Innovation is at the core of sustained economic growth. In addition to natural resources and labor, innovation focuses on generating and adding ideas to products and processes–for making outputs better and also less costly. Of course, advancement in education, R&D, publications, patents, and infrastructure matters. However, they are not sufficient. In the absence of softer aspects like a culture of passion for perfection, progress measured along commonly used indicators, particularly by the Global Innovation Index (GII), does not reflect economic benefits, derived from progress in indicators. It runs the risk of wasting resources and misguiding development policies. Hence, the issue of ‘who will finance innovation‘ has started to surface. Such a reality raises the question: do innovation indices miss perfection?
Innovation is about getting jobs done better using ideas. We produce and add ideas to products and processes to generate increasing utility from depleting resources. Profit-making competition in taking ideas to market is the key driving force. The successes of creating innovation competence should be measured as a profit-making outcome of offering us increasingly better products at decreasing cost out of ideas. Hence, until our competence leads to offering better products out of ideas by consuming fewer resources, we do not succeed in creating economic value out of the investment. It has been found that the passion for perfection has been at the core of pursuing the relentless journey in offering better products out of ideas. In the absence of this vital virtue, all other inputs fail to produce effective ideas and sustain the journey. However, most of the innovation indices miss the perfection aspect of competence need.
Review of innovation indexing indicators
One of the prominent indices has been the Global Innovation Index (GII). Cornell University, INSEAD, and WIPO jointly publish an annual evaluation of innovation trends and performances. The recent evaluation included 131 economies. Often GII fosters innovation debates and policies, particularly in aspiring developing countries. It focused on seven broad categories of competence indicators. In each of these seven categories, there are 3 indicators. There are a total 80 sub-indicators. However, among these indicators, the cultural aspect that is the passion of perfection is missing.
In the absence of this virtue, often strong competence in all stated inputs runs the risk of failing to create economic value from ideas in a competitive market. Often such cultural virtue grows at the very early stage through family orientation, apprenticeship, and craftsmanship. Besides, the formal education system also has a role in sharpening it. However, instead of sharpening, often, formal education blunts this innate ability. The integration of this virtue with available global knowledge stock and the formal approach of creating knowledge flow is vital for creating a scalable path. However, not only GII, all other similar indices also miss this vital aspect. Hence, we should look into the implication of innovation indices missing perfection of products and processes.
Challenges in profiting from innovation competencies
According to GII and other indices, primary innovation ingredients are high-caliber graduates with formal qualifications, publications, and patents. They are in the category of human capital. However, until and unless these competencies lead to better products at a lower cost, we cannot derive economic benefits from them. Ideas out of them should be used either in redesigning existing products and processes or innovating completing new ones. In fact, theoretically, there are an infinite number of possibilities of redesigning existing products and innovating new ones. Often the persuasion of such possibilities leads to the exponential growth of publications, ideas, and patents, giving the impression that we are making progress in innovation competence. However, only a small sub-set of them matter. In certain cases, numerous publications and patents create confusion. They often lead to pursuing wrong ideas, causing wealth annihilation as opposed to creation.
Moreover, many great ideas invariably emerge in primitive forms generating loss-making revenue. Remaining on course of pursuing such ideas, while incurring a loss, over years and decades is a challenge. How to figure out that innovators are on the right track or caught in an escapable loss trap is often a challenge. To overcome such challenges, the passion for perfection plays a vital role. In the absence of it, we often keep producing numerous measurable innovation indicators or getting lost in the mission of taking ideas to market. For example, recent report indicates that India has produced more Scopus indexed scientific publications than Japan. Does it mean that India has made proportionate progress in deriving economic value from those publications? Similar questions are worth investigating with respect to China’s voluminous publication and patents. Moreover, there is a cost in producing them. Is the return on investment in producing them positive?
Examples of passion for perfection from Japan
Japan has a strong reputation for a culture of craftsmanship and passion for perfection. On the other hand, Japan’s successes in creating an innovation-centric industrial economy are praiseworthy. Is there a correlation between their passion for perfection and economic success out of innovation? Many of the great Japanese companies started the journey out of this passion, often in the form of tinkering. Over the decades, they have become iconic innovation success stories. In recent time, we also observe similar examples. Moreover, the recent success of winning the Nobel Prize by 15 Japanese in Physics and Chemistry over the last 20 years is also intriguing. Is there a linkage between passion for perfection, innovation-led industrial economy, and wining Nobel Prize?
Initial research indicates that there is a strong correlation among them in Japan. As opposed to chasing publications, the number of graduates, and other innovation indicators like patents, the Japanese appear to be highly focused on profiting from redesigning products they are producing now. Furthermore, they also focus on making scientific discoveries and technological inventions in opening entry in new industries and also creating them. It appears that passion for perfection is at the core. However, innovation Indices miss perfection component. Hence, we should look deeper.
Examples from Japan
Starting from Sony to Nichia, there are numerous examples referring to Japan’s innovation success stories by blending their culture of perfection with scientific discoveries and technological inventions. For example, Sony took licenses of Transistor and also electronic image sensor from the Bell Laboratories. As opposed to participating in the competition in publications and patents in solid-state physics, Sony focused on perfecting transistor and image sensors’ design and the processes to produce them. The primary purpose was to keep improving the quality and reducing the cost out of ideas generated from scientific discoveries and technological inventions. Still, to date, this approach is at the core of Japan’s success in innovation. Recent examples include Nichia’s LED, Asahi’s Lithium-ion battery, and Toshiba’s flash memory. Hence, such reality demands such to investigate whether innovation indices miss perfection culture.
Race in graduates, publications, and patents runs the risk of wasteful investment and wrong assessment
Most of the Governments in the world are desperate to derive economic growth out of innovation. They often take globally reputed innovation indices, particularly the Global Innovation Index, as a reference frame. To uplift their positions in these indices, they have been increasing investments for improving infrastructure, producing more science and technology graduates, and publications as well as patents. As a result, some of the countries like India, China, Singapore, and South Korea have occupied bright spots. For example, China, Singapore, and Ireland are ahead of Japan. Does it mean that those countries have been deriving more economic benefits from innovation than japan? Highly likely, the answer is no. As opposed to Japan’s success in several creative waves of destruction like digital camera, LED light bulb, lithium-ion battery, or flash memory, those countries have no comparable success records to present.
Many of the developing countries are pumping money to accelerate the production of graduates, publications, and patens. Often, the source of such money is foreign loans. Often, these outputs are not making a proportionate contribution to economic value creation. Moreover, their labor-based economy suffers from a labor shortage, as university graduates are not willing to take factory jobs. It appears that as the innovation indices miss perfection in measuring what it takes to create economic value out of innovation, many developing countries are making a wasteful investment by pursuing wrong policies. Subsequently, they end up paying back the loan from the revenue from labor and natural resources. Often such reality raises a question, who should finance innovation? Therefore, it’s time to dig down to figure out the softer competencies that we need to sharpen to profit from the investments we are making in building innovation competence.