Ignacio Prieto

Let others do the inventing

Sunday, September 13th, 2009

Global Innovation Index

Many years ago, an Spanish philosopher Miguel de Unamuno, when asked about the measures which Spain could take to promote the development of scientific knowledge gave this short answer.

Recently the Insead and the Confederation of Indian Industry published the second Global Innovation Index completed by 2008/2009.

For the second time the USA ranks first with Germany, Sweden, United Kingdom following. Countries like France have fallen to 19th and Spain is, as usual, in a modest number 28 below countries like New Zealand, UAE, Qatar and Israel but ahead of Italy, ranked 31.

The classification is done based on so-called sub classifications inputs (institutions and policies, human capacity, infrastructure, markets and business) and outputs (knowledge, competitiveness and wealth). Within these two subsections, Spain scored better in the first than in the second thanks to improvement in market development and infrastructure and ICT.
In Outputs maintain a position slightly less than discreet thanks to # 20 given in competitiveness.

The year 2008 has been good somehow, although now it may seem otherwise. Gross domestic product still grew at 1.2%. It is possible that the next ranking is not so benevolent.

This contrasted to the countries that innovate in the creation of technology and put the means to grow faster. However, this information may lead to mistakes in strategic approach for some companies.

Generally we mean by innovation developments occurring in the higher levels of knowledge. The famous Large Hadron Collider recently installed at CERN near Geneva, belongs to this level and can – they say – give clues to how the universe originated.

This knowledge can sometimes seem futile, as happened with the theory of relativity at the time but today it would not be possible to teak the GPS function without regard to its principles.
Many SMEs feel the need to differentiate themselves to compete against the great champions of industry, increasingly globalize and more resources for research. Just a few years ago, General Electric deployed in R&D 50% of what the whole Spain spends on it.

For SMEs would be interesting to remember that innovation occurs not only in basic knowledge and protected with patents. Professor Amar Bhide Columbia University in his book TI venturesome Economy: How Innovation sustains Prosperity in a More Connected World (Princeton University Press, 2008), explains how the U.S. industrial sector only accounts for 12% of GDP as it absorbs 42% of resources in R&D.

This disproportion is even more remarkable when one realizes that the services sector is no less than 70% of GDP.

Even so, the U.S. retains the enviable first position in the ranking of innovation but its ability to generate wealth is not a direct consequence but precisely for its willingness to adopt the advances and new technologies through its overwhelming commercial equipment sales and distribution .

This phenomenon may be familiar to more than one small company. How many major innovations have occurred within an SME after a long period of struggle and sacrifice, and when finally the product is ready for marketing, no enough resources can be assigned to promote it or, as happens many times, a larger company from the same sector, changing just enough to avoid breaching the patent, extensively deployed it on the market within days, leaving no options to the authentic inventor of the idea.

Every country is today striving to promote technological innovation but this depends on many factors to be viable.

First is a long journey in which the results are slow in being noticed. It should be performed most often in collaboration with other companies or institutions, known as clusters and whose importance has masterfully portrayed Malcolm Gladwell in his best-selling Outliers. And, for many companies, it might not be the best strategy for its cost-effectiveness.

Instead, companies can opt for the middle and lower level of innovation (ground level innovation) Adjusting their structures and mentality to make the most progress out of inventions made in other countries. Examples abound. Some Spanish companies have achieved spectacular growth and great benefits by implementing a strategy of cost leadership products and technologies found in other countries. Think about the automotive industry and how Spain became the third European manufacturer.

Times change and so does strategies but by applying innovation at this level, companies can achieve great results. The way companies market a certain product can make all the difference. A great way for improvement.

Somehow Unamuno was right in the end.

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