Daily Archives: June 15, 2007

Innovation is Relative

A recent CRM Today article, which quoted Gartner, noted that Emerging Markets are Increasingly Driving Global Innovation, that developing nations are adopting innovation and technology faster than mature markets, and that China and India are innovating at a faster rate than ever before. But the title misleads one about the truth, which becomes somewhat clearer in the article, that this innovation is relative to their current state of development.

For example, the article notes that in highly constrained environments, which might include poor infrastructure and low affordability, there is an acute need for products that can serve the local market better, rather than products designed for the developed world. For example, mobile phones which require less power and have built-in connectivity, are more suitable for emerging markets than PCs. They are also cheaper than PCs and more adaptable to the emerging market environment. Gartner predicts that mobile phones will outnumber PCs by a factor of 15:1 in developing markets by 2010.

Furthermore, even though China and India have the ambition to lead the IT industry in the global market, as the article notes, India is still lacking in infrastructure and China still has huge cultural barriers to overcome. As I noted in Can China Be Innovative?, a huge obstacle is the nature of China’s educational system, which stresses conformity and does little to foster independent thinking. This is also a country where new product development is equated equal to copying something someone else does, but doing it slightly cheaper and / or using a new color. Furthermore, as I pointed out in Is Low Cost Country Sourcing to China Really Innovative?, even though media reports in 2004 indicated that China produced 600,000 engineers compared to the 70,000 produced by the United States, more than 290,000 of the Chinese degrees were subbaccalaureate and studies by organizations such as the McKinsey Global Institute have indicated that multinationals find that less then 25 percent of the graduates are employable which indicates that the number of employable graduating engineers in China from a multinational perspective is roughly equal to the number of employable graduating engineers in the U.S.

So even though I can understand Gartner’s prediction that by 2015, IT engineered for developing economies will drive 20 percent of disruptive IT innovation worldwide, I will only agree if innovation is taken in a context relative to the local economy. In other words, I think China, India, and other developing nations, with their huge appetite, will increase their rate of innovation, to the point where they may even exceed the rate of North American and European innovation, but that innovation will be relative to where they are today and that, as such, they can not be banked on as sources of innovation for our developed economies. Not to say that they won’t stumble on a few breakthroughs along the way that will really help us out, just that I wouldn’t bank on it.