Where Do You Look for Innovation? Not the U.S. Anymore

Breakthrough ideas that change industries are increasingly coming from the developing world rather than the United States or Western Europe.  Part of this is due to the fact that the West is outsourcing more research and development to emerging markets.  Currently, Fortune 500 firms have 98 research-and-development facilities in China and an additional 63 in India.  IBM’s staff in emerging nations is larger than its U.S.-based workforce.

According to The Economist, “But it is also because emerging-market firms and consumers are both moving upmarket.  Huawei, a Chinese telecoms giant, applied for more international patents than any other firm did in 2008.  Chinese 20-somethings spend even more time on the internet than do their American peers.  Even more striking is the emerging world’s growing ability to make established products for dramatically lower costs:  no-frills $3,000 cars and $300 laptops may not seem as exciting as a new iPad but they promise to change far more people’s lives.”

Dubbed “frugal innovation”, this trend redesigns products and processes to eliminate unnecessary costs.  For example, Indian telecom provider Bharti Airtel has dramatically cut the cost of providing mobile phone services by creating unique partnerships with its competitors and suppliers.  The firm shares radio towers with competing firms and outsources network construction, operations and support to companies such as Ericsson and IBM.