Innovation and Creativity Mindset

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01

Approaches to Innovation: China

The main approaches used by China to drive innovation are government policies, Frugal Innovators and cost-effective worker's pool, next-generation manufacturing and funding ecosystems, and a large domestic market.

Government Policies

  • China has gone through 13 five-year plans up to this point, and the country's entire economy is KPI driven. Right now, the government is running a five-year plan (ending 2020) focused on scientific advance and green development.
  • In 2006, the central government issued a ‘Medium- to Long-term Plan for the Development of Science and Technology.’ The stated goal of this was to cultivate an innovative society by 2020.
  • Currently, China's budget allocation is prioritized on aviation and aerospace, agriculture, electrical power, new-energy automotive, high-end robotics, next-generation information technology, new materials and composites, rail transportation, maritime engineering, biomedical and advanced medical equipment sectors.
  • The Chinese administration, through its various regional branches, is focusing on the promotion of strategic emerging industries in these areas, according them preferential treatment with subsidies, tax breaks, bank lending, and direct financing. The goal of the Chinese government is that "the share of the global GDP for all those industries should increase to 15% in 2020".
  • The percentage of GDP invested in R&D is expected to reach 2.5% by 2020, up from 2.1% in 2016.
  • The Chinese administration is playing an active role in building world-class infrastructure to support digitization as an investor, developer and consumer. It gave the internet giants of China, Baidu, Alibaba and Tencent a free hand to experiment before setting up regulation, especially in the privacy, data management, and property rights fields.
  • The Chinese government is also heavily focused on innovation education, the ninth five-year plan of China explicitly made reform aimed at improving the quality of education a core priority. Since then, China has allocated an ever-increasing percentage of its budget to education. In 2015, that expenditure reached 4.26% of the country’s GDP.
  • China is the second-largest spender on research and development (R&D) after the US, accounting for 21% of the world’s total of nearly $2 trillion in 2015. China’s spending on R&D grew by an average of 18% per year between 2010 and 2015 (more than four times faster than the US spending).

Frugal Innovators and Cost-effective Worker's Pool

  • The concept of Frugal Innovators refers to the first wave of Chinese innovators who developed cheap and reliable solutions for the majority of the Chinese people, a huge, but low-income population. A great example of that is BYD.
  • BYD was founded in 1995 by a chemical engineer, Mr. Wang Chuanfu. The company started as a manufacturer of cheap batteries for mobile phones, with a “Western-style” and decent quality, but adapted to Chinese purchasing power. BYD became the second-largest battery company in 2002. In 2003, BYD created an automotive subsidiary, specializing in building electric cars.
  • The innovation philosophy of these early Frugal Chinese entrepreneurs is, rather than expending years on design, take tried and tested worldwide products as a benchmark and adapts them to Chinese tastes through a process of reverse engineering.
  • Though labor costs in China have been rising, China still enjoys cost advantages in two major talent categories, R&D and marketing and sales.
  • China has grown its local pool of engineers and MBAs by investing in universities. It also provides several incentives for overseas Chinese to return.
  • Another example of Chinese companies benefiting from cost-effective worker pool is that in 2016, DJI had 1,500 people in R&D, or 40% of a workforce of 4,000 — a luxury only available to a company that can tap into low-cost engineering talent.

Next-Generation Manufacturing and Funding Ecosystems

Large Domestic Market

  • China has a population of over 1.3 billion people and a single dominant language in Mandarin (nearly a billion speakers), which, coupled with a fast-growing economy and a rising middle class, results in a vast home market.

Research Strategy

We searched through multiple case studies and overviews about factors driving growth in the innovation sector in China. We utilized credible sources like Harvard Business Review, BMI Lab, and Springer. Multiple factors we found were common among various sources, which we selected and further researched on them. We also searched for supporting statistics related to these growth factors on sources like Factor Daily and the World Economic Forum. We also provided examples of Chinese companies leveraging on these growth factors.
Part
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Part
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Approaches to Innovation: Sweden

Sweden points to four factors that foster innovation in the country: (1) Welfare; (2) Education; (3) Research & Development; and (4) Infrastructure. Innovation in Sweden is not a recent phenomenon, as such has been occurring within its borders for a long time.

Factors Fostering Innovation in Sweden

1. Welfare

  • Sweden's transition to a welfare system dates back to the 1930s, though more substantial progress towards such was achieved in the 1940s and 1950s.
  • The fact that Sweden is a welfare state is essential for the resulting innovation the country enjoys, as it yields a business environment that can be described as one with low-stakes.
  • If a new venture, startup, or idea flops, the entrepreneurs behind such have "a social safety net to fall back on." As a result, entrepreneurs and innovators feel free to take chances and try new ideas without fearing what failure could mean for their financial well-being.
  • Examples of welfare benefits offered in Sweden include free healthcare, education, and childcare. Paid parental leave for an 18-month period is offered to those who qualify and job security following parental leave is guaranteed. These and other benefits free people up to take more chances when it comes to innovation.
  • Since welfare is provided by the government, there aren't companies driving innovation in Sweden through this factor. However, a Swedish governmental agency directly involved with the country's social welfare system is the National Board of Health and Welfare.

2. Education

  • For a long time, Sweden has promoted education, which has been a key driver behind innovation.
  • Such focus dates back all the way to 1842 when Sweden made it mandatory for children between the ages of seven and 13 to attend school.
  • Sweden credits the implementation of that mandatory school as "a game-changing move" because it increased the education level of the Swedish people as a whole.
  • The result of that increased education level changed the trajectory of the Swedish economy from one that was poor and centered around agriculture to one that was prosperous and at the forefront of innovation.
  • Sweden's embrace of education continues to be seen in the country today, as approximately one in three Swedes are college educated.
  • Coursio is a company driving innovation in Sweden through education. Coursio provides a "platform for organizations and educators to create and sell online courses." EdTech Europe named Coursio among "Europe's 20 fastest growing and most innovative e-learning companies."

3. Research & Development

  • Sweden's ongoing commitment to research and development (R&D) has been a key factor that has fostered innovation in the country.
  • AstraZeneca is a company driving innovation in Sweden through R&D, as one of the company's three centers for R&D is located in Gothenburg, Sweden.

A. GDP Investment

  • Sweden supports R&D by investing over 3% of its GDP to such.
  • For comparison, Sweden's investment in R&D has outpaced the U.S. by a considerable margin throughout the time period of 2006-2015.
  • Back in 2006, Sweden invested 3.5% of its GDP in R&D. Meanwhile, the U.S. invested 2.55% of its GDP in R&D that year.
  • In 2011, Sweden invested 3.249% of its GDP in R&D, while the U.S. invested 2.77% to such.
  • In 2015, Sweden invested 3.265% of its GDP in R&D and the U.S. invested 2.732% to R&D.
  • Fields that Sweden excels in with respect to R&D include life sciences and green technology.

B. Offices & Organizations

  • With respect to the life sciences field, the government established the Life Sciences Office Sweden in order to create an overall strategy for the country to support the continued advancement of the field.
  • The Swedish government further supports R&D nationwide through its Vinnova agency.
  • Vinnova provides funding for and further supports research projects spanning numerous industries and fields throughout Sweden, such as smart cities and transportation to name a few.
  • Sweden's Knowledge Foundation is another key participant in the funding of R&D nationwide.
  • The Knowledge Foundation provides funding in the areas of both competence development and research for both new and established universities across Sweden.
  • Another Swedish governmental agency that supports R&D and entrepreneurship is the Agency for Economic and Regional Growth.

4. Infrastructure

  • The fourth factor credited with fostering innovation in Sweden is infrastructure.
  • Sweden has a lot of land (450,295 square kilometers), making it the 56th largest country in the world by territory. Thus, it's essential that there is solid infrastructure nationwide in order to support reliable communication, transportation, and delivery, all of which ultimately support innovation.
  • As an example, Sweden's "government pushed out a widely developed broadband network" during the 1990s, before the internet became the lifeblood of business. The government also provided subsidized programs that lent computers to its citizens, in order to promote innovation.
  • Since then, the Swedish government has continued its commitment to maintaining strong infrastructure, as it "adopted a new broadband strategy" in 2016.
  • The goal of that strategy is that by 2025, all Swedes will have a high-speed internet connection.
  • Skanska is a construction company driving innovation in Sweden through infrastructure, as it is focused on developing innovative and sustainable solutions that will improve development across Sweden.

Research Strategy

To identify the main approach that Sweden uses to foster innovation, we first turned to the business section of Sweden's official website. That site stated the factors that Sweden credits with fostering innovation within its borders. There was also supporting information about each factor provided through that source. Additional Swedish governmental sources we cited to involve the country's R&D and social welfare. We found examples of companies driving innovation in Sweden through the factors identified (except for welfare, as that's a government-provided benefit not applicable to the private sector) by conducting broad searches for innovative companies in those areas. Each company we chose is a leader in their field, per the reasons provided above.
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Approaches to Innovation: Switzerland

Three factors that drive Switzerland's innovation are the support for patent creation, a modern education approach, and high investment in new technologies and start-ups. Two companies that are utilizing these factors to drive innovation in the country are Novartis and Roche.

Overview

  • In August 2019, Switzerland was named the most innovative country in the world by the Global Innovation Index, for the ninth time.
  • From 129 countries, their innovation ranking is determined based on 80 parameters, which includes mobile app creation, regulatory environment, gross spent on development and research, technology, and creativity, among others.
  • Examples of their innovation drive are the invention of the Swiss Army Knife, the Red Cross, white chocolate, Velcro, and the modern zip, among others.

Switzerland's Approach and Differentiating Factors

1. Patent Creation

  • Switzerland has the highest number of patent applications in Europe, mainly from the life sciences and pharmaceutical sectors.
  • According to the President of the European Patent Office, António Campinos, Switzerland’s approach is making emphasis on the innovation potential of their people.
  • An example of how they target their innovation potential and promote the creation of patents is the annual event called Exhibition of Inventions, which takes place in Geneva, and allows inventors from every sector to present their products and patents.
  • Switzerland has become a land of inventors thanks to its support towards new developments and scientific knowledge, motivating their population to create patents.
  • As a result, the country has a ratio of 956 patents created per every one million inhabitants, almost doubling the number of patents created by the closest competitor countries.

2. Investment in New Technologies and Startups

  • Switzerland's innovation approach has always had a particular interest in new technologies and start-up businesses.
  • To promote the creation of more ideas and entrepreneurship, their government worked with the Swiss Entrepreneurs Fund to create a fund of CHF500 million in 2018, to help new businesses close the gap between being a start-up and a fully established company.
  • After announcing this fund, the investment in venture capital start-up companies increased by 32% exceeding 1 billion CHF, ICT investment increased by 120%, as did the investments in new digital health, medtech, and biotech start-up companies.
  • Additionally, the country's private sector invests more than CHF22 billion in research and development each year.
  • Zug’s Crypto Valley is also a big reason why IT security and fin-tech start-ups are growing in Switzerland, as it is one of the top hotspots for blockchain technology in the world, which at the same time attracts innovation in the financial section.
  • Every year, Switzerland sees the creation of over 300 new start-up companies, demonstrating how their support for them drives their innovation.
  • A reason why start-up companies are driven to Switzerland is its willingness to try new technologies and launch them faster to consumers, like being the first to implement a green economy model using solar and clean power technologies.
  • According to the analysis made by the World Intellectual Property Organization, INSEAD, and Cornell University after conducting the Global Innovation Index report of 2019, this practice is not surprising, as most high-income economies that have a significant position in the innovation ranking assign large budgets to promote research and development.

3. Education Approach

  • Switzerland has taken a modern approach towards education. They have some of the best universities in the world and have also distinguished themselves by creating technology universities, like the EPFL and ETH, that are dedicated to robotics, or the Lake Of Zurich High Technical School.
  • According to the World University Rankings of 2019, the Zurich University of ETH is the second-best institution to learn computer science in the world.
  • Thanks to the government's fund for R&D, students from these modern universities can use their knowledge and transfer it easily to the many start-up and technology companies available in the country.
  • Switzerland's educational focus starts in primary school using advanced teaching methods and paying special attention to teaching skills and not only to knowledge. An example of this method is Lehrplan 21.
  • While on school, students are not only tested on the content learned, but also on a series of skills that they must develop to complete their curriculum. The education system makes an emphasis on problem-solving and learning strategies.
  • The Swiss VET (Vocational, Education, and Training) system is also implemented on advanced school levels, demanding their students to be trained based on their vocational qualifications and the available job options.
  • This strategy promotes, not only their innovation potential, but the country also has the lowest youth unemployment rate in Europe, and the one most supportive for scientific knowledge, ranking as one of the countries with the highest educated employees.
  • Additionally, Switzerland has created technoparks and innovation centers around the country to promote collaboration between the private sector, universities, and educational institutions.

Innovative Companies

  • Two examples of innovative companies in the country are Roche and Novartis. These pharmaceutical giants are the leaders in Swiss patent applications, having the most patents in the last years.
  • To take advantage of the education and investment factors available, these companies created two of the largest research and development centers of the country and have large budgets assigned for research and development.
  • Additionally, they try to maintain close contact with R&D establishments, innovational start-up companies, small and medium business, universities, venture capital, business authorities.
  • Both Swiss companies are global leaders in driving innovation development.
Part
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Part
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Global Approaches to Innovation

Collaboration and co-creation, the implementation of IoT (the Internet of Things) technology, and the use of gamification are three global trends that are driving innovation and creativity. A significant amount of research around each of these practices supporting there use as drivers of innovation has seen them develop into major trends over the last few years. Companies that adopted the practices early have seen improvements in innovation within their organizations.

Collaboration and Co-Creation Trend

  • The benefits of working together have been widely acknowledged for some time. Organizations have historically failed to embrace this concept, restricting innovation to specific functions and roles.
  • Recently organizations have realized that there is valuable information and insight to be found outside the organization. Collaboration and co-creation in innovation is the new rule rather than the exception in innovation and creativity.

Driving Innovation With Collaboration and Co-Creation

  • Remaining relevant is becoming increasingly important for organizations, especially against the background of real-time tracking and instant customer feedback. Collaboration or co-creation is seen as a way to address this, and as a result, it is driving innovation and creativity.
  • Organizations need to be innovative and creative to remain competitive in today's market. Over the last year, there has been an increasing realization that a competitive edge in innovation can be gained through collaboration.
  • The benefits of adopting a collaborative approach are significant and driving this trend. A recent European report found that 58% of businesses had piloted co-creation projects in innovation.
  • The same report found 51% of the organizations that used collaboration and co-creation in innovation had improved their financial performance. 54% reported it had improved their social impact.

Important Factors Driving the Trend

  • Technological advancements mean that organizations need to have the capacity to adapt quickly tho the ever-changing environment. They often do not have the resources to address these changes internally, so collaboration is essential for them in relation to innovation and creativity.
  • The increasingly competitive nature of the business environment means that organizations constantly need new ideas and opportunities in innovation. Resources within an organization are finite, but collaboration creates a wider pool of resources to drive innovation and ensure the organization remains competitive.
  • A period of slow economic growth and increasing pressure on budgets within organizations is a factor that has contributed to the trend of collaboration to drive innovation and creativity. The sharing of resources is mutually beneficial for all involved in the process.

Example

  • Unilever is one of the global leaders in using collaboration to drive innovation. It recognized the potential collaboration had in driving innovation and adopted the approach well in advance of its competitors.
  • The company is one of the biggest consumer goods companies in the world, with more than 400 brands. It has a customer base of over 2.5 billion people in more than 190 countries.
  • They recognized that their customers were a valuable resource and launched an open innovation platform to encourage engagement with this customer base for "product solutions, asking startups, academics, designers and customers for ideas and suggestions."
  • Unilever received over 1,000 proposals in the first year it used this collaborative approach. Currently, 60% of Unilever's research and developments in innovation involve external collaboration.

Implementation of Internet of Things Technology Trend

  • Over the last few years, the internet of things (IoT) has evolved from the experimental phase to a valuable resource within organizations. The role it has to play in business operations is becoming increasingly important.
  • This has seen the development of a trend towards the adoption of this technology by organizations as a basis for driving innovation and creativity.
  • Spending on IoT will total $1.1 trillion by 2021. This illustrates the increasing trend to adopt this technology.

Driving Innovation with the Internet of Things

  • The IoT is driving innovation by creating business efficiencies, improving profitability, and creating cost efficiencies within organizations.
  • The speed that the IoT has grown at means it has already grown to a scale that exceeds the human population. It has the ability to collect, analyze and interpret data on a scale that has not previously been seen.
  • As a result, opportunities that have not previously existed are available to organizations. This is driving innovation and creativity, as organizations seek to embrace the technology to develop opportunities that create a competitive advantage.

Important Factors Driving the Trend

  • The value that IoT adds to processes around innovation and creativity is a key factor driving this trend.
  • Innovation is seen as a key to organizational success. By using the technology offered by the IoT and the opportunities this technology creates, organizations are becoming increasingly innovative, which has the long term effect of creating and maintaining a competitive advantage.
  • Organizations are aware of the importance of access to real-time data as a means of driving innovation and its importance to ongoing success. Against an ever-changing landscape, the internet of things is seen as essential in innovation and creativity.
  • The need to cut costs and create efficiencies is seen as vital if an organization is to be successful. The IoT is key in this process.
  • There is a need for organizations to be innovative and creative when developing products and services on the global market so the organization can be distinguished from competitors. By adopting new technologies, such as IoT, innovation and creativity is improved, which helps establish the organizations' position in the market.

Examples

  • Ralph Lauren has recently launched a new line of shirts known as the PoloTech Shirt. This line used IoT to create and develop a new and innovative product line.
  • The PoloTech shirt uses technology to monitor the user's vital statistics. It collects the data and then downloads it to an app for further analysis.
  • The IoT has driven Ralph Lauren to become more innovative and creative when developing product lines. If Ralph Lauren had not implemented this technology, this innovative approach would not have been possible.
  • It has resulted in growth for the company and increased customer loyalty.

Gamification

  • Gamification is a rapidly growing trend driving innovation and creativity. It is an "innovative" approach to the "innovative" process.
  • A recent survey found that over 50% of companies that manage innovation and research are currently using gamification to drive the process.

Driving Innovation with Gamification Trend

  • Innovation and creativity are being driven through the use of a competitive process to engage users, improve productivity, and solve problems.
  • A number of organizations have found incorporating gamification into innovation systems has seen an increase in the quality of ideas and participation levels. This is important if an open innovation process is being used.
  • Gamification can be used to create a highly collaborative environment and a sense of community. These factors often result in an increased sense of purpose, which motivates people to engage more. This is the type of environment that sees innovation and creativity thrive.

Important Factors Driving the Trend

  • Gamification often results in an increased pool of contributors and more unique ideas, which are seen as important factors in innovation and creativity.
  • Global research has validated the use of gamification as a mechanism for driving innovation. This is largely due to the increased levels of participation and environment created.
  • Initially, gamification focused on technology, however, a significant amount of credible research has seen the development of a number of theories and frameworks that are supportive of this approach to innovation.

Examples

  • The Department of Work and Pensions in the UK created an innovation game to generate ideas and decentralize the process of innovation within the organization. It also aimed to increase participation among the 120,000 people in the organization.
  • In the first 18 months of implementation, 4,500 users generated more than 1,400 ideas. Significantly, 63 of these ideas progressed and were implemented by the organization.

Research Strategy

We extensively searched a range of industry publications, scholarly articles, media stories, and expert opinion articles to identify the global trends that are driving innovation and creativity. After identifying several trends, we reviewed the literature to identify the three main trends. The trends that we have identified as the main trends driving innovation and creativity were referenced as such by a number of different sources, had experienced the greatest levels of uptake among organizations, and have had the most significant impact on innovation and creativity. Once we had identified the trends, we searched the aforementioned sources to find examples of companies that have implemented the trends in their innovation processes.

One of our observations in reviewing a range of different sources is that trends in the area of innovation often take time to develop before there is widespread implementation. We have therefore relied on a couple of articles that fall outside of the last two years to illustrate the trends' historic development.


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