Thursday 3 January 2013

Innovation in the age of Globalisation

Vijay Vaitheeswaran, China Business Editor, The Economist (China) explained how the new rules of innovation can transform businesses, propel nations to greatness and tame the world’s most wicked problems.  He listed the problems as the crisis of capitalism; terrorism; climate change; resource depletion and the resulting wars; urbanisation; globalisation, and the pandemics which will arise from globalisation.  The problems were not the result of overpopulation and it was of course the population which would provide the solutions.  Improving education of women would reduce the size of future families, and the increasing creativity which follows improved education would provide the answers to the problems. Clearly it would be the emerging economies, Brazil, Russia, India, China and South Africa that would be most likely to invent ways out of the problems.

Resources were not really running out.  The Earth is a closed system and rubbish can be recycled.  Food production was going to be the problem 70 years ago but the Green Revolution in the US and Europe solved that one.  A green revolution is now happening in Africa and India, so all we have to do is to organise to allow markets to be developed and work freely.  Conservation is important but the word has a moral tone and should be avoided: we’re talking the need to use resources more efficiently so increasingly democratic and disruptive innovations will make the necessary improvements happen.  Here Mr Vaitheeswaran was defining innovation not as R&D driven technological invention but simply as fresh thinking which creates value.  By way of example he mentioned Peak Oil – in this case the peaking of whale oil supplies needed for lighting in the 19th century.  Innovative use of gas and the oil which leaked from the ground in Pennsylvania, and the industries built on this innovation, avoided the expected collapse of civilisation.

Socially important innovation must be properly rewarded – and rewarded more substantially than financial innovations. Profitable industries have arisen in
Tanzania to produce mosquito nets which can be distributed more cheaply than the charity versions and which are more likely to be used because they are made in attractive colours.  New products must be brought to market quickly and in the emerging economies, “cheap and cheerful” should be the motto.  The whole healthcare and medical instruments/devices industry is the exact opposite and is ripe for disruptive innovations coming from China/India.  On-line collaborations and sites such as Innocentive make it possible for anyone with a smartphone to contribute creative thinking to listed problems.
Finally, more innovations will lead to more failures and failure needs to be managed.  People don’t easily give up on pet projects so why not, as now practiced in W L Gore, throw a party and give the project a decent send off.
In response to questions, the following points arose:

  •         Water, energy, food and climate change problems are all related and the solutions have to be created by coalitions of all countries.
  •          Will the many small companies emerging from micro-loans and mobile phones in Africa be devoured by larger companies?  Maybe not – the internet means micro-multinationals are now possible.
  •          The Chinese economy is slowing down because the EU, its largest market, is buying less.
  •          The era of cheap China is over.  Cost and wage inflation is now affecting the regions which industrialised first.
  •          Opening up the interior of China to industrialisation will not solve the problem.  The supply chains are too long.
  •          Innovation is not a zero sum game. Both China and the USA can grow from innovation together.

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