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Inclusive innovation: a source of new ideas to deliver business growth.

As emerging markets continue to grow in both size and economic influence, innovation managers at companies around the globe increasingly turn to those markets for new ideas that could catalyze their business and deliver the next generation of growth. At the same time, governments in these regions are seeking new ways to generate economic growth and ensure that their entire populations--not just business elites--benefit from that growth. One outcome at the intersection of those two needs is the proliferation of inclusive innovation programs. These government-supported initiatives offer companies potentially important sources of new ideas and governments and the people they serve a way to power economic growth.

Business should pay attention to the rise of inclusive innovation programs. They offer a direct channel to ideas developed by local innovators, which may represent new business opportunities. For example, through one country's inclusive innovation program, a multinational fruit processor identified a small enterprise that had developed a novel method for drying and processing mango pits into a nutrient-rich flour. The business is considering either partnering with the local firm to scale the process or licensing the know-how from the local enterprise to introduce the innovation into its processing plants globally. Whatever form the final deal takes, the company will benefit from a new business line that turns a waste stream into a value-adding product, the grassroots innovator will benefit from licensing fees or other resources made available through a partnership, and the community will benefit from the wealth created through the company's engagement with the local business and the community.

Although the specifics vary by country, inclusive innovation programs broadly seek to drive innovation from nontraditional sources and enable grassroots innovators by propagating best practices and developing clear paths to commercialization. From the government perspective, inclusive innovation programs offer a means of supporting economic development objectives by connecting innovation with growth. Growing support for inclusive innovation among emerging-market governments is driven by a belief that these programs will nurture new ideas that generate new products and services; those new offerings will then boost the economy, and the returns generated by innovators will create increased domestic spending power for both the individual innovators and their communities.

The inclusive growth promised by inclusive innovation programs is essential for these countries to escape the middle-income country trap, an economic dilemma faced by countries whose growth has previously been fueled by access to resources--especially cheap labor. As labor costs rise, the competitiveness of these countries is threatened, particularly in export markets, leaving them without the resources to offer the higher-value products that drive advanced economies. Countries facing the middle-income trap today include Thailand, Malaysia, and India, as well as the more often-cited examples of Brazil and South Africa. These countries must find a way to transition from growth based on cheap labor and commodity resources to growth based on higher productivity and innovation, which can expand export markets and increase domestic demand. Supporting inclusive innovation can help achieve these goals by nurturing locally developed, value-added innovations that capture greater value in the global marketplace and deliver economic growth to the originating community.

For companies seeking to do business in these markets, inclusive innovation programs offer streamlined access to new ideas that might otherwise never reach their attention. Further, the programs frequently provide support for building partnerships with local innovators. Whether funded by the public sector or supported by social organizations, the programs actively seek to identify innovators--both through active search and through open calls designed to attract innovators' attention--and support them in developing their ideas to maturity. As these nontraditional innovators are identified and developed, they present promising new partnership, licensing, and acquisition opportunities for global firms.

In order to access these opportunities, however, firms must understand what inclusive innovation is and how its meaning has changed in the last decade. In the early 2000s, inclusive innovation was synonymous with innovation for the base of the pyramid; inclusive innovation efforts focused on developing innovations to serve low-income populations. These government-sponsored efforts were undertaken almost exclusively by traditional science and technology experts, who often lacked firsthand experience of the harsh realities faced by the marginalized communities they sought to serve. As a result, they often failed to address the real needs of these communities and, consequently, saw limited success.

These early failures led many governments to reconsider their approach. Increasingly, that meant turning to innovators within the communities concerned--after all, who better to address the needs and constraints of a community than its own members? As a result, inclusive innovation programs have expanded and reshaped to include support for innovation by those outside of the traditional R&D community, such as social organizations and individual inventors living and working in local communities. This expansion has created new pathways for grassroots innovators--those actually in the communities that would benefit from the inventions they create--to access programs and support to advance their inventions.

A number of countries have created inclusive innovation initiatives. Thailand and Malaysia, for instance, explicitly include inclusive innovation in their national innovation strategies, recognizing its importance to their growth. Both countries have developed programs and schemes to support inclusive innovation.

Thailand's long-term development strategy states that "the economy should be restructured toward more inclusive and sustainable development while a more diversified and robust grass-roots economy should emerge" (National Economic and Social Development Board 2015, p. xii). The National Innovation Agency (NIA), a branch of the Ministry of Science and Technology, is responsible for supporting such efforts. NIA's work is based on a firm belief that innovation should not overlook the poor and that there are an abundance of ideas locked up with the community intellects. NIA views its role as unlocking this intellectual capital, a goal it pursues by supporting grassroots innovation and small and medium-sized enterprises (SMEs) through innovation coupons, vouchers that pay for capacity-building services to support startups, bank loans, and interest rate guarantees for business loans.

Malaysia's Ministry of Science, Technology, and Innovation acted from a similar belief when it established Yayasan Inovasi Malaysia (YIM), also known as the Malaysian Foundation for Innovation, in October 2008. The mission of YIM is, according to its website, to "promote and inculcate creativity and innovation among Malaysian citizens, especially targeting children and youth, women, rural folk, people with disabilities and non-government organizations" (YIM 2015). Malaysia's government believes that the engagement and inclusion of all citizens will catalyze innovation, which is the "engine that will propel [the country] to that future" (YIM 2015).

That effort is off to a strong start. In 2015, YIM conducted a countrywide discovery trip that uncovered 1,400 grassroots innovations, ranging from a new process for peeling and processing ginger root to equipment for more efficient harvesting of palm fruit. The foundation then narrowed the pool of innovations to those that appeared to have commercial viability, and it is now working with inventors to commercialize and scale their innovations. YIM connects the innovators to other Ministry programs that offer assistance with prototyping, market access, and intellectual property assessment, as well as other kinds of support. Commercial success of these innovations is expected to benefit both the local communities from which the ideas originated and the Malaysian economy as a whole.

Inclusive innovation may be a valuable tool for government and policy makers, but what does it mean for large, transnational companies? In short, inclusive innovation programs can catalyze commercial innovation by providing access to a new stream of ideas, products, services, and business models--all supported by a close understanding of potential consumers and markets. They also can help businesses see where they might be disrupted. After all, grassroots innovators, and their locally generated and tested products and services, are potential competitive threats as well as potential partners. To access the power of these movements--and avoid being disrupted by them--global firms must be alert to these emerging activities and willing to engage with them on their own terms.

There are a number of positive steps firms can take to find and engage with local efforts:

1. Contact the ministries of science and technology in the countries in which you have a presence or desire to have a presence. The ministries have broad insight into activities and programs that are actively supporting grassroots entrepreneurs, and they can help identify the most relevant programs for your objectives. Most ministries are keenly interested in public-private partnerships, so your inquiry will likely be received warmly.

2. Engage with the organizations that are supporting inclusive innovation, such as YIM and Agensi Inovasi Malaysia (AIM), as well as accelerators and incubators, such as the Malaysia Global Innovation and Creativity Center (MaGIC). These organizations can act as your eyes and ears on the ground as you seek to identify emergent innovations that might provide a new business opportunity or disrupt a business line. Organizations like MaGIC actively seek private-sector partners who understand the nuances of industry value chains.

3. Expand open innovation programs and scouting activities to identify innovation emerging from newly empowered communities. Ensure that in-country visits include excursions into the local communities, not just to government agencies and formal business contacts. Although the breadth of possible sources and innovations may seem daunting, understanding how innovation is happening in these communities, and where, is an important first step to leveraging these nascent developments.

Although the kinds of inclusive innovation programs Malaysia, Thailand, and other countries are creating have yet to deliver proven results from an economic development perspective, they are rich with promise--for the countries that host them and for the companies that connect with them. Transnational firms do not have the luxury of waiting for final results. Fully harnessing the power of the ideas that are certain to emerge from the marginalized communities that are gaining new access to markets through these programs will require early, persistent engagement. The payoff for firms that participate will be significant.

Jamie N. Jones is an innovation advisor at RTI International and an adjunct professor of entrepreneurship and innovation at the Kellogg School of Management at Northwestern University. She recently spent three months in Southeast Asia as part of the RTI Global Rotation Program, exploring how developing nations are driving innovation-led economic growth. She has a PhD in chemistry from the University of Texas at Austin and an MBA from Northwestern University, jnjones@rti.org

DOI: 10.1080/08956308.2016.1185338

References

National Economic and Social Development Board, Office of the Prime Minister. 2015. The Eleventh National Economic and Social Development Plan (2012-2016). Bangkok, Thailand. http://www.nesdb.go.th/Portals/0/news/plan/p11/Plan11_eng.pdf

Yayasan Inovasi Malaysia (YIM). 2015. Introduction. Yayasan Inovasi Malaysia, http://www.yim.my/yim_v3/index.cfm&menuid=37&lang=en.html
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Title Annotation:POINT OF VIEW
Comment:Inclusive innovation: a source of new ideas to deliver business growth.(POINT OF VIEW)
Author:Jones, Jamie N.
Publication:Research-Technology Management
Geographic Code:9MALA
Date:Sep 1, 2016
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