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Innovation is the only means for sustainable differentiation

Further from my earlier view, it seems to me that there is much debate and self-rationalization about where innovation is and where it will remain, with some expectation that it won’t change in the near future.  This view is just out-right dangerous.  The world is in rapid change, and we are seeing major changes when it comes to investment in R&D.

Please read my post to BusinessWeek:

http://www.businessweek.com/debateroom/archives/2009/04/innovation.html

Emma Lo Russo

April 21, 2009 07:43 AM

Interesting this debate has a certain degree of fixation on “western innovation.” That somehow it is “more innovative” than other regions’ innovation, especially innovation emanating from “the east.”

Yet the recent data (much of it factually from the US) tells a different story: Innovation is shifting. By any measure, China, India, and other countries are investing more in R&D, are exporting more high-technology goods, and are selling more to internal markets. Most significantly, they seem more enthusiastic about accelerating these effects, and moving into new areas.

Here are some examples from my desktop. According to the Information Technology and Innovation Foundation, in its report called The Atlantic Century: Benchmarking EU and US Innovation and Competitiveness, China has changed its innovation ranking score by 19.5 over the past 10 years (the highest margin) and tops the ITIF’s table for change, while the US has changed its score by 2.7, and is at bottom.

Elsewhere, the WTO reports that China’s electronic exports grew 173 times in the 17 years to 2007. The US grew four times. The proportion of total exports from hi-tech goods also grew in China. The US, albeit with a much larger proportion, halved.

OECD countries awarded 6.7 million degrees in 2004. China awarded 2.1 million–one-third of all the OECD countries combined. And again, according to the OECD, China was only 15th on the world patents list in 2005, but grew patents by 35% that year. The US grew by 3%

So the argument is not that innovation is region-specific, but instead that acknowledgement is required that the world and innovation leadership is changing. Where design is created, what designs are being done, who it is done by, how it is done, even where designs are being manufactured, is all under a massive period of change.

It’s re-skilling over and over again, combined with innovation, that should set the agenda for future success, rather than dwelling on past and potentially fading glories.

This is what is happening in countries such as China. China is no longer about so-called cheap labor. Nations such as China, in many cases under national policies, are investing in innovation and re-skilling en masse. In electronics design, the industry in which Altium operates, the appetite for technical training and new development software runs unabated. Altium, as one example, is growing sales in China three times faster than other regions. And the desire is stronger about looking to the future rather then in rationalizing past decisions or investment. Whilst it is easy to argue that there is nothing to rationalize if payment of the tools they were using was not there in the first place, we should look to see how liberating that can be when it comes to evaluating what is required to lead and the willingness to leapfrog yesterday’s design paradigms. When I visit and meet with customers, universities, and partners in China, the desire to be ahead of the rest of the world, along with considerable self-belief, and commitment to investing in world-leading tools and practices are obvious.

Our future, as individuals, as companies and as nations, is in our own hands. Governments should focus on investments for companies that focus on technology innovation and in re-skilling people and organizations over and over again. Individuals should clamor for these new skills, preferably building on those they have already.

Let’s not hide from the challenge and the opportunity to do things differently. We will continue to seek great new products that are connected and smart. Someone, somewhere, will make the products we want to use or own, and at a price that we are prepared to pay, and for the quality we expect for that price. These are all “ands,” rather than choices to trade off, and in truth become the price of entry if you want to compete.

As to who will lead in various sectors, it will be down to us as individuals, and us as individual companies. The US has had a history of leading the world in innovation and electronic products, to assume it’s always going to be that way without changing its view of the world, what will be required, where competitors will be, and where the markets will be, will be required. Focusing on what makes us special requires real discipline of approach around true differentiation, being first to market, being cheapest, having historical leadership–none of these will do and thinking so will be a big mistake.

Innovation is the only means for sustainable differentiation.

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Turning organization values into organization valuables

Values need to be more then words we aspire to…we must live them and hold ourselves (and others) to account…

Much has been written about the downfall of the financial markets and many of the leading institutions who are paying the price for over extending on high-risk portfolios. 

Even those who have survived relatively unscathed, and those who remain propped up by government support, must ask themselves how they plan to deal with the next 12-18 months. 

It seems to me that there are two fundamental learning lessons from these recent times that we need to revisit as part of rebuilding the greater organization culture:

1)  Revisiting what we mean by organization values

This requires an urgent and hard look at what this means in relation to core values such as honesty, transparency, respect, responsibility, duty of care, balancing risk and return, and what are the non-negotiable points and measures. 

Organization values need to be more than empty words on paper. 

Values must be lived.  They need to move from ticking the box of “we have organization values” and instead move to be seen and be protected as “organization valuables”. 

You know your values are living when:

  • they are discussed regularly in meetings not as a separate topic, but within every topic
  • senior management are being measured and called out if they are not acting in harmony with the values (employees and managers are encouraged to ask and call this out), and 
  •  when every decision is understood and explained in relation to how it represents the business values. 

A good measure would be if every employee understands the decisions being made in relation to where it sits within the balance of investor returns against customer, community and employee responsibilities.

Values need to be shared and explored in every stage of recruitment, decision making, promotions, and in explaining any changes the organization is making.

The other lesson needs to be around industry regulation:

2)  Industry regulation needs to be overhauled

We need to change our model from having those who regulate the industry who previously have mostly been made up of those within the industry, to those representing the greater business, customer, government and investor community.  We need to move from a secular-type model to a representative-democracy of the greater stakeholders.

It is too easy to corrupt decision making when the regulators are also those who are likely to be influenced by the decisions, either positively or negatively. 

Whilst representatives from all groups are required to provide a good forum of interested parties, it needs to be strongly balanced out by those who represent the greater beneficiaries and of those likely to suffer the on-consequences of any decision.

With increasing pressures on short term results, the pull will be significant to overlook both these aspects in the immediate.  If values can be made omnipresent, not only will it be representative of strong organizational character but become a valuable platform of strong characters (employees) to leverage from.

The challenge for all organization leaders will be how to balance long term progress against short term and to never be tempted to accept or deliver anything if it comes at the expense of organization values or the greater stakeholders.

Emma Lo Russo

Published: April 13, 2009

 

 

 

 

 

 

 

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Great firewall of China

The following article was published in the Manly Daily.

by Sue Hoban, Manly DailyThe article reads as follows:

Frenchs Forest IT company Altium is set to sign off on a ground-breaking co-operative agreement with authorities in Shanghai today in a smart quest to turn around the mass unlicensed use of its electronics design software.

Chief Operating Officer Emma Lo Russo flew to China on Monday promising a collaborative approach to the problem, including joint education initiatives and an amnesty-and-conversion program.  This will offer free Chinese-language training, support and special pricing for students and presently unlicensed industry users willing to migrate to the latest version of the product.

Company spokesperson Alan Smith said Altium was used for 80 per cent of design training in China and more than 20 books had been published in Chinese languages on Altium solutions. Yet, of the estimated 300,000 Altium users in that country, more than 290,000 were using pirated software, in a scenario well known to Australian intellectual property (IP) owners.

“Those sorts of numbers give us a huge opportunity,” he said. “We obviously already have brand recognition and a great reputation because they’re all using Altium, now the task is to move them to a moe formal relationship.  We have a conservative estimate of being able to migrate about 20 per cent of those 300,000 users over the next gour years which would translate to about $100million in export sales over that period.”

Mr Smith said Altium, whose client base includes NASA, had created the world’s leading unified electronics design software system which meant electronics designers could use a single tool for all aspects of the design process.

He said there were now 26,000 licensed users around the world compared with 300,000 unauthorised users in China so that country clearly represented a big expansion opportunity.

He said Altium had always pursued an active campaign in China to detect unlicensed use of its software but had decided the climate was right to try a collaborative approach, backed by the Chinese Government’s recent moves to start enforcing intellectual property proection.  “We are seeing greater willingness in China now to support organizations that want to protect their IP,” he said.  “The alternative approach would have been to use heavy-handed legal compliance measures but there is no evidence that that actually works.  This approach is to work with users, offer them an amnesty and real value to encourage them to move to a more formal relationship.”

Mr Smith said as part of its package of measures in China, the Frenchs Forext company planned to set up five Alitum training centres which would train 40,000 Chinese engineers in the next four years.  It also planned to set up electronics engineering centers of excelence in selected universities and create the Altium-China Academic Association. “that will be a peer network of professors, educators and Altium managers in China who will set standards around the future training of electronics design,” he said.

Ms Lo Russo said Altium’s opportunity in China was further enhanced by the Chinese Government’s determination to switch from a “made in China” to “designed in China” mentality which should generate demand for the latest generation of design tools.

Trade Minister Simon Crean said yesterday Altium’s initiaitve was a good example of how Australian capability could be harnessed to assist that transition, at the same time expanding trade and creating jobs for Australians. 

He said it also demonstrated how Australian companies were benefiting from improved intellectual property laws in China, which had resulted from its membership of the World Trade Organization.

“The new partnership will ensure a proper return for Altium’s investment in product development,” he said.

Journalist: Sue Hoban, Manly Daily

Published: July 23 2008

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“Our innovation is not superior to theirs”

The following  article was published in China Business News daily (CBN Daily).

china-business-news-daily-10-april-2009

 

Here is the story in English:

“Our innovation is not superior to theirs”

A fixation seems to be appearing in the worldwide debate about jobs, survival, leadership, technical excellence, and perhaps most markedly, innovation.

 It’s a fixation that, somehow, “western innovation” is “more innovative” than other regional innovation, especially innovation emanating from “the east”.

 In this era of global trade, global travel and global connectivity, this somehow seems foolish at best.

 Time and again, data is presented from that perspective. What’s ironic, though, is that even if we view those data from a western seat, and even if the data are presented through western filters (even inadvertently), and even if those data are read by western eyes, the data still say the same thing: innovation is shifting.

 By any measure, China, India, and other countries are investing more in R&D, are exporting more high-technology goods and are selling more to internal markets. Most significantly, they seem more enthusiastic about either accelerating these effects, or moving into new areas.

One example is a new report from America’s Information Technology and Innovation Foundation, called The Atlantic Century: Benchmarking EU and US Innovation and Competitiveness. Even as the report states that the US is not the innovation leader it thought it was, it goes on to say, “Many nations that get much of the attention as competitors in the innovation economy… including fast-developing Brazil, Russia, India and China… actually score at the bottom of the rankings… The main attraction of these nations remains their low costs, not their innovative infrastructures, and this situation will remain likely for many years, at least until they raise productivity in a wide range of sectors.”

 Yet China has changed its ranking score by 19.5 over the past 10 years, and is top of the ITIF’s table for change, while the US has changed its score by 2.7, and is bottom.

 Elsewhere, the WTO reports that China’s electronic exports grew 173 times in the 17 years to 2007. The US grew four times. The proportion of total exports from hi-tech goods also grew in China. The US, albeit with a much larger proportion, halved.

So something is changing.

In Australia, the closure of its factories by Pacific Brands triggered the predictable, sorrowful outcry about Australian jobs, with just a hint of how shocking it is that these jobs are going ‘somewhere overseas’, meaning China. Yet many of these workers had been at Pacific Brands for 30 or 40 years, doing essentially the same jobs, certainly with essentially the same skills.

It’s re-skilling over and over again, combined with innovation, whether it’s in electronics design or clothing, that should set the agenda for managing the current economic downturn, and preparing to the future.

This is what is happening in countries such as China.

It is no longer about so-called cheap labour. These nations, in many cases under national policies, are re-skilling en masse. In electronics design, the industry in which Altium operates, the appetite for technical training and new development software runs unabated. Altium, as one example, is growing sales in China three times faster than overall. When we visit and meet with customers, universities and partners, the desire to be ahead of the rest of the world, along with considerable self-belief, are obvious.

Our future, as individuals, as companies and as nations, is in our own hands. Governments should focus on investments for companies that re-skill over and over again, that reinvent themselves over and over again. Individuals should clamour for these new skills, preferably building on those they have already.

But let’s not blame others. We will continue to buy underwear, cars, fridges and mobile phones. We might do so in fewer numbers in the next 12-18 months. But someone, somewhere, will make products we want to use or own, at a price that we are prepared to pay, for the quality we expect for that price. As to who this is, is down to us.

Published: Friday April 10, 2009

About the publication:

The China Business News Daily is considered the most influential daily business newspaper published nationwide. CBN Daily is 100% focused on the key issues and current affairs that have significant impact on the macro economy and the business world. The newspaper provides information and insights for business leaders and affluent professionals across China.

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IP in China: less about intellectual property, more about infinite possibilities

Emma shares her views that the protection of intellectual property (IP) should no longer be seen as a primary issue in China. Chinese businesses, supported by the government, are seeking out and are willing to pay for the best in the market to create economic leadership for the long-term.  It is time for Australia and the rest of the world to really see the infinite possibilities that China represents – and it’s time to see the value in competing with piracy, rather than wasting time policing piracy.

Read the full press release:

http://www.altium.com/files/corp/media/pdfs/20090330-IP-in-China-less-about-intellectual-property-more-about-infinite-possibilities.pdf

March 30, 2009