The Broad Mind | Innovation – A competitive advantage

By Sardul Singh Minhas

India needs to make a significant additional commitment to R&D in the public sector as a strategic move to boost the country’s innovative capabilities.

We remember the legendary Steve Jobs as a master innovator. Apple was near bankruptcy when he re-joined it in 1997; he propelled it to become the world’s most valuable publically-traded company by the time of his death in 2011.

Despite owning only around 10 percent of the global mobile handset market in 2011, Apple collected 50 percent or more of the industry’s available profits. For instance, the 16GB model of iPhone 4s retailed for $649 in 2012, which included a hefty profit of $368 per phone to Apple. Public took a fancy to Apple’s truly superior products, and has been willing to pay a premium price for them. Furthermore, the benefits flow not to the distant off-shore manufacturers (Foxconn in China), but straight into Apple’s coffers in Cupertino, CA.

An innovator is a lot more than an inventor. Innovation is something original, new, and important that obtains a foothold in a market or society and, to quote Jobs, “makes a dent in the universe”. While an invention refers to the creation of an idea or method, innovation is at the heart of the process that brings together various novel ideas in a way that they have an impact on society. In the annals of innovation, new ideas are only part of the equation. Execution is the key.

Today’s personal computers, smart phones and tablet devices have at their heart two revolutionary developments, graphical user interface and bit mapping. Both were invented at the Xerox Corporation’s Palo Alto Research Center. Xerox had tried to commercialise these technologies in the form of Xerox Star, a clunky and costly machine, which flopped. It was Job’s genius to recognise the enormous potential of these technologies, vastly improve them and, showing perspicacious judgment in what consumers would prefer, launched the train of dazzling new products such as the iMac, iPhone and iPad. While Sony was the inventor of Walkman, it was Jobs who created the iPod because he intuitively understood the joy of having a thousand songs that would fit in your pocket.

How does innovation benefit societies? Innovation is the key driver of competitiveness, wage and job growth, and long?term economic growth. It can also help address major global challenges such as energy and climate change.

Why are some societies innovative and others less so? Some societies are fluid where hierarchy is not rigid and employees believe that it is appropriate to challenge the status quo and direction from above, and creativity is higher. There is more trust between different hierarchical levels.

As a young nation, America has a big advantage over other large democracies such as European countries, Japan and India. These countries have deeply ingrained hierarchical patterns and sclerotic systems that developed over centuries. America’s advantage is magnified several fold over authoritarian societies, such as China and Russia, where communism left in place societies which do not encourage open inquiry and vigorous debate, with far less incentive to innovate. In a society like America’s, individuals have more reasons to expect compensation and recognition for inventive and useful ideas. The innovative trait is boosted by its education system, which encourages vigorous class room discussion. Such willingness to question and even challenge teachers is an utterly unfamiliar concept in Chinese and Indian schools.

A closely related factor is a society’s willingness to deal with uncertainty, or avoid it. In societies with high levels of tolerance of uncertainty, organisational rules can be violated for pragmatic reasons, conflicts are considered a natural part of life, and ambiguous situations are regarded as natural and interesting. In more rigid societies, working relations rules play an important role and are punctiliously followed. Uncertainty-averse attitudes mean that there is less incentive to come out with a novel idea, which will be possibly rejected.

Can we measure innovation? The global innovation index looks at both the business outcomes of innovation and government’s ability to encourage and support innovation through public policy. The latest global index was published in July 2013. The study measured both innovation inputs (such as, governmental fiscal and education policies) and outputs (such as, patents, technology transfer), as well as business performance (such as,  labour productivity and total shareholder returns) and business migration and economic growth. Switzerland, Sweden, the UK, Netherlands and the United States ranked 1 through 5, respectively. China ranked 35, and India ranked a distant 66.

Traditionally, the innovation capacity of a nation has been measured by the investment in research and development (R&D) as percentage of gross domestic product (GDP). Going by the data published by the World Bank in 2011, the top six countries came in as follows: Israel (4.2 percent), Japan and South Korea (3.7 percent each), Sweden (3.3 percent), Finland (3.1 percent) and the U.S. (2.8 percent). China’s R&D investment was 1.8 percent of its GDP.

The World Bank did not report India’s R&D expenditure as a per cent of its GDP. It is safe to say that India needs to make a significant additional commitment to R&D in the public sector as a strategic move to boost the country’s innovative capabilities. India also needs to introduce the discussion format in the education system to foment creative thought.

Dr Minhas resides in Southern California. He is a business consultant and a writer. He holds a Ph.D. in engineering.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.