The Innovation Advantage

by | Sep 22, 2012

President Barack Obama’s State of the Union address brought innovation into the spotlight.

Following the president’s speech, Council on Foreign Relations Fellow Adam Segal spoke to Strategy + Business about the rise of innovation in China and India and its impacts on the US.

Media reports suggest the rise of innovation in these countries is a threat to the US. However, Segal believes this threat is exaggerated.

Here are the key messages from Segal’s interview.

China has invested heavily in the “hardware” of innovation: Spending on research and development, number of researchers, patents and publications.

However, the “software”, the political, cultural and social influences on innovation, is falling behind. China admits it is spending a considerable amount on innovation, but it is not getting a lot in return.

India’s spend on research and development has plateaued over the past 15 years or so. In 1995, the country’s spend on innovation was 0.8 per cent of its Gross Domestic Product. In 2010, it was only 0.9 per cent. China’s spend in 1995 was 0.5 per cent. In 2010, this was 1.5 per cent. It aims to be spending 2.5 per cent by 2020.

Government bodies carry out research and development in India. There is not a lot of emphasis on the individual or new research and breakthroughs.

The majority of universities in India use outdated programs and don’t teach in English. By the government’s own findings, two thirds of universities and 90 per cent of colleges are considered to be hovering in the low to middling levels.

A culture of entrepreneurship thrives in India, but there is a lack of incentive to enter new markets. Money can be made in established markets, such as retail and IT, but there is not a lot of science-based, brand new innovation. Foreign firms are making the most of the gains.

The US is strong in terms of its software but there is room for improvement in its hardware. The nation needs to determine where the greatest demand lies and be flexible enough to tailor its responses to this. Ideas are happening where the US used to send ideas out. This one-way path of communication needs to change.

Building on its existing links with China and India is crucial. Many Chinese and Indians study in the US.

The US can benefit from the rise of China and India. It needs to leverage what is going on by being more comfortable with the flow of ideas.

People in China and India believe barriers to innovation exist in their countries.

There is a window of opportunity for the US as China and India are still learning. It is well positioned as other countries begin making innovation breakthroughs.

Software is going to become more important as innovation become globalised.

The strengths of the US are its ability to manage across different times and cultures, its carrying out of leading interdisciplinary research, its ability to tap into new markets and its openness to new ideas. Other countries are just beginning to get a handle on these capabilities.

You can read the interview  here.

Jeffrey Tobias

About Jeffrey Tobias

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well-known startups.

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Managing Director, The Strategy Group

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well known startups. Jeffrey’s corporate background includes leading global innovation strategy at Cisco, working with large corporates such as Adobe, Westpac, Telstra, Woolworths, and Perpetual.

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