EARLIER this month, I was fortunate to attend the Khazanah Megatrends Forum
2015 in Kuala Lumpur on Disruptive Innovation.
The forum brought together many amazing speakers who are at the cutting edge of
innovation. The most impressive was Dr Hugh Herr, who lost both legs to frost bite
when mountain-climbing. His doctors told him that he should be resigned to limited
mobility.
After an initial period of despondence, he decided boldly that it was conventional
medicine that was broken, not his body or mind. So he invented robotic legs and
today, fitted with bionic legs, he has not only climbed more difficult rock faces than
before, but also helped a thousand other handicapped people.
The point of his story is that innovation is all about changing the status quo through
sheer will power – to do what most people thought is impossible.
New technology is changing the world, and Asian economies are facing both the
threat of disruptive technology and the benefits of new growth and new profits.
Disruptive technology is a cut-throat business. Out of roughly US$400bil of annual
sales, two smartphone companies – Apple and Samsung – dominate the business,
with almost everyone else bleeding losses or being re-configured.
Likewise, Factory Asia is facing compressed creative destruction – as its industries
like coal, steel, petrochemicals and cars are facing excess capacity, pollution
constraints and huge energy and resource inefficiencies. No Asian dragon or tiger
economy is immune to the combination of both technology disruption and secular
stagnation.
Princeton Prof Dani Rodrik, probably one of the foremost development economists
around, thinks that growth through knowledge-based services could be the focus
going forward.
However, the shift to a services-driven economy inevitably comes at a cost of slower
GDP growth, partly because it is easier to measure physical production than services
production. The value-added services depend also on the skills of the workers. The
value added of a MacDonald hamburger flipper is very different from that of a
software designer working in Google. A completely different policy mindset is required
to shift our successful manufacturing model to a service and innovation-driven model.
In other words, assembly-line skills or pumping oil out of the ground are very different
from thinking and creative skills. Certain service sectors are relatively easy to grow,
such as tourism, food and catering, but others such as healthcare, education,
financial services, creative industries and Internet technology require very specialised
skills and mindsets.
The old hierarchy is driven on a top-down basis, whereas the new Internet market
requires lateral-thinking and is much more bottom-up.
So far, the advanced countries generate most of the innovation through their higher
levels of research and development (R&D) in both basic sciences as well as applied
technology. Their advanced universities encourage creative thinking rather than rote
learning.
What the multinational companies have learnt is that they can tap innovation through
diversity and investing in youth. The most creative and dynamic companies are not
more than ten years old, whereas the older companies are still struggling to re-invent
their business models.
The innovation supply chain moves up a knowledge scale.
Henry Ford was the pioneer in “product” (car) and “process” (assembly line)
innovation. Toyota perfected the famous just-in-time production process and the
quality control circles that made Japanese cars so reliable and defect free. Steve
Jobs took a common product (phone) and innovated it into a cool lifestyle, which was
pure “psyche” or mindset innovation.
Then Alibaba created within Asia its first “platform innovation”, where its Internet
platform facilitated half a million small businesses to trade with each other and to
reach millions of online customers. At one stroke, Alibaba intermediated the
previously segmented payments and logistics industries.
In short, the only way out of the current trap of secular stagnation – the advent of
both slow growth and deflation – is continuous innovation and structural reforms. We
need painful structural reforms because we need to phase out the 20th century
industries that are polluting, energy and resource wasteful and value-destroying.
Getting rid of these zombies is very difficult because there are huge vested interests
in their continued survival.
But as long as these entrenched interests are still controlling the bulk of resources,
the young and innovative have difficulty in getting their fair share of voice, energy and
funding into building the new products, processes, platforms and pysches for the 21st
century.
The old resists changing the present for fear of an uncertain future. The young have
no such fear, because they will inherit the future. Thus, if we are to unleash our
growth potential, we must celebrate our youth by trusting them to make their own
mistakes, to learn from them and build the new businesses and institutions that will
improve our societies.
Throughout Asia, a new generation is waiting to make a difference. They grew up in
an age of the Internet. Their skills sets are very different from the present generation
of baby boomers who have created tremendous wealth and prosperity, but have
produced at the same time, unprecedented inequality. This generation of leaders’
capacity to innovate can only at best be linear, whereas the mass innovation from the
young could be quantum.
This means that we must now begin to build the platforms and new social institutions
to allow the youth to channel their energies towards creative outlets – not in rebellion
of the present, but to shape the future. Sometimes I wonder why new appointments to
many public positions are mainly for the “tried and tested grey-hairs”, rather than the
young and more diverse.
As opinions harden, positions become more polarised. The dialogue between
generations is not happening, because they are talking past each other. Success
depends on succession. Time to pass the baton to the next generation to tackle the
problems of the 21st century.
Tan Sri Andrew Sheng writes on Asian global issues.
A version of this article appeared in The Star Online, 17 October 2015
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