Why Should Companies Look To Asia For Innovation?3 November, 2015 / Articles
Innovation is the buzz word of the year. Everywhere, it seems, is another story about how startups are innovating new products. The unspoken corollary is that large, mature companies are lagging behind, with too few innovative ideas.
How does innovation happen? Can it be formulated or taught, or is it serendipitous? Can companies iterate their way to innovation, incrementally finding a new future or should they make big bets on select projects? Where should companies look to invest if they want bold, new ideas?
The answers are not simple. There is no foolproof process or method to generate winning new ideas. Some companies can spend years and millions of dollars in research & development efforts without the promise of a new product. Other companies can strike gold in the most unlikely places without much effort. But in most cases, innovation is the result of an environment. It involves exposure to a variety of perspectives, viewing issues with a different mindset, building a culture of curiosity and borrowing ideas from different domains.
Large companies may find that the best place to look for these ingredients is Asia. Here are three characteristics which make Asia a fertile ground for innovation.
In developed economies, which enjoy a high standard of living, people innovate from a position of sufficiency. In many of parts of Asia, people still struggle to live without electricity or clean water. The continent is home to 70% of the “Base of the Pyramid” population which lives on less than $8 per day. Business people in these markets are attuned to the issues faced by the local population. They understand the struggles of daily life firsthand. Entrepreneurs in these locales innovate from a position of need. They build and invent to shift the living standard in their society, while operating within very difficult constraints. This forces creativity and ingenuity. Reliability, efficiency and renewability are automatically part of the mindset and design process because excess resources simply don’t exist.
Asia has a diverse mix of people who observe different religions and speak different languages. Coming from over 25 countries, people have different income levels, value systems and daily routines. This diversity is reflected in consumer choices. Diverse buyers force a product or service to work in several settings. Products and services in Asia must be able to cross borders and function in multiple settings. By default, product development in Asia means that language requirements, pricing issues, service teams and other localization issues must be dealt with upfront. This level of adaptability is baked into the innovation process, making other market adaptations easier down the road.
Large Consumer Class
Asia’s population tops 4.4 billion people. China and India each account for over 1 billion people. The demographics of several Asian countries tilt towards a growing middle class. This creates more revenue potential and market segments for new products. Large buyer markets can also provide for multiple product testing cycles. Pilots can be run multiple times with different individuals. Companies do not need to worry about exhausting their limited survey panel or user-test participant pool with repeated requests. At the same time, a large market means that a product can be produced in high volume for costs to be scaled down.
While Asian countries have long served as lower cost shared resource centers or a tertiary market for large companies, they may be an even better source of innovation if companies are willing to reframe their own mindset about the region. As startups and disruptors challenge mature companies, Asia can be a strategic lever that enables innovation and a new future.
Read a prior article about how companies are launching accelerators in Asia.