Monday, May 22, 2017

The Inescapable Locality of Innovation

Two things trigger this thought. First, the conversation I have been recently engaged into, and particularly the question, why is Indian IT Industry is not more innovative. And, second, this is about the Not-For-Profit projects which I dabble with, which concern themselves with the task of creating innovation ecosystems in India and Africa.

My point is - despite all the fuss about Innovation - developing countries are doing quite poorly in innovation. Overall, the world is living in a bubble that Fredrik Erixon and Björn Wiegel will call an Innovation Illusion. There is a lot of talk and lots of people claiming that they have made a truly new thing - and media fawning over this and that - but apart from 'digitization' of some of the tasks, we are moving forward little. And, this is particularly acute in the developing world, which is doing some 'Copy and Catch-up' innovation (Tyler Cowen's term) but failing to solve their most basic problems. In more ways than one, Peter Drucker's observation that the last true innovation was the ATM Machine has a ring of truth around it.

I think what we miss in the innovation conversation is that all innovations are essentially local. Local problems spur the innovative spirit, local usage perfect the application and local market build the traction. Somehow, we visualise innovation as a neat event where some genius inventor unleash the next great product on the world: It is about great technology, brilliant men (usually men), breakthrough ideas and universal truth. Whatever the truth of this picture, it misses a lot. The big part it misses is usage - that all innovation goes through a cycle of acceptance, modification and often endless series of re-innovation - and this crucial detail often generate talk about 'changing the world' without changing the neighbourhood first.

The importance of local in innovation is not merely benign, but crucial for success or failure of the innovation efforts. In the context of dependent economic structures that globalisation built, it is often more rewarding for organisations in the developing world - both in terms of availability of capital and in terms of projected revenues - to try to innovate for global, essentially American and European, markets. However, without a local demand, what they call innovation is based on insufficient 'native understanding' of what they are doing, consigning them to the role of 'execution partners' for overseas clients who may have to feel their way to the solution themselves (or find a local consultancy company to do this work). This is essentially the challenge of the Indian IT: The lack of local market for innovation.

This challenge is also central to the projects that aim to build innovation ecosystems - universities, incubators etc - because they essentially aim at the supply side of the innovation process with an assumption that the demand side will take care of itself. I shall claim that these two attitudes - our fetish with innovation and the assumption that the demand side will take care of itself - are at the core of our failure to innovate: This is why so many urgent problems remain unresolved in developing countries, so many born-global start-ups fail to take off, and why we talk so much about so little when innovation is concerned. The essential failure to create what Amar Bhidé calls 'venturesome economy' limits how we innovate.
Now, one final point: It is not easy to create 'venturesome economies'. This is not just a function of education: This is a social attitude that is created by the confluence of many factors, including economic affluence. Americans, living in one of the richest and most dynamic economies in the world, can afford to be 'venturesome' in a way poor Indians can not. However, here the governments can play a role, by being deliberately entrepreneurial (as in Mariana Mazzucato's idea of 'Entrepreneurial State') and creating demand for innovation in local markets. Indeed, the state interventions are often inefficient and bureaucratic, and the structure of state programmes often aim for predictability and does not suit innovative approaches. It is for no reason we associate the state interventions with crony capitalism than innovation. However, as Ms Mazzucato has illustrated, State can indeed be innovative and spawn great innovations (the Internet was one example), and it is the revolution in governance upon which the spotlight should fall first.

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