The Third Pillar Driving The New Global: Innovation
As consumer markets have become more global, both in terms of consumer tastes and competition, there is a very high premium on innovation. The potential rewards from product or process innovation are much larger when compared to the past, because of globally integrated markets. The bigger scale also allows much larger investments, and the ability to attract talent and expertise from all corners of the globe. At the same time, product lifecycles are becoming shorter with constantly evolving technology and consumer tastes. Even the most successful corporations can fade away within a relatively short period, if they cannot stay ahead of the competition. It will take only one or two breakthrough products from competitors to erase the aura of even the most innovative corporation. In this globalized era, the challengers could potentially be from anywhere in the world, not necessarily the U.S. or another developed country.
The rapid development of new technologies such as hydraulic fracking and deep sea drilling in response to record energy prices is one of the recent examples of the power of innovation to transform the global economy. The U.S. is now forecasted to become energy independent before the end of this decade, an incredible prospect even a few years earlier, mostly because of higher oil and gas production from fracking. In addition, the efficiency gains achieved in automobile and other engines through technology innovation in recent years has been remarkable. The success of these new technologies has saved the world from even more expensive oil, and has allowed global consumers to sustain their spending.
Unlike in the past, the benefits of innovation could also travel from the developing world to the developed countries. This is more so in areas like development and manufacturing of low cost products and services that could expand the market by making the product accessible to more consumers. For instance, Asian companies are developing low cost smart phones and tablet computers that could retail for a fraction of the price of products now available in the developed markets. Large global corporations, which are developing more affordable medical and other equipment aimed at the developing countries, could potentially find a market for those products in the developed world as well.
While the economic benefits of most innovations are measurable, the true scale of benefits from transformative technologies such as the internet has not been fully understood. For instance, what is the true economic value of providing instant, reliable, and often free information over the internet to billions of people worldwide? A farmer even in the most remote location can now make use of reliable weather information or more effective planting techniques available free on the internet. Can we fully measure the improvement in productivity of the modern professional who is connected to her colleagues and work environment outside the regular office hours through smartphones and tablet computers? How do we value the ability to collaborate with teams located in different continents? While we may not have specific answers to these questions, they further emphasize the potential of innovation to drive economic progress.