Has Globalisation pushed innovation to the top of the agenda?

Interim Managers are renowned for being innovative when on an interim assignment. They come in with a fresh pair of eyes and are able to clearly see 'the wood for the trees' and then help guide 'the organisation' through the challenge they face. Innovation is now key to every organisations agenda. A recent study has looked at which countries are the most innovative.

So which nations and regions respond best to the challenge of innovation? In recent years, innovation has pushed itself to the very top of policy-making and senior executive agendas. What has put it there can be summed up in one word: globalisation. Now INSEAD and World Business have developed the Global Innovation Index (GII) to measure the shock of the new.

The top six are:
1 US 5.80
2 Germany 4.89
3 UK 4.81
4 Japan 4.48
5 France 4.32
6 Switzerland 4.16

Rank Country Score* The World Business/INSEAD Global Innovation Index 2007 in association with BT.

When all economies are interdependent and interconnected, the "waves of creative destruction" described by economist Joseph Schumpeter show no respect for national boundaries, rolling with impunity over the whole planet. And technological change is accelerating - US futurologist Ray Kurzweil has noted that "in the first 20 years of the 20th century, we saw more advancement than in all of the 19th century. And we won't experience 100 years of progress in the 21st century - it will be more like 20,000 years of progress at the current rate."

Simply doing the same as before - only more intensively - is a losing strategy; there is nowhere left to hide. Instead of trying to wring diminishing returns from today's array of goods, services and processes, prosperity urgently demands that companies quickly shift to creating fresh value from new ones.

A recent report from the US Council on Competitiveness declared: "Innovation will be the single most important factor in determining America's success in the 21st century. Where once we optimised our organisations for efficiency and quality, now we must optimise our entire society for innovation." In Europe, 2000's Lisbon Agenda challenged the EU to make itself "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs, and greater social cohesion" by 2010.

The emerging economies are racing towards the same goal. Since the late 1990s, China has boosted its R&D spending by 50%. Now, led by president Hu Jintao, Beijing wants to raise it to 2.5% of GDP - $115 billion - annually. Even in Africa, governments are attempting to use technology as a springboard for innovation and development. Ethiopia, one of the poorest countries in the world, is committed to bringing a broadband connection within reach of all its 74 million population by 2007, and little more than a decade after the horrors of 1994, Rwanda is working to create a knowledge-intensive, technology-enabled business environment (see box).

Innovation is about much more than generating new ideas. Translating these ideas into value- adding products and services requires flexibility of attitude and willingness to adapt to, and welcome, unprecedented levels of change on the part of individuals, organisations and society as a whole. So who is doing it best? What are the conditions for doing so? Can we pin down the catch-all notion of innovation in ways that can be quantified and normalised to generate meaningful comparisons?

The results are revealing - and in some cases surprising. For example, while the presence of the US at the top of the table is predictable, the great extent of the lead is less so. Typically, differences between consecutively ranked nations are marginal (remember, these are relative scores). However, the US leads the second most innovative nation (Germany) by almost a full point, putting it in a league of its own as far as global innovation is concerned. This is confirmed by the top ranking that the country garners in both 'input' and 'output' sections of the model. The US is unique in being consistently among the top eight performers on all the measures used in the GII.

Nevertheless, for those wanting to know where the future lies, the direction is clear: look east. While Japan comes in at a highly creditable fourth overall - a rebirth of the Asian powerhouse after the doldrums of the 1990s - followed by Singapore (7th), Hong Kong (10th) and South Korea (19th), perhaps even more significant is the appearance of India and China at 23rd and 29th respectively. With the burgeoning and technology-hungry middle classes of these two countries adding to existing strengths, Asia is set to redefine many aspects of innovation. Already South Korea is the most advanced broadband society in the world; China has more than 300 research centres, second only to the US, and this number is steadily increasing. Perhaps the biggest global challenge for international firms will be to find ways to tap into and leverage these emerging Asian drivers of global innovation.

Another sign of the shifting tectonic plates of the world economy is the appearance of the United Arab Emirates at 14th in the global list. The brightest star in the Middle East - four places above Israel - UAE has benefited from government leadership that sets it apart from its neighbours through policies explicitly designed and implemented to attract skilled workers and technology-intensive companies. The result, particularly in Dubai, has been growing clusters of innovative companies.

On the other hand, another group of countries, with the Nordics to the fore, currently do relatively better on inputs than outputs, suggesting that they have the potential to move up the overall table as the results of their investments feed through. Finland, for example, has put most of the ingredients of the future networked society in place by focusing on innovation, education and IT. Unlike the rest of Europe, it scores very highly on human capacity. Finland was the first country in the world to conceive of the idea of a national innovation system to feed into policy formulation. Leadership comes from the very top, with the Finnish prime minister chairing the science and technology council, which also has seven other ministers among its members. Finland's investment in R&D, at 3.4% of GDP, is one of the highest in the world.

Another example is Israel, which has a sparkling economic story to tell in human capacity and technological sophistication inputs. Strong ties to Silicon Valley and US academic and research institutions are important advantages, and successive governments have invested heavily in education - reinforced by large-scale immigration - to build human capital. As part of a close collaboration with business, successive governments have also developed effective investment incentives, fostered the highest spending on R&D of any industrialised nation (4.6%) and overseen incubator and venture capital programmes to convert research into new businesses.

Thank you to 'World Business' for the inspiration behind this posting: The World's Top Innovators

Source: Soumitra Dutta, INSEAD, and Simon Caulkin, World Business