Innovation in the 'new world order'
Two weeks ago, Bloomberg BusinessWeek reported the findings of its most recent ranking of The 50 Most Innovative Companies. The surprise finding: for the first time, the majority of companies in the Top 25 are not U.S. based, and 15 of the Top 50 are Asian. A Boston Consulting Group consultant asked to comment effused, "We're starting to see the beginning of a new world order ... the developed world's hammerlock on innovation leadership is starting to break a little bit." Though a nice sound byte, the statement would earn little more than a yawn from regulars in Beijing, Singapore, Taiwan or Mumbai.
Identifying which companies are innovation leaders sells magazines, of course. But as consultants and educators, we're more interested in what the most creative companies do differently, and the factors that best support prodigious innovation. Along with our colleagues at The RBL Group, we've had the frequent privilege of teaching business leaders in China, Singapore, India and Malaysia. From what we have observed, there are clear trends that help explain what Asian - and non-Asian innovators are doing to produce these results:
Ambition and vision. Scratch a persistent innovator and you'll find a deep ambition to incrementally improve and radically reinvent. Thomas Edison called it relentless tinkering. Peter Drucker described innovators as monomaniacs on a mission. Organizations like AT&T and Xerox once had such ambition, and their research arms - Bell Labs and Xerox PARC - delivered technology on which we still depend. Companies like Cisco, Ford and Facebook continue to exemplify the innovator's attitude.
But we see more and more companies in the developing economies of Asia, Eastern and Central Europe and Latin American, who are committed to growth and profitability through innovation. In fact, many of these companies see corporate innovation as an act of economic patriotism. What's your company's ambition, change the world or deliver the next quarter?
Investment. It's tough to stay ahead in innovation without spending on R&D. The U.S. continues to lead overall in R&D spending, but developing economies are accelerating. According to the National Science Foundation, U.S. investment in R&D grew by 5 percent annually between 1996 and 2007 while China increased its investment in research by 20 percent annually during the same period, and India and South Korea grew R&D investment by 10 percent annually or double the U.S. rate. Moreover, in the Bloomberg BusinessWeek study, 88 percent of Chinese executives said they were raising their innovation budgets this year, followed by 82 percent in South America and 73 percent in India. In the U.S., only 48 percent of executives planned to do so. As Peters and Waterman noted in In Search of Excellence a generation ago, successful innovators "break more eggs."
Commitment to developing leaders and leadership. We know from our global research at The RBL Group that great companies maintain their investment in developing future leaders during good times and bad. During the so-called "Great Recession" of 2008-2009, U.S. spending on executive education hit the pause button. By contrast, Asian companies, although smarting from hard economic times, more frequently kept their investment steady. Innovation depends on leadership, and companies that invest in ensuring and developing the quality of their leaders are more likely to deliver innovative products and methods.
Building a brand as an innovator. Samsung is selling innovation. So are Haier and Mittal and Infosys. Singapore is establishing itself as a regional and global center for human capital, partnering with top universities and consultants (full disclosure: the Government of Singapore is a member of The RBL Institute). These and other Asian companies are not just working hard to innovate; they are emphatically positioning themselves as innovation leaders in the tradition of IBM, Apple and Google. It's no surprise that top companies want to partner with them, and top students want to work there.
The quality of young, enthusiastic talent. Some years ago, one of us attended the wedding of a young Chinese friend. She was a recent Wellesley and Princeton graduate, and would soon return to China with her new husband, also a Chinese national, who had recently earned his PhD in finance from MIT. These two impressive young people, and the millions of others that Asia exported to the U.S. and Europe to learn and return, bring a combination of competence, hard work and determination that is breathtaking. For every young American who goes to China, a thousand students and young professionals from China, South Korea and India come our way. For example, the National Science Foundation (NSF) reports that in 1998, the U.S. and China educated roughly the same number of engineers. But by 2006, China was graduating almost four times the number of U.S. engineers. In fact, NSF points out that in the last decade, 68 percent of engineering doctoral degrees granted in U.S. universities were earned by foreign nationals, three quarters of them Chinese and Indian.
So, what does this mean for U.S. companies, our leaders and you readers? We say, three cheers for innovation wherever it is found. We live in a networked world where "coopetition" - simultaneously competing and cooperating - is the norm. Regional and national boundaries are increasingly irrelevant in the context of knowledge creation and product innovation. The opportunities for a "win-win" on both sides of the Pacific are huge, aided by interlocking ownership stakes, joint ventures, cross-investments and technology agreements. R&D performance, whether in Shanghai or Silicon Valley, lifts all boats.
However, the Bloomberg BusinessWeek survey also makes another point: it challenges companies in all geographies to ask whether they have what it takes to be an innovator; the corporate ambition, willingness to invest, emphasis on leadership quality and development, guts to build a brand as an innovator and ongoing effort to attract and engage impressive young talent. More than anything else, the Bloomberg BusinessWeek research proves that innovation is fundamentally democratic and available to any organization willing to do the heavy lifting.
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