Last year wreaked havoc on cutting-edge technology firms. Although many didn’t have to worry about finding or paying off financing because most weren’t profitable enterprises, they suffered lost and postponed orders after customers reined in spending on the latest innovations. The government retrenched, its vendors retrenched and big business retrenched.

Meanwhile, small-cap tech names and many of their bigger brethren hunkered down, pushed product and waited. Exposure to Asia and Europe buoyed some firms, as these regions still spent money on renewable energy technologies and related products. Nanotechnologies have continued to find markets and potential products, but a lot of the work went back to the laboratory and away from fabrication.

Fortunately, that’s beginning to change. It appears the global financial hemorrhaging is stanched, banks are beginning to lend (at least to companies), and consumers are wading cautiously back into the marketplace.

Large-cap tech stocks started their run last spring, but it’s taken a while for small- and mid-sized names to catch up; the smaller fry lack the long-term contracts and an enormous amount of locked-in users that characterize the big boys.

Be careful of getting too caught up in the renewable-energy revolution; there’s money to be made here, but it’s not going to supplant conventional energy anytime soon. It takes 60 square miles of solar panels or 2,500 large wind turbines to generate the energy of a conventional coal-fired power plant. And the solar- and wind-power facilities are far more expensive to build. For energy company executives, it’s simple arithmetic: the lower the cost of the inputs, the better the margins on the outputs. Also, with local, state and federal governments all hurting for cash, trying to push through a rate hike to offset the cost differentials between a coal plant and a wind farm is quixotic at best. What’s more, the power companies are beholden to their shareholders and boards, neither of whom are keen on driving up costs and lowering margins.

We’re constantly looking for emerging opportunities in innovative companies; that’s what our subscription service, Portfolio 2020 is all about. The 21st century success stories are going to differ from the 20th century stories in one significant way: Whereas the status quo and tradition were the watchwords of many corporate models last century, this century will be about innovation.

The Business Dictionary has a detailed definition of innovation that distinguishes between technologies and innovations. As an investor your best bet is to search out and buy innovative companies, not technology companies. Innovators are constantly looking for new technologies to incorporate in their existing products and have an eye toward developing new products using vanguard technologies. And innovative companies are about using technologies to make money, not spend money. The bold type is mine, for emphasis.

Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources, and encompasses all processes by which new ideas are generated and converted into useful products.

In business, innovation results often from the application of a scientific or technical idea in decreasing the gap between the needs or expectations of the customers and the performance of a firm’s products. In a social context, innovation is equally important in devising new collaborative methods such as alliance creation, joint venturing, flexible working hours, and in creating buyers’ purchasing power through methods such as hire purchase.

Innovations are divided into two broad categories:

(1) Evolutionary innovations are brought about by numerous incremental advances in technology or processes and are of two types (a) Continuous evolutionary innovations result in an alteration in product characteristics instead of in a new product, and do not require any user-learning or changes in his or her routine, examples are multi-blade shaving razor, fluoride toothpaste, and laptop computer; (b) Dynamic continuous evolutionary innovations require some user-learning but do not disrupts his or her routine, examples are fax machines, instant photography, and handheld computers.

(2) Revolutionary innovations (called also discontinuous innovations) require a good deal of user-learning, often disrupt his or her routine, and may even require new behavior patterns. Examples are photocopier (xerography) machines, personal computers, and internet. Innovation is synonymous with risk-taking and firms which introduce revolutionary products or technologies take on the greatest risk because they have to create new markets. A less risky innovation strategy is that of the imitator who starts with a new product (usually created by a revolutionary-innovator) having a large and growing demand. The imitator then proceeds to satisfy that demand better with a more effective approach. Examples are IBM with its PC against Apple Computer, Compaq with its cheaper PCs against IBM, and Dell with its still-cheaper clones (sold directly to the customer) against Compaq. Although many innovations are created from inventions, it is possible to innovate without inventing, and to invent without innovating.

The last century was about evolutionary innovations up until the pace quickened in the 1980s and ’90s; this century is all about revolutionary innovations. That doesn’t mean big changes will happen quickly, but people and industries are more receptive to new technological changes and ensuing innovations. I daresay that more and more people are expecting revolutionary change in one facet or another–WiFi, mobile phones and data, high speed transport, clean technologies, data visualization, etc.

There are big companies that are innovating on a huge scale in myriad ways, like US power producer Duke Energy (NYSE: DUK), global hydropower and high-speed rail giant Alstom (OTC: AOMFF), international energy juggernaut Iberdrola (OTC: IBDRY) and global chemicals and materials king BASF (OTC: BASFY). And then there are smaller companies that are making it possible for companies and governments to remain innovative and cost effective like water and sewage infrastructure player Insituform (NSDQ: INSU), smart metering meteor Itron (NSDQ: ITRI), and custom chip maker Qualcomm (NSDQ: QCOM). These are the kind of companies we find and profit from at Portfolio 2020.

And remember, we’re all headed to the Mediterranean in late October for an investment cruise on one of most luxurious boats on the water with some of the greatest investment minds on land. Come join us. Here are the details.