The Next Empire

What the Asian markets can teach us about innovation

As this issue goes to bed, my family and I are in Italy, a land noted for great coffee, pasta, wine and art.  It’s a nation whose defining culture once ruled the western world, and it has, in spite of its recent economic issues, much to recommend it for the tourist.  The falling euro doesn’t hurt either.

The Roman Empire was built by great innovators and inventors who used not just their army to subdue tributary states, but also their skills for building roads, bridges and aqueducts. They pushed their borders across seas and over mountain ranges to dominate the ancient world. Then the empire devolved, prey to political factionalism that in classical Rome resulted in murder as often as a skewed ballot.

Geopolitically, the U.S. has been the undisputed empire only since the fall of the USSR, but as economic movers and innovators, we've dominated the playing field for more than a century. The global economy has diversified economic power, however, and it’s beginning to dilute the undisputed hegemony of the U.S.

Reinvention Abroad
So what does the rise and fall of nations have to do with innovation?  A recent issue of The Economist spoke to the nature of innovation in emerging markets – primarily Asia, the world’s next likely “empire”.

Within the Asian nations, a new consumer class is clamoring for goods.  Young people are gaining better educations in record numbers.  Peasants transformed into factory workers are now seeking upward mobility.  Increases in urbanization and education have led to greater numbers of middle class and affluent Asians.  The newest generation, at least in China, are beginning to reject the rigors and low wages of the factory.  Everyday Asians are transforming from peasants to consumers.

What’s different about innovation in Asia? Asians are innovating toward cost savings – counting on the sheer numbers of consumers and the stark need for basic goods and services at affordable prices.

Take for example, an $800 hand-held electrocardiogram (ECG) device called the Mac 400.  The Mac 400 can deliver an ECG test for just $1 per patient. Elsewhere in India, another entrepreneur has perfected a filtering system than can purify water for an initial investment of only $25 – and it’s made from rice husks, an abundant waste product in the region.

Car manufacturer Tata, maker of the $2500 Nano, famously went to Germany for some of its revolutionary technology -- asking only that companies invent "the world's cheapest" auto parts.  When price-slashing engineering becomes commonplace for high quality goods, U.S. consumers won’t be far behind: Tata has already slated a U.S. release of the Nano (adapted for our market) for 2012.

Get ready for a continuing release of innovative products from Asia competing in our own backyard.

And Asia is not simply inventing new products.  They are reinventing business models, finance and management as well.  For many decades in the U.S., Asian emigrants have engaged in enterprise groups that self-finance an ongoing host of new businesses.  Micro-enterprise systems abound throughout Asia, and new management models are also issuing forth.  New approaches to public/private partnerships have influenced international standards for resource management, often to the frustration of American industrial interests.  Asia is also proving adept at harnessing the marketing power of the internet, with the Chinese the world’s undisputed champion of social networking.

And where once the U.S. attracted the world’s greatest minds for university study and kept them here, now Asians come to us for schooling and return overseas to ply their trades in engineering, science, research, and industry, as well as public policy and finance.

Forewarned and Forearmed
So what’s a Smart CEO to do?  First, pay attention. Not only to the innovations coming out of Asia that directly influence your industry, but to trends and inspirations throughout the developing world. Stay abreast of emerging markets however far flung.  Forewarned, as they say, is forearmed.  Even if you have no aspirations to global commerce for your own company, it helps to know what others are doing, and what we might expect to see on our shores soon.

Next, take a hint from the Romans.  They were adept at appropriating and modifying the technologies (and even beliefs) of others. “Innovation” includes the timely transfer of ideas, products, and technologies into new markets.  While for the past century that stream flowed mostly from our nation outward, the tide is shifting.  You can profit from being the one to transplant a great idea from the developing world to your existing marketplace.

Consider the “less is more” pricing focus that Asians are perfecting.  In response to our economic crisis, costs of goods in the U.S. first contracted and then began to expand at a clip again – in spite of the reduction in people’s ability to pay.  There is obviously profit in making a necessary product – like the ECG or water filter – that’s outrageously affordable.  What is there in your industry that could be reengineered into something that slashes costs of health care, or education, a demanded service or basic consumer items?  That is a winning idea on either side of the ocean.

Finally, relax.  Some Americans become agitated and insecure at the suggestion that the center of innovation is shifting.  But, for the individual businessperson, is that really such a big issue?  Nobody is predicting that our nation will become irrelevant or insignificant simply because the axis of economic power wiggles. The dominance our nation has enjoyed may fade, but we aren’t going out of business.  Anybody who has useful ideas, a fertile imagination, and an adaptive, flexible approach to business will find the future replete with opportunity. After the Roman Empire ended, Senatorial families became Feudal-era noblemen and later, twentieth century businessmen.  Fortunes were won and lost, but after a thousand years, those ancient families are still with us.  Their castles still litter the Italian countryside.  Their businesses are global brands.  And the olive oil, wine, and gelato are legendary.  Even without an Empire, life can be sweet.

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