Innovation is not just about high technology
People at ‘Maintenance & Resilience Asia 2019’ in Bangkok show an underwater robot that can repair oil pipelines. Somchai Poomlard
Innovation is central to business competitiveness and economic growth. Thailand 4.0 is a comprehensive and ambitious strategy for improving economic performance through innovation-driven growth, supported by the National Science, Technology, and Innovation Policy and Plan (2012–2021).
The innovation strategy in Thailand 4.0 aims to develop advanced technologies and skills through cutting-edge research and development (R&D) and aims at high quality products and services. This is an essential prerequisite for strengthening productivity and international competitiveness. However, despite considerable efforts by successive governments, it has proven to be a challenge for Thai businesses.
While South Korea and Taiwan spend just under 4-5% of GDP on R&D, Thailand stayed at around 1%. In a recent study by the World Bank on innovation in East Asia, less than 15% of Thai companies say they have a product or service innovation, compared to 60% of Chinese companies. The relatively few Thai companies that are innovative cite the lack of appropriate management and leadership skills as a critical limitation.
The concept of innovation should go beyond dealing with new types of world novelties and related start-ups. For tangible results, it should build on the role of Thai companies in global industries and address underserved opportunities in emerging Asia.
Supplier innovation in value chains
Many Thai companies are well positioned as suppliers in global value chains such as automotive, electronics, IT and clothing. These firms can innovate within existing industries in order to develop competitive skills by specializing in certain levels or components of a value chain.
A company like the Italian Brenta can concentrate on design, prototype development and production engineering. It is a global leader in translating luxury shoe brand designs into products that can be produced efficiently and in large numbers.
Component innovation enabled two humble companies to completely transform the global bicycle industry. Shimano, a Japanese company from the city of Sakai in Osaka, is the dominant supplier of high-end transmissions; while Giant Manufacturing, a Taiwanese company from Taichung, is the leading supplier of stable and lightweight bicycle frames.
New ways of profitably manufacturing complex products from different components and materials can be an important, if not glamorous, basis for innovations. For example, Foxconn, the world’s largest contract manufacturer and leading supplier to brands like Apple, has implemented process innovations to flexibly manufacture a range of products in the same location and on the same production lines to meet rapidly changing demand.
Innovation for Asian markets
Asia, particularly Asean, China and India, will account for more than half of global consumption growth by 2030. The growth in spending in these markets is being driven by the lower middle income (160,000–796,000 baht per year) and lower income households (below 160,000 baht).
This represents a huge “second tier”, much of it in secondary cities and rural areas whose populations have high ambitions but cannot afford or need top quality products. Thai companies that can tailor products and business models to these consumers expect significant opportunities.
The concept of the corresponding innovation is aimed at this market. It starts with a deep understanding of specific market segments and knowledge of existing technologies. It focuses innovation on specific consumer needs, conditions, and constraints.
India’s Vortex Engineering has developed an automated teller machine (ATM) to meet constraints in semi-urban and rural areas such as unreliable power supplies and high illiteracy rates. It is solar powered and uses only 10% of the energy of a conventional ATM; generates much less heat and eliminates the need for continuous air conditioning; and uses a fingerprint identification system. It costs less than half of conventional ATMs and is now used in Asia and Africa.
Embrace Innovations, founded by Stanford students from fieldwork in Nepal, produces baby incubators that are small, light, inexpensive to transport and can be disinfected in boiling water. They cost around $ 25 (795 baht) compared to $ 25,000 for traditional incubators and are now sold worldwide along with related products.
Reasonable innovation is also for large companies. GE has developed market-driven, easy-to-use electrocardiogram machines in India and China to meet local income, infrastructure, funding and service restrictions. Other related products have found niche markets in the US and Europe, leading to the creation of GE Healthymagination for underserved fringe communities worldwide.
Innovation management for results
Innovation related management skills are a critical limitation for Thai companies.
However, the ISO56000 standards for innovation management provide a practical framework for meeting this need. It is supported by more than 50 countries, including Thailand as an observer. It describes the most important steps for innovation management; to measure innovation performance; for strategic intelligence for innovation; for the management of intellectual property; and for building innovation partnerships.
For example, ISO56002 presents a results-oriented management system relevant to a wide range of innovation strategies, including products, service processes, from novelty to incremental innovations and for all types of organizations. It has been used by world leaders such as Bosch, IKEA, Siemens and Sony, as well as by governments. This is the most popular management standard for innovation in Japan today. Implementation of the ISO56000 series of standards can greatly enhance the innovation performance of Thai companies, including small and medium-sized enterprises.
A demand-side innovation approach underscores the key role of “breakthrough customer insights” alongside a focus on breakthrough technologies. Taiwan and Germany are examples of its success. They are not primarily aimed at creating new industries, but rather at innovation in established industries in order to achieve sustainable competitive advantages and world-leading exports. A broader perspective on innovation can complement the Thailand 4.0 strategy to strengthen the competitive performance of Thai companies in world markets.