Throughout the course of my career, I have been extremely fortunate to manage and lead innovation initiatives with companies in different parts of the world. One of the companies that I had been consulting for opened an Innovation Centre in India where it designs, tests and scales new business models that systematically address barriers to market growth.
Interestingly, they are not the only one doing so. Over the last decade or so, Asia has truly become the hotbed of innovation- a shift which is attracting global corporations to shift their innovation centres and R&D activities in Asia.
Leading companies around the world are leveraging Asia’s talent to develop new products and test business models that would drive future growth. Back in 2013, I had highlighted this trend in my book ‘Asia Incredible’ and in just five years the dynamics seem to have shifted to Asia completely- with the region witnessing an exponential surge in attracting top innovation projects and R&D dollars. It might take you only a couple of days in Beijing or Bengaluru to get an idea of the magnitude of impact the Asian countries are creating on the global innovation ecosystem.
With a regional economy that is growing many times faster than the developed western economies, robust demand from the fast growing middle class and a credible support system from the government are some of the reasons which highlight Asia’s dominance when compared to its western counterparts. This article dissects some of the potential reasons why Asia is the new destination for innovation and digital business transformation.
- Access to skilled and educated workforce – Of late, Asia has caught up with the west on an important source of competitiveness in the global economy: people. In fact, the most populated countries in the world- China and India- house some of the smartest tech talent on the planet today.
- Proximity to markets – Physical proximity to customers not only makes it easier to ship products, but also continually evaluate their changing preferences. Four of the six biggest manufacturing global hubs are in Asia- China, Japan, Korea and India, and a physical presence in the region makes it easier for companies to steer innovation efforts in the requisite direction.
- Access to capital – With Singapore and Hong Kong leading the way, most countries in Asia today boast of sophisticated banking systems. Additionally, developing Asia has been a recipient of much foreign direct investment inflow from private equity firms and multinational businesses who see ambitious plans for themselves in the region.
- Protection for intellectual property – If there is one area where Asia has progressed significantly, it is its commitment towards recognizing the importance of IP. With Japan ranking fourth in the world, Singapore eighth, and South Korea ninth, according to the U.S. Global Intellectual Property Center’s International IP Index 2017, other economies are introducing reforms to credibly boost its intellectual property laws and infrastructure. China is fast shedding its image as a copycat and India has taken giant strides by sprucing up activity in this space.
- Government support – Apart from providing a sound physical and digital infrastructure, governments are providing incentives and creating programs which nurture startups and boost innovation activity in the region. Singapore consistently ranks among the top countries in the ease of doing business index and a number of other Asian economies like India have demonstrated credible progress in the recent years.
A report suggests that over 85% of the next billion people to join the global middle class would come from Asia. Couple this with robust digital infrastructure (high internet/social media penetration rates) and a relatively young population, it is little surprise that companies from around the globe have flocked to the region, creating business ecosystems that further stimulate and support innovation. In the VUCA world where lifespans on the S&P index are shrinking and where new technologies, from mobile communications to artificial intelligence, are upending traditional business models, companies understand they must work smarter to better serve the customer who increasingly expects more from them.
Many Asian economies offer all (or most) of these ingredients. Analysts have traditionally spoken about Japan, Singapore and South Korea as the most exciting markets for innovation. It must be understood that both China and India are staking claim in this elite league and the other ASEAN countries are not too far behind, either. Asia’s very own tech giants- China’s Tencent, Alibaba, Baidu, Japan’s Rakuten and Softbank among others are fueling the innovation activity in the region. Be it the number of unicorns that have sprouted up in the belt or the rise of Asian economies in the Global Innovation Index, this change is here to stay.