These are features of what has been called the knowledge economy . It is innovation that transforms these intangible skills into economically valuable activity. As knowledge becomes the basis for economic competition, innovation becomes important for all firms, large and small. Even the smallest firm can be innovative, and traditional industries can transform themselves through innovation. The mining industry in Australia, for example, is seeing remarkable innovations emerging from small firms in areas like exploration and environmental management.
History is littered with firms that failed to innovate.
However the effects can be much more devastating. Lack of innovation nearly wiped out the once-mighty Swiss watch industry, and killed the British motorbike industry. The contrast is profound, in social and economic terms, when compared with the extraordinary vigour and wealth of the innovative industries found in the areas around Silicon Valley and Boston. So innovation is difficult, but it is essential. Very simply, they must become cleverer.