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Marco Annunziata: Innovation Barometer — Businesses Disruption-Ready, in Right Conditions

Marco Annunziata GE
January 20, 2015
Our world is changing faster than ever. The marriage of digital and physical technologies is accelerating change in industry; the rise of the Global Brain with crowdsourcing and open-source collaboration is enabling hyper-charged innovation; and global growth is rapidly reshaping the map of global economic power. The confluence of these three forces is bringing about an unprecedented degree of disruption.
Click Here For Interactive Innovation Barometer Results


This year’s Global Innovation Barometer shows that industry leaders around the world realize they have no choice but to embrace this disruption. But embracing disruption is not easy. It forces companies to fight the inertia inherent in established practices — often the very same practices that have been driving their success. They need to disrupt themselves before someone else disrupts their industry and puts them out of business. That can present a daunting challenge.

Entrepreneurs in emerging markets appear much more ready to face that challenge than their counterparts in advanced economies. In Turkey, the “Maker Movement” and 3D printing are making rapid inroads. And across markets as diverse as Algeria, India, Kenya, Brazil and Mexico, an overwhelming majority of entrepreneurs surveyed recognize we are facing a true revolution — and are ready and eager to adopt new technologies.

In advanced economies, entrepreneurs are often more reluctant to put existing revenue models at risk. Such is the cost of incumbency. Emerging market entrepreneurs are used to operating in more difficult and volatile environments and often feel they have more to gain than to lose, with lower capital stock levels creating the opportunity to leapfrog to new technologies. The Innovation Barometer therefore suggests that disruptive innovation could also accelerate the ongoing rebalancing of the global economy.

As innovation stands to reshape the global competitiveness map, governments should take notice — and take action. Their policies play a crucial role in creating an environment where innovation thrives — or wilts. Indeed, the Innovation Barometer finds that countries where entrepreneurs report greater satisfaction with the policy environments tend to place higher in rankings like the Global Innovation Index.

The No.1 priority for both public and private actors should be attracting, developing and retaining talent. Eight executives in 10 identify talent as crucially important. The new wave of digitally driven innovation calls for new sets of skills and an ability to learn and adapt at a faster pace. Education policies should not only raise the bar on critical STEM — science, technology, engineering and math — knowledge, but also place a higher priority on problem-solving abilities. The education system and industry should engage in a closer dialogue to better align supply and demand for skills. Companies need to bolster their training programs to allow workers to upgrade their skills on a continuous basis. And immigration policies should play a crucial role in attracting and retaining global talent — something that would bolster openness and innovation.

Openness and collaboration are key characteristics of this new, digitally driven wave of innovation — and attitudes are shifting rapidly. Whereas even just a year ago a significant share of executives were held back by intellectual property (IP) concerns, today most recognize the value of openness. A vast majority of those who practice collaborative innovation see it translating into significant benefits to their topline. IP protection, of course, remains crucially important — and indeed countries where IP protection is strongest tend to see greater reward in open collaboration. Other forms of “protection,” however, stand out as significant impediments to innovation: domestic bias in public procurement policies and local content requirements. Fostering the development of domestic industry should not require policies that hobble innovation and undermine long-term competitiveness.

Once again, it is in emerging markets where there tends to be a greater eagerness to adopt openness and collaboration. They also prize the innovation role played by multinational companies, likely due to their capacity to more rapidly achieve scale.

Through the Innovation Barometer, executives are sending a clear and loud message: governments can and should lay the foundation for an innovative environment. They should encourage the development of incubators, innovation parks and crowdfunding. More generally, they should ensure their economies are flexible, lowering the administrative and financial costs of setting up businesses and winding them down. In some cases, this will also require a cultural change: today’s fast-paced competition requires entrepreneurs to experiment and sometimes fail fast, learn, adapt and rebuild. Bankruptcy legislation should reduce the cost and stigma associated with failure — Europe is a case in point.

Business leaders across the globe have developed a stronger appetite for disruption — and disruptive innovation is now set to reshape the world we live in at a faster pace than ever before. We all have a lot of work ahead: companies, governments and schools. And we need to do it together — this is a competition, but not a zero-sum game. Openness, collaboration, adaptability, speed and talent will be the determinants of success. Let’s get started.

Click here to download the full Innovation Barometer white paper.

Marco Annunziata is
 the Chief Economist
 and Executive Director of Global Market Insight at GE.

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