<B>By Dr Dinesh MOONSHIRAM</B>

A number of recent global surveys of businesses suggest that innovation in technology, products and services rate amongst the top ten most important trends affecting the global economy over the next five years, particularly factors that could promote or constrain growth. These surveys have highlighted the increasing pace of technological innovation, the growing affluence of emerging economies, and low-cost offshore manufacturing as the most important trends for global business.

They have also concluded that technology executives are more bullish about innovation and automation than their business counterparts and finding skilled people and managing on a global scale as two of their biggest challenges. Overall, business and technology people agree on one thing: the increasing pace of technological innovation, the growing affluence of emerging economies, and low-cost offshore manufacturing as the most important trends for global business.

Executives around the world see innovation and the free flow of information as the primary drivers of an accelerating pace of change in the global business environment. At the same time, they continue to confront familiar and powerful forces that bear the unmistakable imprint of an emerging global market ? plentiful, cheap, and mobile capital, unlimited access to talent and labour pools and a global and regional reduction in trade barriers. A broad range of factors contribute to this accelerating pace of change: of these, innovation in products, services, and business models as well as the greater ease of obtaining information and developing knowledge figure most prominently.

<B>The paradox in a culture of Innovation</B>

Close to 90% of both small as well as big companies businesses surveyed rate the intensity of competition in their business environment as fiercer than it was five years ago. Of all the industries surveyed, the telecommunications area comes out as providing the toughest business environment to be in; business services seem to be at the other end of the spectrum. Telecommunications executives have every reason to be twice as likely as respondents from other industries to be deeply concerned about innovative market entrants. We are likely to see a repeat of the early nineties when telecommunication giants, AT & T and Bell Canada, both fell victims to the no-frills telecommunications providers that took full advantage of their pioneering and heavy investments. Both saw their traditional customers seeking solace in the low-cost, customer centric embraces of the new market entrants.

Managers in health care view regulatory changes as the most important factor behind growing competition in their industry. As reported in l?express earlier this week, it is hardly surprising therefore that in Mauritius clinics and private health care providers are closing ranks to fight off the invading Apollo.

The factors that contribute most to this relentless competitive environment seem to be the improved capabilities of their competitors: more knowledge, more talented employees with innovative skills and a growing number of low-cost competitors.

To drive the spirit of innovation or to gain competitive advantage by actually doing something new, experimentation has to be been sanctioned at the highest levels. To achieve this, companies need to revamp their business models and their management mind-sets, because in a culture of innovation, the location at which value is consequently created undergoes a major shift along the whole trajectory of innovations and new technologies.

Here a valuable stakeholder, the customer, has an invaluable input that comes with risks. An increasingly competitive business world is always characterised by great opportunities and an equal amount of risks that can be underrated in the blinding haze of dollar signs.

To grow, companies should be willing to assume the concomitant measures of risk and deep uncertainties associated with innovations. Joseph Schumpeter who pioneered the idea of ?creative destruction? shows how innovations in effect destroyed the old order in which they were introduced. The paradox is that innovations create the basis for their own downfall where new innovations displace old innovations.

It stands to reason then that, according to these surveys, the three most important ingredients for an innovative business culture are a leadership with an appetite for risk, creative people, and good business and technology alignment. In Imagination at Work, Meredith Levinson describes five projects that succeeded because technology and business leaders made it easy for talented employees to pursue ideas that, though unconventional, held potential for a big payoff.

Few of us would disagree that technological innovation and change are major ingredients of long-term economic growth, or that they are beset by a high degree of uncertainty. Understanding the nature of this uncertainty and the obstacles to surmounting it is no easy task. It goes to the heart of how new technologies and novel ideas are devised, how rapidly and how far they spread, and how they affect economic performance.

?Few of us would disagree that technological innovation and change are major ingredients of long-term economic growth...?

It is hardly surprising then that innovating firms have historically experienced high failure rates. Indeed, the vast majority of attempts at innovation fail. This failure may be due to several factors, like an inability to fully understand customers? needs. Even when customers know precisely what they want, they often cannot transfer that information clearly to the manufacturer.

<B>Where does the value lie</B>

Research by Eric von Hippel at the MIT has shown that in many cases manufacturers like Bush Boake Allen and GE have just abandoned their efforts to understand exactly what products or services customers want and have instead equipped them with toolkits to design and develop their own products, ranging from minor modifications to major new innovations. They then commercialise the best of these innovative components. GE and Bush Boake Allen have thus bypassed the often expensive and error-prone efforts to understand customer needs in detail. Also, the trial-and-error cycles that inevitably occur during product development can progress much faster.

Knowing how to capture the value of innovations will be crucial, is just going to be from business to business or business to customer? From open software to cereals, companies are planning to allow consumers to mix and match. However, a more intriguing field of enquiry might be the apparently widespread inability of companies to anticipate the future impact of successful innovations and to sort the wheat from the chaff even after their technical feasibility has been established.

It is as intriguing as Macbeth asking the three witches if they can ?look into the seeds of time and say which will grow and which will not?!