Michael Porter did a Q&A session with Bloomberg TV's Eric Schatzker at the World Innovation Forum where ExecuNet was reporting exclusively for attendees.

The biggest problem on Wall Street?
"I think that fundamentally what happened on Wall Street is a disconnect between what they are doing and what we need in a real economy. Wall Street is supposed to serve the real economy. The real economy creates wealth in the long-term -- not in a year or a quarter. Most stock used to be held for a decade, and loans were held to maturity. What's happened in the last 10 or 20 years is a disconnect and shortening of horizons. The average stock is held for less than a year, and the average loan is packaged and sold to someone who doesn't even know why the loan was made. As things got more short-term, we saw more trading, more volatility, more hedging. Wall Street began creating products for itself and not its customers. It created products with little value and lots of destructive possibility."

Does America need an economic wake-up call?
"America has no coherent strategic plan. Our economy has lost its dynamism; Washington is both too heavy handed and non-functioning. We need to be primarily bottoms-up. Washington is a catastrophe. It is not designed to solve problems. We need some top-down policy prescriptions, but that doesn't mean spending money. The jobs bill and stimulus make no sense when you can just make the regulatory system friendly to hiring without stimulus. And yet, the US is still the most entrepreneurial place on earth. It just has to get some balance, with government playing its rightful role and companies transforming themselves how they can."

What is strategy?
"It's a complete and unique value proposition for a specific set of customers that distinguishes you from your competitors. You need renewed clarity of the fundamental purpose of your company and what makes you different."

What is innovation?
"Non-incremental improvements in productivity, in the value chain or the product itself. Incremental improvement is something that can be done in predictable process. Innovation is something where you see a new combination or go in a different direction. The failures of innovation are that you can do something but it is not valuable, or you can do it but it is not affordable."

Is there good innovation and bad innovation?
"Corporations have to examine what they do and find out whether they're creating real value with their innovations. Are the innovations we are making practical, and can they be delivered at a reasonable cost? If an innovation fails one of these tests, it is more than likely a bad innovation."

Robyn Greenspan
Robyn Greenspan is the Editor-in-Chief at ExecuNet, where she is responsible for setting and driving the editorial content engagement strategy across the private business network's publications and expert-led programming. She is also a Huffington Post blogger. You can follow her on Twitter @RobynGreenspan

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