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strategy and business
 / Spring 2012 / Issue 66(originally published by Booz & Company)


The Innovativeness of Nations

S+B: Many readers may find that surprising. I think there is a general perception that India is a more innovative country than China.
Well, by another measure we use — innovation efficiency, or the innovation outputs divided by inputs, which discounts for the fact that different economies are at different income levels — India ranks number nine in the world, meaning it’s producing a high level of outputs compared to its level of innovation inputs. But if you look at many of the measures of innovation input, such as infrastructure and human capital issues, India doesn’t perform very well. This is hurting its overall innovation ranking. Clearly, India has clusters of excellence that are creating a disproportionately high level of innovation, but the mass of the country still has a lot of underdeveloped potential.

The innovation efficiency measure is interesting. If you look at the top 10, it includes six of the most densely populated economies in the world. In addition to India, there are Nigeria, China, Pakistan, Brazil, and Bangladesh. What this tells us is that these countries have the potential to move forward significantly in the future.

S+B: What are some of the study’s other major messages?
One is that, clearly, innovation has become global. If you look at the top 20 or 30 ranks, you find economies that are successfully innovating from all parts of the world. Singapore, Hong Kong, Israel, Korea, Japan, Estonia, Qatar, China — you see a range of economies besides the usual suspects you might have from Europe and North America.

S+B: What about the implications for companies?
Corporations have to have a much more global perspective about their innovation strategies. It’s no longer enough to focus on only one market or region. And that has a number of follow-on consequences and implications in terms of how one might design innovation hubs, and how one might think of connecting them. You need to create the right culture to support the integration of ideas from different parts of the world. (See “How to Make a Region Innovative,” by Ernest J. Wilson III, s+b, Spring 2012.)

Another implication is that you see some emerging markets are moving very rapidly. The fact that China has moved into the top 30 is not trivial, and as I mentioned, many East Asian economies today have reached levels of innovation competitiveness similar to those of European countries. What this means is that European nations — and many other developed nations — will have to run hard to maintain an edge. And this is especially significant in today’s climate of global financial crisis, especially in Europe, where many sense a lack of leadership and are questioning the commitment of Europe to innovation.

The low rankings for South Asia should concern both corporate managers and policymakers. The question this raises is, Will these economies be able to take off like their neighboring East Asian economies, or will they get stuck in the same way that many of the economies in Africa have gotten stuck in the last several years? That question has implications both for the innovation strategies of global companies and for the strategies that policymakers in government might want to follow.

S+B: Do you have any specific advice for multinationals that want to maintain an edge in innovation?
Companies have to recognize that many key innovations will be coming from markets where there are large numbers of people who are becoming consumers for the first time in their lives. These new consumers have rising demands for products, and services such as education and healthcare, but at very different price points. Multinationals will have to innovate to satisfy these new demands in a sustainable and scalable manner.

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