Innovation is the Only Way to Survive Competition
From the First Industrial Revolution to now, we have entered the Fourth Industrial Revolution. Tech-driven innovations have created a world that our ancestors could not dream of and will create a one we could not imagine as well.
Human history is a history of innovation. From the first axe homo sapiens carved out of stone to brain-machine interface lab researchers used to execute certain orders, human society has evolved into a level that our ancestors could not even dream of.
As we enter the Fourth Industrial Revolution era, faint echoes of the First Industrial Revolution that took place 260 years ago can still be heard. Each revolution spurred by innovation brought countless inventions and opportunities to society. These innovations changed the way people communicate, travel and work, introduced new lifestyles and even overhauled the business landscape.
Innovation affects and unfolds in three areas: Organization, business model and technology. Innovation and practice come hand in hand and mutually reinforce each other. The ultimate goal of innovation is to boost efficiency, adding more value while reducing costs.
For all companies, innovation is key to survival in the market. In a mature market, competitors form clusters with similar products, services and even prices. The more mature the market, the more intense the competition. Innovators will find a way out of a red-sea competition and discover new opportunities or new engines of growth.
Innovators are keen. They can identify the critical problem as one defined by the following attributes: It is common, real and long-lasting.
The problem affects the majority of a population, indicating the possible size of the market.
For instance, Airbnb satisfies various needs of accommodation with a standardized system. Before Airbnb and similar companies came under the spotlight, accommodation options available in the hospitality industry had been restricted to hotel chains. Travelers seeking more local experience then began to look for alternatives that promise a better experience at a fair price. Their needs remained unmet until Airbnb and Couchsurfing came into being. The market is large enough for these companies to grow sustainably.
The problem is real, rather than fictitious or imagined. When innovators step upon a pain point, it signifies a market opportunity waiting to be tapped.
Take ride-hailing business as an example. Mobility is a real need and it could not be satisfied by the taxi service alone. The huge demand gave rise to the emergence of ride share firms such as Uber, Lyft, DiDi and Grab. Ride-sharing companies came up with a new way to match the needs of both riders and drivers. DiDi’s MAU in September 2019 reached 850 million, twice the US population. In comparison, Uber’s MAU exceeded 95 million in 2018. The market will continue to grow as consumers increasingly look to rideshare services as a new choice of mobility.
A long-lasting problem is one that defies a one-off solution, as the demand is constant and cannot be satisfied once and for all.
Based on this characteristic, innovators are always on the lookout for solutions that address sustained consumer demand. This has been well demonstrated by examples listed above: Airbnb and DiDi. One individual’s demand is satisfied and more demands will follow
After identifying the problem, innovators can devise various solutions according to the specific situation. There is no such thing as a universal answer to a single question, since the circumstances vary. While we talk about innovation, it is interesting to examine the geographical patterns behind global trends in innovation.
Based on a study released by Global Innovation Index, China is the most innovative country among middle-income economies, followed by India, Russia, Brazil and so on. By contrast, the US tops Germany, Japan, Switzerland and a few others as the most innovative country among high-income economies.
In terms of innovation capacity, the aforementioned study examines both input and output: input is defined as education and R&D expenditure, while output stands for the number of patents, inventions, and positive cash flows generated.
Why are these countries innovation powerhouses? Is it because their citizens are inherently innovative? No. It is because these countries have access to the most advanced information as well as the ability to provide fertile soil for innovation (including favorable policies and regulations, a pro-startup environment, ease of doing business and quality education).
Internet is the go-to source of readily accessible information. The Internet penetration rates in countries coming at the top of the survey are high. In the US, 84.1% of the population were Internet users as of 2018; in China, the Internet penetration rate was 61.2% as of June 2019. Through the Internet, a person can have a better grasp of the world, develop his preferred way of living, help an entity know its place in the market and utilize information to formulate its own strategy to not just survive, but thrive as well.
When it comes to the underpinning of innovation, talents are the key to it. The US, Germany, Japan and other high-income countries are home to a number of world-famous universities and research institutes. They also hold the most patents worldwide. The medium-income countries that rank high in surveys of innovation capabilities, like China and India, have been investing heavily in building world-class universities and research institutes. According to a 2018 ranking by QS, the top 3 universities in the US, Germany, China and India chalk up an average score of 99.0, 69.1, 82.5 and 47.3 respectively.
Tertiary education continuously produces the “reserve force” necessary to fuel innovation. Somehow the biggest innovations with the potential of changing the world mostly happen in the business world outside the ivory tower.
Game changers that disrupt industries and shift life patterns will have their names written down in the annals of innovation. However, that does not guarantee their continued success in the future. There are always new leaders emerging from each generation, with opportunities arising at the same time for innovators. This century is littered with examples of so-called innovative disruption across a wide range of industries: Amazon and Alibaba changed the traditional retail industry from inside out; Uber and DiDi delivered a knockout blow to the traditional taxi business; Meituan Dianping redrew the borders for the catering business.
From a macro perspective, startups are only thriving in countries with a burgeoning economy, favorable policies toward startups, a fully functional financial market and a young generation equipped with the most up-to-date knowledge and a cosmopolitan mindset.
The most innovative countries – The US, Germany, Singapore, Japan, China, India and a few others – happen to tick all the boxes.
Another significant criterion with which to assess the innovation capabilities of countries is the development of startups. In 2018, more than 6,000 VC-backed investments occurred in China, while the US recorded more than 8,000 deals during the same period. Meanwhile, these two countries have the most VC companies and startups. Globally, fast-growing countries are issuing policies to foster startup innovation and actively involving VC in the financing of startups.
Asia has been a hothouse for startups in the past few years, with Grab, Shopee, Dehlivery and a lot of other big-name unicorns stepping into the global spotlight. Asian markets are yet to be fully developed and we are expecting more innovators to come in the next decade. The US and Europe are emblems of the innovative spirit, having influenced industries worldwide and in turn, also benefited the most from innovation in the past centuries.
Two decades into the 21st century, we want to speak to the current generation of innovators to know how they perceive the world and identify the problem under certain conditions and in a certain environment.
What are the most exciting changes brought by technological innovations? What are the most challenging situations that practitioners will face? What are the essential qualities that a founder must have to guide the company to surmount obstacles? Bring your questions and get your answers at the largest innovators event in China. With more than 200 speakers and 6,000 innovative minds brought together, your answers to the above questions lie in the every “aha” moment when you are inspired by our insightful speakers from all over the world.
World Innovators Meet 2019 welcomes every innovator eager to create value and change the world! On December 6-8, we look forward to meeting you in Beijing and finding the answers for 2020.