Thinking Economy aka Innovative Economy I

Thinking Economy aka Innovative Economy I

The concept of Thinking Economy or the Innovative Economy could be viewed from many perspectives. From the micro-economic level, it is basically about the product value chain.

Within a short span of 6 decades of rapid technological advancement, there is basically a redefinition of economic terms such as ?commodities? and ?value add? process. Products are becoming more sophisticated with high technology content. There are also traditional ?basic items? being redefined in many ways as well as new invention or products creation that are ?non-traditional? in nature. For example, the creation of walkman to Audio laser CD, Audio mini CD player to mini MP3 player occurs within a short span of 30 years or less. These products do have high technology content with respect to the era of their creation but such technology content has become a ?basic commodity? instead of high value add creation over time.

High technology content does not necessarily mean high innovative content. There is a misconception of technology equates innovation and vice versa. Technology should be view as merely a tool, not the end product. Innovation is the process of creation of products by utilizing creative imagination (the Thinking process) couple with whatever technology available or created specifically to suit this creation. In simple terms, Technology is just like a tool like the brush to an artist. When the artist needs ?special brush? to complete his masterpiece, he will ask other people to make that special brush for him. Many times, people misconstrue that the making of the technology is Innovation, which is not. The Innovation comes from the artist, not the one who is tasked to make the special brush.

The process of creating the necessary ?special brush? is Research and Development (R&D) in technology. The one who created the need (demand) or necessity of the technology is the one who is innovative. There are also instances whereby through R&D, a new technology or technical process is created and waiting for others to utilizing it to create more products based on this R&D creation.

The creation or trying to learn the technology and produce products is what we know as ?Knowledge based economy?. It is just like the master artist thought out a good perspective and artwork but instead of him painting them out, he provide the special brush to others to help him paint and reproduce his ideas out on paper. Obviously, it is the master artist that has most value add. Using another example, it is just like famous fashion designer that asks the factories to use special clothe, machine and technique to reproduce his masterpiece. He is not the creator of the machine but he tells his technology scientist that he needs certain machine to do certain things and the scientist just creates such machine. He is the ?idea creator?, not the ?technological creator? (his scientist is). The factor is just the producer based on the ?knowledge transfer?.

In Singapore?s context, we have been relying on being the ?factory? for the ?creators? to earn out living for a long time. PAP government?s bragging of ?Knowledge Economy? is really outdated in this new era. Fast growing developing countries like China and India could absorb and learn the necessary knowledge of production quite easily. We should have moved on to the highest level of creation, that is the creator instead of remaining as the ?producer?.

The sudden emphasis on R&D spending is actually an unfortunate misunderstanding of the whole picture. Value is not originally created by technology R&D alone. It is the ?CREATOR? like the artist or the fashion designer that is the motivation of innovation. I am not saying R&D is not important but it is not supposed to be taken as the ?final solution? to our economic restructuring.

We could view this from a very simple perspective. Many innovative companies of ?creation? seldom set up factories to produce the final products. Most of the time when the product idea created is so complex that the company alone could not depend on its own technology level to solve all the technical problems involved. Thus, this company will require other companies that could provide the necessary technology or R&D (technology providers) to assist in its product development. After a few prototypes have been created, the final products will be sent to factory which may not necessary be under its charge to produce. The original idea creator is the one that put up its brand name and sells its products or ideas to the market. It could even patent the ideas and then ?license? it to other companies to reproduce the products.

Technology has become a ?commodity? in the process, in the sense that technology providers are many but the idea creator is only one.

It is very important to understand the difference between an Innovative/Thinking economy and Knowledge economy from the micro-economic perspective. Learning of knowledge to provide technological solutions is no longer a niche area which only some could master. In this internet era, information flow is tremendously easy and acquiring knowledge from such environment is no longer a big problem. Idea creation is totally a different game altogether.

A knowledge-based economy will definitely face tremendous competition from other countries, including those rapidly developing third world countries, basically because information and knowledge is easily available and attainable. It has become a commodity unlike in the past where few privileged ones have access to these information and knowledge. This is the root of our problem at the moment. We have positioned ourselves at a level which has little entry barrier and really free flow market. Thus, displacement of jobs in our economy by other cheap substitutes from these developing countries would be a norm. The structural problem will be more eminent when the developing countries move up the ladder of technology.

The environment needed to cultivate a knowledge-based economy is very different from the Thinking/Innovative economy. I will touch on this aspect in my next post.

Goh Meng Seng