Innovation is how we can change the world, create new and better things, and solve complex problems of our society. It’s about breaking the rules and creating new rules. The world is changing at an exponential pace never before experienced by humankind. Everyone has a smart phone that can give answers in seconds and collects data on our every thought. Traditional concepts of ownership are changing – we used to think we had to own the things we needed – books, cars, houses – but our world is turned upside down as we realise that we want to access them- not necessarily to own  them - Kindle, Uber, Airbnb are ubiquitous. Assets can be now tokenised – crypto-currencies are becoming commonplace. Opening a new world!

We are interested that the definition of assets globally seems to be controlled by accountants.  That seems a very myopic way of looking at the world. It is clear that the post-Bretton Woods world driven by profits alone is not an inclusive nor equitable one. The time is well overdue to review what we value as a society. Valuing people and the planet seem to be no brainers, that are not yet baked into the global economic system.

Should we be surprised? Does it make any sense to leave the classification of assets to accountants?

Looking first at Wikipedia, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Intangible assets are things like copyrights and computer programs.

This does not quite capture the value of innovation. Innovators are not incrementally reshaping products; they are offering fundamentally new and superior buyer value in existing markets and by enabling a quantum leap in buyer value to create new markets.  We live in a world of breathtaking digital transformation.  In the past 10 years the innovation ecosystem has changed our lives.  We all carry mobile phones which increasingly rule our lives.  We happily get in the cars of strangers, and sleep in the beds of strangers. The biggest companies in the world are the giant platform companies of Facebook, Google and Amazon. Data is heralded as the most precious resource of our time.

But what of the innovators who created these Digital innovations and how do we value that intangible asset?

Raising capital for a start-up is a difficult process. Convincing a person or entity to invest in a new business can feel like a dead end—most potential lenders or investors will want business history as proof that your business will succeed. And start-ups just can’t offer that. The funding system is broken and innovation stops where fear beginning and where culture act as a blindfold.

We are not fostering the innovation ecosystem to grow and blossom. Research and development grants are painfully slow, other government grants require huge proposals and long wait times and EU VC firms are too risk averse in comparison to other continents. Many of our brightest, high potential innovators with tech start-ups are struggling to survive.  We need these young innovators and many more.

Why?  Firstly – jobs – we need to create jobs. McKinsey are saying that the digital economy can create 60-65 million jobs by 2025.

Second – we need innovators and entrepreneurs to address major social challenges of health, education, food, water, jobs, finance, security and environment. Now more than ever we must establish the right environment and incentives for innovators. We need to create the ecosystem where industries can work together with start-ups, universities, corporates, governments and investors to solve societal problems effectively.

It comes down to four things: (i) people; (ii) education transformation; (iii) rethinking the classification of innovation on the balance sheet and (iv) collaboration.

People: Find and grow talented innovators and entrepreneurs!  We don’t believe that “everyone is an innovator.”  Companies make rules and manage risk. Innovators break rules and create new paradigms. Not everyone can be innovative, creative and entrepreneurial. What counts is talent – we need to value aptitude over experience and look for raw intelligence and a track record of getting things done.  We need to:

1.      Find and back high potentials fearlessly

2.      Align the interest of innovators, entrepreneurs, potential entrepreneurs (e.g. students), mentors, investors and service providers

3.      Optimize the financing of innovation to deliver better outcomes and greater returns

4.      Create more cross-continent co-investment opportunities

Transform education: Are we mad? What are we thinking with our education system? Our children are training for jobs that will not exist in the future or will be transformed by automation. Yet we continue to channel hundreds of thousands of students into universities - with the hope that they learn the skills of tomorrow. We need to grow future generations of innovators and entrepreneurs through a radical overhaul of our education system. The subjects we teach, how we teach – everything – has to change – or our children will be ill prepared for their future world. The world must create a more innovative and creative next generation:

1.      Digital literacy must be taught from a young age.

2.      Science, coding, data science, technology need to be as basic as literacy used to be.

3.      Experiential entrepreneurship education programs should be introduced in all layers of the education system.

Funding and Incentives: Our funding models are just wrong and the centralization of capital kills innovation and slows down economic growth! Most of our R&D grants and government procurement are based on old models and preference bigger organisations, with sophisticated proposal teams and stable cash flows. They don’t incentivise collaboration and rarely help innovative start-ups. We must be able to deploy capital accurately at speed and at scale - which only decentralization combined with knowledge transfer can reach.

Collaboration: We have all been trained to be competitive, specialised, siloed, and protective – this is not the way of the future. Our aim should be to get the best and brightest in business, tech, innovation and research working together.  Innovation is happening outside of universities – in co-working spaces, garages, accelerators, start-up collaboratives. Some of today’s most innovative ideas are coming from these groups. We need to embrace, engage and propagate these communities. People want to connect, and they are creating communities, where the separation of work and leisure is blurred. These groups combine work, play, learning and creation in a supportive environment with peers, role models and mentors generating countless opportunities to connect. Entrepreneurs are already leading the start-up community and we need to harness and accelerate that phenomenon.

Innovation and entrepreneurs can transform health, education, transportation, energy and food - and in the process change the way we live our daily lives. Let’s build the innovation culture for our children’s future. Let’s find and support talent; transform education; fix the funding and incentives for innovation and build collaboration. Then let’s celebrate our successes – the world is changing fast and we need to be ahead of the curve.  Change the paradigm created by accountants and let the balance sheet reflect innovation as a new highly investible asset class.

This article is co-authored by Fintech Worldwide CEO, Dr Jane Thomason and Consilience Ventures co-founder Director Kevin Monserrat.