WIPO ASIAN REGIONAL SYMPOSIUM ON THE PROMOTION OF INVENTIVE AND INNOVATIVE ACTIVITIES AND THEIR VALUATION AND COMMERCIALISATION
Creativity and innovation must be viewed in the context of a world changing from an industrial society concentrating on manufactured goods to a borderless economy, where the real engines of development are economic regions like Silicon Valley in California and Guangdong in China. It is a creative era where brain power matters the most and where the various economic regions integrate with the world economy through networks sharing information. For example an engineering business in Singapore may rely upon programming skills in India, design integration in Kuala Lumpur, financial services in Hong Kong and may outsource manufacturing in regions of China driven by work stations in Bangalore and having sales in USA.
The first economic truism is that without innovation enterprises would not remain competitive. They would be walking while others are running.
At the same time you need a co-runner to run faster so the second economic truism is that you need vigorous domestic rivalry to spurt innovation.
Vigorous domestic rivalry creates cluster companies of the highest quality in several regions of the world; for example, pharmaceutical companies such as Hoffman La-Roche, Ciba Giegy and Sandoz in Switzerland; car and truck companies like Saab and Volvo in Sweden, chemical companies like Hoechst and BASF in Germany and computer hardware and software companies in USA, all demonstrate how successful firms compete and press each other to improve and innovate. (See Endnote 1)
2. CREATIVITY AND INNOVATION
Creativity is the process of producing ideas while innovation is the process of transferring creativity into profit. A person may come up with lots of new ideas but may be unable to sell them to others or convert them into reality. Thus, an innovator is creative but not all creative persons are innovators.
It is thought that creativity comes naturally to human beings unless the pattern of rewards and sanctions extinguish creative behaviour. In the corporate context, it is thought that creativity gets killed by growth, success and performance for the same reason that an elephant cannot move as quickly as a rabbit. (See Endnote 2)
In a creative organisation, each person is "authorised to think" so that each person tries to find a better way of doing his job. Creativity involves several steps such as:
i) Absorption, which is the process of gaining knowledge from the outside environment through new ideas and information which in turn are building blocks for new ideas and new solutions. It is said that one year from now, you will be the same person you are right now, except for the books you read and the people you meet to influence your ideas.
ii) Generation of new ideas. Thomas Edison rightly said that the purpose of your body is to carry your brain around. The most critical step in innovation is to generate a good idea.
iii) Testing of Ideas : Louis Pasteur said "Others tell you to prove you are right. I say try to prove you are wrong". All ideas must be tested with an open mind.
iv) Refinement or removing of rough edges : Ideas very rarely come in creative flashes. For most innovators, it is a matter of following the path of hard work with a lot of evaluation, modification and refinement before the ideas become a block buster. Thus, Thomas Edison's famous statement "genius is 1% inspiration and 99% perspiration" is most appropriate. The failure of ideas is no reason to quit. Creative thinkers see it as reason to change tracks and refine the idea further.
v) Selling i.e. making a finished product that does well in the market.
There are creative people who cannot go through all these steps, namely, (i) to (v) successfully. A rocket scientist has great ideas but may not be able to explain the value of those ideas to marketing people and conversely a salesman can sell a product but does not know much about the technical side. The trick for an organisation is to align people in all these stages as if they were one man.
Chester Carlson invented the photocopying machine in 1939. He had no funds and potential sponsors turned him down. At that time the alternate to a photocopy was carbon paper which was simple, cheap and readily available. Thus, when most people saw Carlson's idea, they did not understand why there was a need to go through the trouble of transferring an image on paper to an image on glass. After 20 rejections, one Battelle Memorial Institute invested 12.5 million Dollars in the invention and after 10 years of development, marketed the first Xerox machine in 1959. This business became Xerox Corporation. Carlson had mastered the entire system from idea to finished product and became a very rich man.
Thus, innovation in an organisation must go on in the organisational processes, work methods, ways of communicating, ways of making decisions, planning, cooperating with other departments so that the sharing of ideas improves on the half baked ideas, getting management approvals, working on large or small projects to benefit from ideas.
At a more practical level, innovation involves (1) enlarging the range of products and services and associated markets; (2) establishing new methods of production, supply and distribution; and (3) introducing changes in management, working conditions and skills of workers.
The innovative firm must have two skills, referred to as the strategic skills and organisational skills. Strategic skills are the firm's ability to anticipate market trends and its ability to collect and use technological and economic information while organisational skills are its ability to handle risk, coordination between its various departments, its external interface with public research and investment in human resources.
Technology is not the only element in innovation, human resources being essential. A better trained and better informed team of workers strengthen innovation. The relationship of a firm with its environment is so complex and there are so many factors involved, such as the quality of education, the regulatory, legislative and fiscal framework, intellectual property rights, public infrastructure for research and innovation support services etc.
Innovation has many facets. Thus, it denotes both - a process and its results. In the former, the emphasis is on different stages leading up to the product, for example, creativity, research, design, production, marketing and distribution. Importance is attached to the collaboration between different units or departments of an organisation as well as networks linking the firm to its environment such as research laboratories, other firms etc. Consequently, the relationship with users and taking into account their needs and anticipating trends are just as important as understanding the technology.
In the second sense, the emphasis is on the new product or service. For example, the introduction of 32-bit chips to replace 16-bit chips in electronic equipment.
Innovation is not just new technology as it may be a new combination of familiar elements or redesigning of an old product.
Nevertheless, the technological component is a critical factor and it is, therefore, essential to not only generate technology but equally important to understand and use new technologies whatever their origin.
3. PATENT INFORMATION
Only 20 to 30% of technologies developed in Europe are commercialised by firms. Consequently, there is a vast amount of unused scientific and technological know-how. The European Union has reported having an excellent scientific base but being less successful than US and Japan in converting its competence into new products particularly in the high technology sectors. (See Endnote 3)
Patent information is one of the most useful things for enterprises for several reasons. These are:-
a) It is the most recent information since patents are normally the first publication in any field of technology;
b) The resource is huge since there are over 30 million patents published worldwide and growing at the rate of at least 1 million every year.
c) Patents contain information not found elsewhere. Thus 80% of patents represent information not published anywhere else and it is, therefore, too costly to ignore this information.
d) A lot of the information is free. In UK only 10% of patents are still in force as the others have either expired or lapsed due to non renewal. They can easily be appropriated. Moreover, patents are regional. So there may be countries like India where patents have not been filed and it may be easy to appropriate this information.
e) They can save redundant research and R&D expense. It is said that R&D cost in Europe is Pound Sterling 50 million a day and 30% of R&D expense is duplication of research which can easily be avoided.
f) Patents can be used to monitor technological developments and the activities of competitors.
However, patents are not the only source of information. After the second world war, the British Intelligence Office sent experts to German plants to study the processes of dye stuff and textile industry. Their reports known as BIOS reports were the starting point for the University Department of Chemical Technology at Bombay (UDCT). This source of information was the basis of the Indian textile processing industries and later dyes and bulk chemical industries. It demonstrates a successful example of University - Industry interaction. In 1996 UDCT generated Rs. 43 million through consultancy and this boosted the otherwise very low academic salaries. The interaction included academics on the board of companies and industry representatives being visiting professors. (See Endnote 4)
At the same time, there are many examples of lost opportunities. Alexander Fleming's discovery of Penicillin in 1928 took 10 years to market but was not patented. Similarly in India, there are many ideas that are lost either because the ideas are published in technical papers without patenting or because the patent system is weak. One example is that of N.R. Iyengar's idea for making intermediates for rubber chemicals published in Tetra Hedron letters and cited by Monsanto in its patents. The idea was never commercialised by N.R. Iyengar.
To get over this, the Government policy represented by the technology policy statement of 1983 and the new draft technological policy statement of 1993 emphasised the need for strengthening linkages among industry, the national laboratories and universities. Thus, of the 1250 recognised R&D centres in India, 850 are located around the major cities (See Endnote 5) in order to be close to industrial units. The share of the private sector in R&D expenditure is about 65% and, naturally, incentives in the form of strong patents are desired. The Government provides fiscal incentives such as tax holidays but in the research laboratories, the incentives are of a different kind. Thus, in National Research Development Corporation (NRDC), major technologies have been developed including artificial heart valves, pesticides like monocrotophos, phosphamidon, spirulina etc.
NRDC provides incentives such as awards, financial assistance to make prototypes of the invention and to patent the invention, and royalty from 50 to 70% to the inventor depending upon type of the invention. The Council of Scientific and Industrial Research has also established close links with industry in a number of areas such as drugs, pharmaceuticals, pesticides, petroleum, petrochemicals, catalyst, pollution etc. CSIR has re-oriented its priorities to competitive research and maximising support to the industrial base in the country. CSIR is strongly emphasising intellectual property and has changed its "publish or perish" slogan to "patent, publish and prosper".
The CSIR grants 40% royalty to the inventor when commercialisation takes place and it gets the remaining 60%. As against this, the Indian Institute of Technology grants 60% to the inventor and 40% to the Institute. Scientists get weightage for their research publications and inventors get annual awards.
There are many case studies of successful firms. I will give the example of Titan Industries which started business in 1986 in technical collaboration with a French company for manufacture of watch movements. By 1989, Titan Industries successfully absorbed the technology and started indigenously producing watch components. The technology for converting the movement into a finished watch was developed locally including styling interface and designs of various parts. In order to compete with the Swiss and Japanese watch industry, the main focus was to manufacture high quality slim movements. This was started in 1992 and within seven months, the company had filed patents and had created a niche in the world market.
Firms must constantly innovate. Technical advances are not sufficient. Innovation also means anticipating the needs of the market, offering better quality newer products, marketing efficiently and keeping costs under control. The case of RCA of USA is often cited as that of a company which had a tremendous technological lead, particularly in respect of video disks and video tape recorders, but its marketing failed it.
Apart from innovation in manufacturing and marketing, there is innovation in management with concepts like Total Quality Management (TQM), just-in-time production, process re-engineering, performance ratings etc. In the information society, enterprises are connected to research centres or universities in a way that learning can be done at a distance. There are various steps that can be taken to enhance the quality of innovation. For instance, it is said that the top management in any enterprise must be committed to any new product development.
It is also useful to do a SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis. The enterprise must include a core group which will take the lead in the innovative programme. The core group must be appropriately trained to understand the concepts of :
- idea generation
- idea evaluation; and
- idea protection.
The next step is to get work groups on various issues. These can interact with the core group. There should be a system by which information should keep flowing because every idea must have an outcome rather than being stored. This process can be reinforced by having a company newsletter or regular meeting where people are told of the progress. Priorities set by the company must be flexible. Corporations must encourage the creation of new ideas. The process of encouragement must be visible. People should see what ideas are being generated and what has happened to those ideas. A newsletter is a great channel available to all members of the corporation. (See Endnote 6)
Promotion of industrial and intellectual property is critical as a part of an overall favourable legal and regulatory framework. For small and medium enterprises (SMEs) in developing countries utility models, design registrations, concepts such as copyright in engineering drawings, trade secrets and of course trade marks are useful intellectual property rights. These enterprises may not apply for too many patents.
Businessmen require a strategy for the protection of intellectual property as also for licensing. Enterprises should be able to combat piracy and infringement in an effective and quick (See Endnote 7) way or else their entire growth can be wiped out. Teaching of intellectual property as part of training for research workers, engineers and business executives is essential.
1 Michael Porter - The Competitive Advantage of Nations 2 The Creative Corporation by Karl Albrecht and Steven Albrecht. According to the authors, growth kills creativity as it adds additional layers of habit, rules, regulations and prohibitions. Things slow down and the value systems tend to be less tolerant of the maverick. Success for a particular product, service or line of business makes a company disregard its other possibilities. The more a company is committed to performance and perfection and doing things correctly, the lesser it is involved in a creative struggle where there is a need to fail and to try out lots of alternates, abandon possibilities and keep changing. 3 Green Paper on Innovation (Bulletin of the European Union, Suppl. 5/95) 4 Business India, February 10-23, 1997 5 Mumbai, Delhi, Calcutta, Madras, Bangalore, Hyderabad and Ahmedabad. 6 Managing for Innovation - By - Neville I. Smith & Murray Ainsworth 7 Even in USA, the Hughes Aircraft versus NASA case lasted for 14 years while Polaroid versus Kodak lasted for 10 years.
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