative cultures that can strengthen their competitive edge for generations. After all, innovative companies outperform their industry peers and are the most attractive to shareholders. We must do everything we can to stimulate creative thinking across our organizations, teams and processes. Our economic recovery depends on it.”