Friday, February 22, 2008

BRIC and Innovations: Some Ironies

A few days ago, I wrote a short piece on the BRIC countries -- Brazil, Russia, India, China -- and retail trends.

More on the retail issue later.

In this note, I want to go briefly into BRICs as sources of innovation.

In its March 2008 issue, the magazine Fast Company profiled what it considers the 50 most innovative companies in the world.

The usual suspects - Google, Apple, Facebook, Amazon, Nike -- are in the top 10.

The surprising thing is the appearance of China's Alibaba at No. 9. Only two other BRIC companies appear on the list: India's Tata Group at No. 47 and China's Baidu at No. 50. B (Brazil) and R (Russia) of the BRICs have not yet made an appearance on this list. Non-US companies, other than the ones from China and India just mentioned, are from Malaysia (AirAsia), England (Arup), Germany (BMW), South Korea (LG and Samsung), Japan (Nintendo and Toyota), and Finland (Nokia).

One thing is clear -- all the economic bad news, deficits, and unfunded entitlements notwithstanding -- as far as Fast Company is concerned, USA remains the red hot crucible of innovation.

I want to turn to the three BRIC companies in this top-50 innovators list: Alibaba (China), Tata Group (India) and Baidu (China).

Ironies abound in the appearance of these three in the list. India is seen as the second mecca of IT outside of USA, yet it is two IT companies from China that have made the list. For all its IT outsourcing prowess, India has not produced the level and scale of innovation in IT that China has. Perhaps the free-market nature of India is partly the reason. As soon as innovative IT firms from India hit the radar screen, many get snapped up by acquiring firms in USA or elsewhere.

But there is more to it than that. In the same issue of Fast Company, Professor Richard Florida of University of Toronto writes that the world is NOT flat (a counter to the phrase popularized by Thomas Friedman of New York Times). Innovation and creativity clusters are very spiky -- stalagmites rising at specific geographic centers above the flat, humdrum surfaces of everyday non-creativity. London, New York, Paris, Tokyo, Hong Kong, Singapore, Chicago, Los Angeles and San Francisco are the global geographic spikes of creativity, according to Richard Florida. He further says that places like Detroit, Nagoya and Bangalore are on ruinous treadmills -- running harder to keep pace with innovations happening in Spike Cities. Bangalore, of course, is India's IT city, with 50% more software people working than in California's Silicon Valley. But, if Florida is right, these hordes of IT folks in Bangalore are running in place merely to maintain reasonable share of farmed out IT work. They are not innovating at rates that would make Bangalore a Spike City.

Further ironies in the BRIC innovator list: the only Indian company in the list, Tata Group, is well over a 100 years old. It gets a mention on the list because in recent years it has become very global and fairly innovative -- making trucks in Korea, steel in Europe, and doing software work globally. Tata is surprisingly at both extremes of the automobile market: it is likely to gain control of luxury makes Jaguar/Land Rover (that Ford is spinning off) and it announced in 2008 the Nano, the world's cheapest car at $2500, designed to move millions of customers from 2-wheelers to first-time car buyers.

The Indian company that made the list is over a century old mechanical technology firm, and the two Chinese companies on the list are from-the-scratch IT startups.

Go figure!

Nik Dholakia
University of Rhode Island