- The Washington Times - Sunday, August 3, 2008

ANALYSIS/OPINION:

COMMENTARY:

With tectonic shifts occurring in the global economy, Americans need to think differently about innovation.

Benchmarks used in the past to predict success - new patents, research and development (R&D;) spending, science and engineering degrees granted by universities - may be inadequate today, producing too many false positives. Successful innovation now involves other factors as well, including cost, speed, flexibility, simplification and ingenuity.

To understand what may be required to succeed in the rapidly expanding global commercial world, consider a brief story, about eyes.

A friend’s mother in North Carolina had cataract surgery at the end of May. The cost of her 2.5-hour stay at the outpatient surgical center was nearly $7,000. The doctor’s and anesthesiologist’s bills were additional. But at Aravind Eye Care, the same operation costs a fraction of the amount.

Founded in 1976 in India by Dr. G. Venkataswamy (Dr. V.), Aravind performs some 250,000 cataract surgeries per year. Although 60 percent of all patients are treated gratis, the company still makes a profit.

By using a formula not dissimilar to Henry Ford’s formula for mass-producing affordable cars, Dr. V. re-engineered the surgical process, adopting a business model that probably wouldn’t work in the United States, but is ideally suited to rapidly developing countries.

To drive down costs, Aravind uses its equipment around the clock. Moreover, Aravind doctors are all cataract specialists - that’s all they do - rather than ophthalmologists whose practices include surgery. This specialization enables each doctor to perform more than 4,000 operations per year.

In a traditional hospital or outpatient setting, the surgeon has the patient admitted, plans and conducts the surgery, coordinates the team and monitors post-op care. At Aravind, surgeons move from one operating table to the next, performing only the surgery, while specially trained nurses provide pre-op and post-op care.

To most U.S. and European business and political leaders, innovation typically is seen as a function of relentless addition: increased R&D; spending; more patents; commercializing more inventions and technologies; adding additional bells, whistles and features to existing processes and products. Aravind stood this formula on its head: It simplified the process, making it far more affordable.

Simplification is one route to success in the global economy. There are others.

Repairmen for the Chinese appliance maker Haier, for example, were constantly called upon to unclog the drainpipes of customers’ clothes washers in rural areas. They learned, over time, that customers were using the machines to wash sweet potatoes. Now Haier’s machines come with a “vegetable wash” cycle. What U.S. executive would have shown the ingenuity to think of that?

Brazilian jet maker Embraer also has demonstrated the kind of genius needed to become a leader in a global economy. Now the world’s top manufacturer of regional jets, Embraer turned convention upside down, literally: The top of its newest aircraft is wider than the bottom. The “double-bubble” configuration provides more room and comfort for passengers without sacrificing fuel efficiency. What a novel idea: comfort. Orders are backlogged.

Today’s global economy is unlike anything we’ve seen before. Companies from everywhere - Argentina, Brazil, Chile, China, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Russia, Thailand, Turkey - now compete with U.S., Japanese and West-ern European companies, and with each other, for customers, resources, talent, knowledge, financing and everything else. Everyone from everywhere is competing for everything.

New knowledge, inventions, technologies, designs, processes, products and services will continue to be critical, as always. China and India both have declared innovation a strategic national priority. In January 2006, China unveiled a 15-year plan focused on China becoming an “innovation-oriented society” by the year 2020 and a global leader in science and technology by mid-century.

India’s goals are no less ambitious and were nicely captured by the slogans used to promote recent national R&D; expositions in New Delhi: “Think Innovation, Think India”; “Mind to Market”; “The World’s Knowledge Hub of the Future.”

But successful innovation in the global economy will also require different ways of thinking. Since much of the world’s future economic growth will occur in the rapidly developing economies of Asia, Latin America and Eastern Europe, U.S. business and political leaders need to recognize that these potential new customers have unique requirements and that America’s long-term economic success may depend on meeting these requirements.

Innovating in such a market will be about understanding potential customers, collaborating, synthesizing, borrowing, making rapid-fire changes, and occasionally moving in reverse. Less may be more. And a couple of steps backward may be all that’s needed to springboard a U.S. company to the head of the line.

  • Harold L. Sirkin and James W. Hemerling are senior partners of The Boston Consulting Group (BCG) and co-authors, with BCG partner Arindam K. Bhattacharya, of “GLOBALITY: Competing with Everyone from Everywhere for Everything” (BusinessPlus, June 2008).
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