To cultivate the industries of the future we need to invest in this intangible human quality
What is now known as The Long March, the year-long arduous trek through very difficult terrains in China, allowed Mao Zedong’s Red Army to escape Jiangxi after massive losses at the hands of Nationalist forces.
Chairman Mao, with his innovative ways of thinking, got his battered forces to regroup and recover, making him the undisputed leader.
Similarly, as we plan for the future economy in an equally challenging but economic terrain, we recognise at least two key factors driving innovation – creativity and the role of the government in driving economic initiatives.
Society must embrace creativity over conformity and learn from success as well as failure
In May this year, the Chinese government unveiled a three-stage plan with the objective of making China a “world powerhouse of scientific and technological innovation” by 2050. The idea is to move away from traditional growth sectors such as steel, and give a boost to a slowing domestic economy.
While any government should be driving the engine for fundamental research and development, and the necessary regulatory frameworks that comes with it, we argue that governments may do well to consider letting free enterprise handle incremental improvements. With laissez-faire at work, market forces will see to the survival of the fittest, and in the long run, a more productive economy.
Unfortunately, this is not the case in all economies. The UNESCO Science Report: Towards 2030 points out that despite massive government support, there has been relatively few success stories from China’s domestic innovation system. Yet, as the second largest economy in the world and as the leading economy in Asia, it must drive innovation.
One contributory factor to dismal innovation is lack of creativity. Creativity should start from young. Encouraging creativity means providing equal educational opportunities to all to nurture the curious mind. Similarly, society must embrace creativity over conformity and learn from success as well as failure, while weighing expected costs against expected benefits.
The government’s role is to provide the necessary infrastructural support for talent, innovation and entrepreneurialism to thrive
For innovation to succeed, society must engage in a paradigm shift characterised by a receptiveness to change, a mindset to innovate and succeed in a highly disruptive world, and an attitude to constantly question the status quo. These are almost necessary conditions for disruptive jumps and eureka moments to occur – a line of thinking that many governments may find all too alien.
The government’s role is to provide the necessary infrastructural support for talent, innovation and entrepreneurialism to thrive. It cannot afford formulaic copying of successes from more innovative economies. Such copying may not always work as cultures are different.
In China, one key disruptive force that has the potential to lead the way to innovation is financial technology or fintech. The People’s Bank of China has expressed support for the promotion of internet finance. In January of this year, the central bank announced that planning is underway for the launch of a digital currency based on block chain technology.
A McKinsey report indicated that China’s internet finance sector, driven by a sophisticated e-commerce sector, was worth more than US$1.8 trillion in 2015. Even traditional financial institutions such as China Construction Bank are starting their own fintech initiatives with e-commerce platforms and partnerships. The Financial Times in a recent issue declared that the Chinese fintech centres of Shenzhen and Hangzhou are starting to give Silicon Valley a good run for its money.
Different segments of society, business and government will have different priorities as they march towards the same goal in the future economy. Each taking calculated risks and making errors along the way is acceptable, as long as they are dealt with maturely.
The key is to constantly evaluate and challenge the status quo. The dynamic nature of active constructive criticism and keeping an open dialogue between government, academics, practitioners and opinion leaders are hallmarks of entrepreneurialism. As we march through the current challenging economic terrain, keeping innovative becomes even more critical. Hopefully, it will not be another long march.
Joseph Cherian is practice professor of finance and director of the Centre for Asset Management Research and Investments at the National University of Singapore (NUS) Business School; Dr Lee Kang Hoe is senior consultant at Gleneagles’ Asian American Liver Centre