Arrow Electronics, Inc.
The following editorial from Arrow Chairman, President and CEO Mike Long was posted on June 24, 2013, in the online edition of the Financial Times. To view the editorial as it appears in the Financial Times, visit http://www.ft.com/intl/cms/s/0/f1c77bf2-dd07-11e2-9700-00144feab7de.html#axzz2XY7EN7qD.
Keeping innovation on track
By Mike Long
The stock market is still well up on the year, housing starts are rising, and there’s talk of a manufacturing renaissance in America and Europe. Amid the good news, however, there is also sequestration, a new Cyprus-led European debt crisis, persistent unemployment and volatile oil prices.
Most of all, the gridlock in Washington is darkening even the most optimistic views. At times the list of challenges seems so long that it can feel as though we’ve passed some point of no return.
Yet underneath it all, there is a strong sense of moving forward among small business owners and large company CEOs, because technological innovation is alive and well in America. Finding revenues and profits in a challenging economic environment is not easy, but business leaders find the will to do it every day, empowered by their vision, determined by collective responsibility for their stakeholders, and fuelled, most importantly, by innovation.
Throughout America’s history, innovation has been at the heart of value creation, market creation, and economic growth. From the invention of the cotton gin which transformed clothing manufacturing, to the first refrigeration units which revolutionized food distribution; from the discovery of how to vulcanize rubber which changed transportation, to use of the first assembly line which empowered mass manufacturing, America’s early innovators were the inspiration and fuel of a growing industrial economy.
Today’s modern innovation has been no different. Technology has changed our lives and fuelled unbelievable new markets. The invention of the CMOS image sensor made possible better cameras, video games and even swallowable pill cameras. Innovative electronics design has shrunk the size of components enabling high-powered computing and communication in the palm of your hand, and next-generation network equipment powers an increasingly connected business world across the global Internet…and the Internet itself created an economic revolution like none before it.
It’s said that “history repeats itself” and experience proves that true. Which means, if we are to restart America’s economic engine, it will come from America’s innovative companies. The good news: it’s starting to happen, especially in the technology sector. Last month’s index of business optimism showed a 2.6 point increase, as companies see the effects of innovation.
The annual Booz & Company innovation study found that research and development investment has grown robustly to pre-recession levels. And, while the number of companies increasing R&D spend is up overall, companies in North America grew innovation spending above the global average. The leading industry for investment was electronics and computing representing 28 per cent of the total increase in innovation investment. That’s impressive.
The US Small Business Administration research credits two-thirds of all net-new job creation to small businesses that generate 13 times more patents per employee than larger firms. Yet, the McKinsey Quarterly recently reported small business optimism was at a near 20-year low. Why?
Small firms struggle with financing, confidence in business pipeline, and with engaging with larger firms to generate new business. And even while R&D investments improve, America’s largest companies are sitting on a trillion dollars in cash.
Working with so many smaller technology companies, we see the economic promise in midsized and smaller businesses. We can all agree that the federal government has more to do to ease the barriers to small business growth. But more importantly, now is the time for larger companies to support this critical segment of the economy by finding ways to mentor smaller companies, opening the doors to new supplier relationships, and facilitating financing opportunities to help small business innovation and entrepreneurship flourish.
In short, larger companies can help mitigate the complexity challenges that stifle small business progress. Doing so will not only fuel small-company growth, it will increase business for larger companies, open up new channels of opportunity, and it just might help inspire the next big idea.
Arrow Electronics is focusing on innovation, particularly in electronics of the future. Other high-technology companies – from Apple to Google to Amazon (to name but a few) – are doing innovative things in a host of areas. Surely we can share some of the lessons we have learned during our success with smaller companies – some of which are destined to be the Apples and Amazons of tomorrow.
I am proud of the role Arrow plays in guiding innovation in the technology industry, and we clearly see how innovators have the ability to see “five years out” to what may be next.
America’s innovative companies aren’t stymied by the long list of what stands in the way of economic recovery; they need their larger brethren to help guide innovation forward, reduce complexity and enable that can-do spirit that we believe lives in all businesses, fuelling economic recovery and creating a better tomorrow for all of us.
Mike Long is chief executive of Arrow Electronics