IN­NO­VA­TION-DRIVEN ECONOMIES KEY TO GROWTH

The in­no­va­tion march is on and we must be pre­pared

New Straits Times - - Opinion -

HERE are no whole truths; all truths are halftruths. It is try­ing to treat them as whole truths that plays the devil,” said Al­fred North White­headan, an English math­e­ma­ti­cian and philoso­pher. And, rightly so.

Today, we of­ten hear that in­no­va­tion is re­quired for job cre­ation. That we must teach grad­u­ates to be in­dus­try ready. Or that good lead­er­ship comes from the top. Are th­ese truths or halftruths?

Asean has faced, and con­tin­ues to face many chal­lenges, from the global eco­nomic cri­sis in 2008 to the politi­cal chal­lenges within each na­tion. De­spite this, the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) has pro­jected a 5.5 per cent av­er­age growth rate from 2013-2017.

We need to ap­pre­ci­ate that this growth is the re­sult of the de­mo­graphic div­i­dend en­joyed due to a young and vi­brant pop­u­la­tion. How­ever, this is not ex­pected to last be­yond 2030 and even now, in an in­creas­ingly con­nected and dig­i­tal age, the clam­our for job cre­ation is get­ting louder.

The Brook­ings In­sti­tute of Wash­ing­ton, DC, of­fers us some valu­able find­ings. In 1980, to gen­er­ate US$1 mil­lion in man­u­fac­tur­ing out­put, it took 25 jobs. That out­put could be achieved with just 6.5 jobs in 2015. Fur­ther back in his­tory in 1979, to gen­er­ate US$11 mil­lion, Gen­eral Mo­tors needed 840,000 work­ers whereas in 2012 Google needed fewer than 38,000 em­ploy­ees to gen­er­ate US$14 bil­lion! In­no­va­tion and en­trepreneur­ship in tech­nol­ogy caused those dra­matic changes. And, it con­tin­ues to this day.

What should Asean economies do to grow sus­tain­ably along with an in­clu­sive eco­nomic agenda that leaves no one be­hind? The in­no­va­tion march is on and we must be pre­pared. It is im­por­tant to recog­nise that all three prin­ci­pal types of economies — fac­tor-driven, ef­fi­ciency-driven, and in­no­va­tion-driven — are present in all na­tional economies. But, their rel­a­tive preva­lence and con­tri­bu­tion to eco­nomic de­vel­op­ment varies.

The World Eco­nomic Fo­rum Global Com­pet­i­tive­ness Re­port’s propo­si­tion is that each phase of eco­nomic de­vel­op­ment has a dif­fer­ent op­ti­mal com­bi­na­tion of th­ese three ac­tiv­i­ties. There are five key ap­proaches that can be ac­com­mo­dated by economies at ev­ery stage of their eco­nomic growth.

One, em­brace in­no­va­tion. There needs to be a move away to­wards dis­rup­tive as op­posed to just sus­tain­ing and ef­fi­ciency type in­no­va­tions, if economies are to ul­ti­mately grow.

From a coun­try­wide eco­nomic stand­point, the first mover ad­van­tage may not be an ad­van­tage within the Asean con­text in its need to cre­ate jobs. Un­less those first mover ad­van­tage is ef­fi­ciently lever­aged and the firm quickly achieves scale whilst still de­liv­er­ing cost re­duc­tions to the cus­tomer.

AirAsia Bhd is a good work­ing ex­am­ple of that, hir­ing well over 6,000 em­ploy­ees. Asean firms need to in­vest in ef­fi­ciency and sus­tain­ing- type in­no­va­tions whilst con­stantly keep­ing an eye on the dis­rup­tions com­ing their way. This is done by look­ing at the sig­nif­i­cant forces, usu­ally tech­no­log­i­cal forces, im­pact­ing their in­dus­try. To keep a bal­ance, they could spin off smaller firms that can read­ily em­bark on self­com­pet­ing in­no­va­tions. Such vul­ner­a­bil­ity measures re­flect the in­tu­itive wis­dom of the en­tre­pre­neur at work.

Two, in­no­va­tive lead­er­ship. Lead­er­ship is not solely about the lead­ers them­selves, but what they do to make their em­ploy­ees great, their pos­i­tive in­flu­ence and abil­ity to in­spire.

Lead­er­ship is seen at all lev­els within or­gan­i­sa­tions. More ap­par­ent today is the im­por­tance of the fol­low­ers of lead­ers, and in turn their fol­low­ers, that make a big dif­fer­ence to in­no­va­tion within or­gan­i­sa­tions. They must want to fol­low you, not be­cause they are paid to do so. That makes a boss the “su­per­boss”.

Asean may not be amongst the in­no­va­tion driven economies yet, but our mil­len­ni­als al­ready are, both in be­hav­iour and mind­set. In or­der to cap­ture their imag­i­na­tion and har­ness their drive and po­ten­tial, today’s lead­ers will need a “su­per­boss” men­tal­ity. Mil­len­ni­als are pre­pared to be guided, not in­structed, en­gaged and sup­ported, not dic­tated to.

Three, col­lab­o­rate for in­dus­try in­no­va­tion. Col­lab­o­ra­tion to sus­tain and en­hance in­no­va­tion ef­fi­ciency usu­ally also means pro­duc­ing cheaper and cheaply. The au­to­ma­tion in­volved will re­sult in job re­duc­tion, ei­ther by head count or hours worked.

Un­til and un­less new mar­kets are found quickly, that are suf­fi­ciently large, it will not re­sult in job cre­ation. Col­lab­o­ra­tion is cru­cial. A good ex­am­ple is the re­cent strate­gic al­liance be­tween Jo­hor Cor­po­ra­tion and Si­a­sum Ro­bot In­vest­ment Co Ltd to cre­ate a Ro­bot­ics Fu­ture City in Jo­hor.

Four, learn­ing to learn. Too of­ten we hear the phrase: “we must pre­pare our grad­u­ates for in­dus­try”. But, what in­dus­tries are we re­fer­ring to? Is it the IT in­dus­try, bank­ing, tourism, or air­lines? His­tory over the last 25 years has shown that those in­dus­tries have un­der­gone sig­nif­i­cant changes and will con­tinue to do so. At no time has in­sti­tu­tions of higher learn­ing been able to pre­pare grad­u­ates as re­quired by in­dus­try. In fact, thanks to tech­nol­ogy and au­to­ma­tion, there is even less of such jobs avail­able for grad­u­ates. The re­al­ity is that in­sti­tu­tion­alised teach­ing will al­ways play catch up to in­no­va­tive in­dus­try changes.

Grad­u­ates must learn-to-learn so that they can be in­de­pen­dent whilst fill­ing gaps and ad­ding value as re­quired; be it for ex­ist­ing firms or their own busi­nesses.

Five, fuel your in­no­va­tion. In­no­va­tive ideas by them­selves mean lit­tle. Ex­ploit new in­no­va­tive ideas through en­trepreneur­ship. It will bring about eco­nomic growth and that much needed job cre­ation.

In­no­va­tion is crit­i­cal, but we need to ap­pre­ci­ate its im­pact on na­tions. The in­crease in gross do­mes­tic prod­uct and pro­duc­tiv­ity can also re­sult in many who will be left be­hind. Con­versely, the un­bri­dled re­dis­tri­bu­tion of wealth gar­nered from such in­no­va­tion ef­forts can stag­nate a na­tion’s growth op­por­tu­ni­ties. Thus, our dilemma.

A step in the right di­rec­tion is to ap­pre­ci­ate the half-truths through re­flec­tion and open dis­cus­sions. In the short to midterm, in­clu­sive growth must give way to in­no­va­tion-driven growth.

This is a bit­ter pill, but the re­al­i­ties for a peace­able na­tion are what they are. In­no­va­tion’s growth needs to be tem­pered by in­clu­sion across eth­nic­ity, gen­der, de­mo­graphic groups and re­gions. In­no­va­tion is the re­sult of a na­tion’s en­ter­pris­ing hu­man cap­i­tal and right mind­sets, nur­tured through an un­com­pro­mis­ing ed­u­ca­tion sys­tem. Any­thing less is a com­pro­mise and no na­tion can af­ford to com­pro­mise job cre­ation.

The writer is Deputy Dean of the Bank Rakyat School of Busi­ness and En­trepreneur­ship at Univer­siti Tun Ab­dul Razak (UNIRAZAK). He is also the Pro­gramme Di­rec­tor of the En­trepreneur­ship pro­grammes in col­lab­o­ra­tion with Bab­son Col­lege, Bos­ton, USA

FILE PIC

AirAsia Bhd is a good work­ing ex­am­ple of firms that em­brace in­no­va­tion, hir­ing well over 6,000 em­ploy­ees.

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