DOES ‘HAND-HOLD­ING’ IN IN­NO­VA­TION WORK?

There is a need to ed­u­cate con­sumers to raise the bar for qual­ity as ‘good enough’ prod­ucts should no longer suf­fice

New Straits Times - - Opinion - moony­ati@isis.org.my The writer is a se­nior an­a­lyst with the Tech­nol­ogy, In­no­va­tion, En­vi­ron­ment and Sus­tain­abil­ity Pro­gramme, In­sti­tute of Strate­gic and In­ter­na­tional Stud­ies Malaysia

MALAYSIA’s fo­cus on in­no­va­tion has been sub­stan­tial, es­pe­cially since the 10th Malaysia Plan (2011-2015), with the birth of many agen­cies and pro­grammes cre­ated to boost in­no­va­tion.

How­ever, the story of in­no­va­tion could be traced back from decades ago, and some re­mind us about the fail­ure of “hand­hold­ing” de­spite Malaysia’s ef­forts to en­cour­age do­mes­tic in­no­va­tion.

In the 1970s, Malaysia started to broaden its ex­port in­dus­tries to tran­si­tion to a mid­dle-in­come econ­omy. Sup­port­ing an in­fant in­dus­try, the govern­ment fa­cil­i­tated tech­nol­ogy trans­fer agree­ments with for­eign part­ners, which should have helped com­pa­nies to build knowl­edge to in­no­vate on their own.

How­ever, de­spite ef­forts to as­sist do­mes­tic play­ers, rates of tech­ni­cal adop­tion and in­no­va­tion were less than op­ti­mal.

Sim­i­larly, when Malaysia started to shift into heavy in­dus­tries, for­eign part­ner­ships were again re­lied on, cou­pled with govern­ment as­sis­tance in these in­dus­tries with tar­iff and non-tar­iff pro­tec­tion, as well as sub­si­dies.

How­ever, as a whole, in­dus­try was not very suc­cess­ful at find­ing new ex­port mar­kets for prod­ucts, but was only sus­tained largely by high rates of pro­tec­tion and the do­mes­tic mar­ket.

Now, Malaysia’s ef­forts to lever­age on in­no­va­tion as the cen­tral plank of its eco­nomic growth is proven from its var­i­ous ac­tions, with the pro­lif­er­a­tion of agen­cies aimed to en­hance in­no­va­tion, the var­i­ous as­sis­tance and pro­grammes tar­geted to ad­vance ar­eas that are key to in­no­va­tion such as re­search and de­vel­op­ment, en­trepreneurial ac­tiv­i­ties, hu­man cap­i­tal and skills, tech­nol­ogy, in­fras­truc­ture and many more.

How­ever, the Global In­no­va­tion In­dex (GII) 2016 re­vealed that Malaysia’s in­no­va­tion in­put, which cap­tures el­e­ments that en­able in­no­va­tive ac­tiv­i­ties, is more than the av­er­age of com­para­tor coun­tries but the in­no­va­tion out­put, which in­volves the ac­tual ev­i­dence of in­no­va­tion out­puts, is less than the av­er­age of com­para­tor coun­tries. This im­plies that de­spite the in­vest­ments and ef­forts made, even though larger than other com­para­tor economies, the out­come is yet to be sat­is­fac­tory.

Does this in­fer that too much as­sis­tance and “hand-hold­ing” has re­sulted in the lack of drive for do­mes­tic in­no­va­tion?

Stud­ies have shown that Malaysian small and medium en­ter­prises are not in­no­vat­ing at the de­sired level. Self-re­ported sur­veys show that com­pa­nies do not in­no­vate due to a lack of fund­ing.

How­ever, is the lack of pri­ori­ti­sa­tion the main cause of al­lo­ca­tion for in­no­va­tion not be­ing made in the first place?

To re­flect, let’s look at how other coun­tries feel and re­act on the pres­sure of in­no­va­tion. For in­stance, China’s dig­i­tal trans­for­ma­tion jour­ney and In­dia’s path from poverty to em­pow­er­ment.

Hav­ing the ad­van­tage of a mas­sive do­mes­tic con­sumer mar­ket, Chi­nese in­no­va­tors do not stop there.

In­stead, they strive for im­prove­ments by lever­ag­ing on cus­tomer feed­backs to carry out rapid re­fine­ments. Chi­nese con­sumers would buy 1.0 ver­sions of prod­ucts and give feed­back that helps man­u­fac­tur­ers and ser­vice providers up­grade their prod­ucts ac­cord­ingly.

For in­stance, Xiaomi re­lies on over a mil­lion of its users to vote on­line for new fea­tures, then in­tro­duce those de­sired fea­tures in weekly soft­ware up­dates.

In the case of In­dia, GII 2016 showed that In­dia has im­proved its rank­ing by climb­ing up 15 notches to num­ber 66. In­dian Prime Min­is­ter Naren­dra Modi in­sisted that the suc­cess of in­no­va­tion in the in­for­ma­tion tech­nol­ogy in­dus­try is pos­si­ble due to the govern­ment’s lack of par­tic­i­pa­tion in the in­dus­try’s growth.

Fur­ther­more, in a pover­tys­tricken coun­try like In­dia, the in­no­va­tors, from grass­roots in­no­va­tors to aca­demic cre­ators in­volved in com­plex in­no­va­tion, are marked by a strong sense of con­straints, re­sult­ing in an amaz­ing abil­ity to out­wit them.

How do we cre­ate this “pres­sure” or de­sire to push and drive in­no­va­tion for our lo­cal play­ers? First, we need to ed­u­cate con­sumers to raise the bar for qual­ity. “Good enough” prod­ucts should no longer suf­fice as “guar­an­teed” mar­kets for lo­cal play­ers as they can im­pede in­no­va­tion in the long term.

Next, com­pe­ti­tion should be en­cour­aged to pro­duce com­pet­i­tive in­no­va­tors. Com­pe­ti­tion also pro­vides in­cen­tives for the more ef­fi­cient do­mes­tic firms and a dis­in­cen­tive for the less ef­fi­cient ones.

Lastly, en­cour­age lo­cal com­pa­nies to ex­port and not just fo­cus on the do­mes­tic mar­ket. Greater pres­sure from for­eign com­pe­ti­tion stim­u­lates in­no­va­tion.

To sum­marise, there is a need to re-look into the im­pact of “hand-hold­ing” on in­no­va­tion. It is im­por­tant to balance be­tween as­sist­ing and en­cour­ag­ing in­no­va­tion with­out ac­ci­den­tally cre­at­ing dis­cour­age­ment.

In­cen­tives that “over pro­tect” lo­cal firms jeop­ar­dise their com­pet­i­tive edge to com­pete out­side of the do­mes­tic mar­ket, over re­liance on for­eign di­rect in­vest­ments and easy ac­cess to fund­ing with­out proper mon­i­tor­ing and eval­u­a­tion, are not the an­swers to in­no­va­tion de­vel­op­ment.

Many suc­cess­ful in­no­va­tors did not have it easy; they face chal­lenges af­ter chal­lenges that al­low them to stay com­pet­i­tive. In the long run, to cre­ate sus­tain­able in­no­va­tion, the sink-or-swim ex­pe­ri­ence mat­ters. As the say­ing goes, “no pres­sure, no di­a­monds”.

... there is a need to re-look into the im­pact of ‘hand-hold­ing’ on in­no­va­tion. It is im­por­tant to balance be­tween as­sist­ing and en­cour­ag­ing in­no­va­tion with­out ac­ci­den­tally cre­at­ing dis­cour­age­ment.

PIC FILE

Stud­ies have shown that Malaysian small and medium en­ter­prises are not in­no­vat­ing at the de­sired level.

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