Published at Ideas Lab, Tuesday December 11, 2012

By: Tony Fratto, 202-822-1205,

The former U.S. Treasury and White House official previews the main themes of this week’s World Economic Forum in Davos.

The theme of this year’s World Economic Forum is “Resilient Dynamism.” Klaus Schwab, its founder and executive chairman, describes this current period we’re facing as one where “the interconnectivity, the velocity of the global system represents ever increasing systemic risks.”

The WEF’s Global Agenda Outlook 2013 shows the top three issues members of the Network of Global Agenda Councils deem most urgent all involve instability: unstable global economy, Eurozone fragility and financial system instability. This instability in the global economy is having a direct impact on the perception of innovation. It’s clear the goal over the next four days is to identify what actions can be taken by academia, business, civil society, government and international organizations to help bring about a successful future.

But where to start? Leaders should begin by looking at one of the most important parts of economic growth – innovation. According to the this year’s GE Global Innovation Barometer, a survey of more that 3100 business officials in 25 countries on their perception of innovation, business leaders have two major and noteworthy fears of innovation: (1) an apparent inability to compete in a rapidly changing global economy because of insufficient talent, knowledge, technology, domestic institutions, or capital (among other needs), and (2) concern that too many risks are unknown – not just financial risk, or the risk of fundamental business decisions, but also the risk of policy failures on the part of governments. The consequence of these fears is inward-looking attitudes by firms, governments, and citizens.

The decisions business leaders and governments make on innovation will have a real impact on the standards-of-living for citizens, in particular those citizens living below or at the margins of poverty measures in both developed and emerging economies. And these decisions are especially consequential as economies around the world work to overcome stagnant economic growth.

What this year’s WEF theme recognizes is that we need to embrace both dynamism and resiliency. In fact, the two are actually co-dependent qualities. Firms that are quick to adapt to changes in technology, business management, logistics, and the wants of consumers will succeed – and they also tend to be more flexible and nimble in taking advantage of new challenges.

To get there might require living the mantra of small and dynamic firms: “Move fast and break things” – in other words, don’t be afraid to race ahead in calculated ways, knowing there will be failures along the way.

But if the concept of “moving fast and breaking things” is hard enough for firms to acquire – especially large, publicly-traded firms, what about governments?

Here it’s more tricky, but not impossible. Certainly “breaking things” doesn’t generally earn re-election for government officials, but citizens do see great virtue in moving fast to address their needs. A CEO can often institute sweeping changes of direction, but a president or prime minister will usually have to battle powerful oppositions.

What businesses in the GE Global Innovation Barometer survey are asking of government is to move fast to create the institutions (legal, economic) and capital environment (financial, infrastructure, human) that will give them the ability and courage to take smart, dynamic risks. Conveniently, a stronger base on institutions and capital can also deliver great flexibility and resiliency.

Government, business, and civil society participants in Davos this week should look to the Barometer to inform better thinking to achieve the WEF theme. The global diagnosis of “Innovation vertigo” necessitates all three to come together and work towards the innovations that will both improve lives around the world ad jumpstart lagging economic growth.

Tony Fratto is a Managing Partner at Hamilton Place Strategies, former Assistant Secretary at the U.S. Treasury Department, and a former White House official. He is also an on-air contributor for CNBC.