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Change and innovation
Tuesday, 09 September 2008 18:36

If there is one constant in the history of the world, it is change.  If there is one constant challenge in the history of the world, it is resistance to change.

In the face of the forces of change, we should not just adapt and adjust.  We should be innovative and creative -- like the Beatles, Bill Gates and Albert Einstein.  And also like many people in small villages all around the world who, in their quest for survival, are amazingly inventive.  As Richard Florida said "human creativity is the ultimate economic resource".

Globalisation is one factor stimulating great change in our societies and economies.  But it's not the only one.  There are many factors pushing change -- the rise of new powers like China and India, technology, individual preferences and attitudes, and even the climate.

However, until the industrial revolution in the 18th century, change and innovation in our economies and societies were very slow.  To be sure, empires came and went, as did natural disasters.  And there were innovations in building, transportation and other areas.  But, virtually all the world's population was employed in agriculture or hunting and gathering.  A mere handful of people were rulers, merchants or priests or monks.

The technological progress and innovations that led to the industrial and agricultural revolutions in England and North Eastern Europe provoked massive changes in economic and social life.  Improvements in agricultural efficiency led to a decline in the agricultural workforce, and increase in people involved in industry, and associated with that a massive process of urbanisation.  Technological progress also facilitated transport and trade, and the European colonialisation of much of the rest of the world.

Ever since, innovation and change have been constants in human history, and accelerating ones at that!  They have been a source of societal progress, but required adaptability, flexibiity and mobility.  Innovation has been both a source of change, as well as response to change through innovative solutions.

Technological progress spread out to the New World, and then became the key to post-World War 2 economic development.  And as East Asia, the former communist countries, Latin America and progressively Africa joined the global economy (globalization) these past few decades, there has been an acceleration of innovation and change.

In reality, it is very difficult to identify the causes of change, as several factors may operate at the same time.  People debate the relative impacts of globalization and technology.  Bit, information technology has been a driver of globalization as it facilitates many international economic transactions.

All change results in both winners and losers.  The first effect of change is to destroy jobs, but other jobs are also created.  But invariably change is beneficial especially for prosperity and poverty reduction. 

We cannot and should not stop change.  On the contrary, we must facilitate positive change, that is, the shift of people and investments from one activity into other more productive activities.  The OECD's Restated Jobs Strategy of 2006 provides a good list of measures for doing just that: (i) reducing barriers to the creation of new businesses or to the expansion of sectors; (ii) compensating job losers through social protection systems which are employment-friendly, such as providing adequate benefits along with “activation” policies which push re-employment opportunities; (iii) improving workers' skills, especially for the low-skilled -- both globalisation and innovation are reducing the demand for unskilled labour relative to that for skilled labour; (iv) “making-work-pay” policies which reduce the cost of workers to employers by reducing the tax on workers ("tax wedge"). 

Such policies enable workers to adapt to change, whether it be caused by globalisation, technology or other factors.  They also help strengthen public support for open markets.  Is there a case for providing specific help for people who are adversely affected by globalisation?  Some regions may be badly affected, some professions also.  Perhaps, but experience shows that general economy-wide measures are always the most effective.

How to respond dynamically and positively to globalization? Through innovation!!  Globalization facilitates innovation, as it is a motor for technological transfers between nations.  Also, globalization and its new market opportunities reward innovation with a premium. 

The OECD also has a list of policies for facilitating to adaptation to change would also foster and support the innovation process like: (a) science, technology and innovation policies; (b) policies to upgrade the human resource base of the economy; (c) policies to foster entrepreneurship and new areas of economic activity; (d) cluster policies and efforts at the local/regional level; (e) policies to enhance attractiveness; (f) policies related to intellectual property rights; and (g) open trade and investment policies.

This is all very well, indeed rather pedestrian.  So where are the paradoxes?

 

First, although many countries have been working to implement the OECD Jobs Strategy, most are doing not well enough.  The employment situation of both older and younger workers, as well as migrants, is not good enough.  Education systems, especially in the US, are not equipping people well enough for the work place.  Japan implemented badly designed reforms with the result that some one-third of the work force are now on irregular contracts.

 

Second, innovation in many parts of the world has been too weak for too long.  The European Union responded to this by adopting the so-called Lisbon agenda which is a program to transform form Europe into a full-fledged knowledge-based, dynamic economy.  But the results are not satisfactory.

 

Third, we are now living in the era of creative industries, that is, those industries which have their origin in individual creativity, skill and talent.  A key driver of interest in creative industries and development is the acknowledgement that the value of creative production resides in ideas and individual creativity.  But to harness this creativity, we need to be free in our minds and society, and modern management needs to facilitate that.

 

Many people, like Stephen Covey, the author of the 7 Habits of Highly Effective People, are presenting ideas on how to achieve greatness.  Covey's approach is based on: learning; goal setting and tracking; making friends and global support networks; and online journal writing.

 

While these approaches are sources of inspiration in North America, many parts of the world are on another planet.  Most East Asian countries, which desperately need to move to a higher creativity and innovation plane, still have management systems based on command and control, and strong formal authority, and where initiative and risk taking is neither encouraged or appreciated.

 

 

References:

Creative Class by Richard Florida.

www.creativeclass.com

OECD's Restated Jobs Strategy of 2006

www.oecd.org

Stephen Covey

www.stephencovey.com


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