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To spur innovation, book author and entrepreneur Judy Estrin suggests an overhaul of the U.S. education system, more research and academia investing and the return of risk taking

Is innovation really slowing down in Silicon Valley?

I caught up this morning with serial entrepreneur Judy Estrin (former Cisco CTO) who was giving a talk at the Computer History Museum on innovation (or the lack thereof); most of it based on her book Closing the Innovation Gap.

Estrin argued that what is stiffling innovation are risk adversed venture capitalists and overall short term greed, especially since the Internet bubble in the late 90s.

“I’m not saying that there is no innovation going on. But that the innovation support structure in the country has become much more short term focus and not as deep and broad as before. Meaning that the opportunities that I had to build my career don’t exist anymore,” said Estrin.

Silicon Valley is still the world’s innovation hotbed

Although Silicon Valley is a much richer environment than anywhere else in the country or certainly any place in the world, that’s not good enough, points Estrin who sees 2 main culprits for the decline in innovation:

1. the risk adverse investors in Silicon Valley. Failure is a critical part of innovation. You have to be able to try things even if you don’t know the outcome. You also inspire innovation when you turn threats into challenges and not fear;
2. and the short term view of both investors and entrepreneurs who want to strike it big and quick. One of Estrin’s core values is patience and tenacity. You need to give time to an idea to develop

“It went from the passion of building a company and changing the world to how much can we make in 2-years. The dynamics have shifted,” adds Estrin who recalled a venture capitalist telling her to come back with several customers before he invests in her start-up.

Here are Estrin’s 5 core values behind innovation: questioning (both yourself and others without being judgmental and the tone matters), risk, openness (sharing, collaboration), patience (tenacity) and trust.

Cleantech and Healthcare are the 2 huge opportunities of this downturn

Estrin also argues that dramatic innovation is needed to help repay the massive deficit and to create the millions of jobs lost.

“Normal growth will not solve those 2 key problems because the companies that laid-off will not rehire the employees. So the only way to solve it is through dramatic innovation that will create new industries,” adds Estrin.

For the 7th-time entrepreneur, energy and environment (cleantech) and healthcare (medicine, wellness, care of elderness…) could be the answer. “A crisis is a terrible thing to waste,” jokes Estrin.

More government investments, corporate incentives will foster innovation

The tech celebrity also suggested that new government policies on immigration and investment in academia (not bailout) and incentivize venture capitalists and corporations to take more risks will boost innovation.

Estrin also suggested investors to measure a company’s CFC (capacity for change) – in addition to its EPS (earnings per share) – and place a value on this ability to invest in innovation.