Thinking Economy aka Innovative Economy

goh meng seng SG

We have heard enough of PAP's "Knowledge Based Economy" and about "upgrading skills", "Economic restructuring and such.

Back in May, one forumite and I started a thread on "Thinking Economy". We are not aware that in the International Economic Development field, they were actually studying the next phase or source of economic growth and development; "Innovative Economy". The two ideas are identical but "Thinking Economy encompass a wider perspective.

My argument is that for a vibrant Thinking Economy to evolve, we need a certain configurations of social fabric and structures to be in place, which sadly, is lacking in Singapore's social-economic model.

Nevertheless, this thread will be dedicated to this topic, revisit once again.

I will start off with a link link"

Goh Meng Seng

http://www.asu.edu/copp/morrison/fuzzyeconiden.pdf

(Part of the content)

The Challenge of the Thinking Economy

As Seth Godin of Fast Company magazine writes, ¡°The first 100 years
of our country¡¯shistory were about who could build the biggest, most
efficient farm. The second 100 years were about the race to build
efficient factories. The third 100 years are about ideas.¡±

To succeed in the long run, Arizona must participate in the process
of generating ideasand finding better ways of doing things, rather
than simply executing economic tasks that are dreamed up by knowledge
workers elsewhere. In the words of Columbia University¡¯s Michael
Crow, Arizona must become a ¡°knowledge producer¡± rather than a
knowledge importer."

Knowledge production is important notonly in dreaming up new products
and processes but also in upgrading products that already exist. It¡¯
s true that a growing chunk of production in the modern economy comes
in the form of intangibles based on the exploitation of ideas rather
than material things. But at the same time, manufactured goods, from
Mercedes to Nike, have ¡°knowledge¡± embedded in them.

Thus, the twenty-first century economy willfavor areas that are
¡°knowledge producers,¡±places flush with research and development
activities, the creation of new intellectual products and services
and the most recenttechnologies. Those areas strong in knowl-edge
production will be the white-collar,front-office parts of the new
economy. Areas dependent on knowledge imports ¨C manu-facturing and
processing centers, like Arizonais today ¨C will be stuck with the
blue-collar, back-office parts of the new economy.

goh meng seng SG

The following posting is made in YPAP forum in Aug this year.

I know it would sound pretty confrontational to many of you here, but that's the way I put it in PAP's forum to rouse things up abit. Wink

Goh Meng Seng

So much has been talked about PAP leadership has been "steering" our country out of recession, but one must ask, do they really understand
"Economics"?

It seems to me that Economics to them are "external factors", "foreign investments"...etc..etc. Is that really so?

We have come to a cross road of economic development. Sad to say, what will become to Singapore in the next phase of economic development will definitely depend on PAP's leadership. Why "sad", you might ask. SAD because it needs PAP to willingly relinguish their control mechanism installed in every aspects of Singaporeans' lifestyle. But with their aloof attitude, I do not expect any progress in this direction. We have wasted much time since 1991 in dingdong economics...trying to adjust towards economic cycles instead of creation of wealth by means of providing the clear direction of economic development model.

We keep hearing PAP leadership uttering words of "upgrading", "higher value add".... but do they seriously know what they are talking about? At which productino cycle, does the highest value add exist?

They talk about "R&D", "Bio Tech" and such, but do they really knows what "R&D" or "High Technology" involves? Apparently they are lost in such processes and big talks, only capable to give big words like these.

While the more developed world has been moving on to "Innovative Economy" or what I call "Thinking Economy", our PAP leadership is still stuck with "Knowledge based Economy". Even this is not a new concept or word invented by PAP leadership but adapted from "out-dated" economic model. The reluctance of PAP leadership embracing the new economic development model is glaring; this got to do with more liberalization of the four pillars of the society Political, Cultural, Economic and Social fronts of our country. It is PAP leadership that is too used to having full control mechanisms installed in this country that is reluctant to change, not Singaporeans. The control mechanism has successfully guaranteed the almost total monopoly of power by PAP in Singapore. The "myth" about having both of good worlds, the monopoly of power as well as high economic growth for Singapore, has expired in this era. Monopoly of power is essential (necessary though not sufficient) for initial economic development for a newly industrialized economy. This is necessary basically because growth could be achieved by mobilization of inefficiently used factors of productions....particularly labour, land, financing and other resources. This is the process that China is going through; growth is engined by the reconfigurations of resources utilization. This could be engineered by having strong "governmental interventions" such as building up infrastructure, re-configuring the "educational system", restructuring of the financial system...etc. The potentials of these various resources have been released and utilized in a more efficient ways, so to provide a high growth path for the economy. In short, these are termed as "investment driven" economy, same as what we have been doing for the past decades. But this sort of development path could only last for the initial foundation years of economic development. And it got nothing to do with "Asian values" or particular cultural setup, as PAP has always wanted to portray.

Among the four Asian Tigers, we are the last to engage in reforming our economic cum political model, basically due to PAP's obssession of maintaining monopoly of power. Korea, Taiwan and Hong Kong have progressed into higher "value added" economic models not only by introducing technological intensive industries, but the liberalization of the society IN EVERY ASPECTS, including political, cultural, Economic as well as social aspects.

Wealth creation does not depend on techonology alone. Wealth creation lies in cultural liberalization. Many people thought Nokia is a technological driven entity; it is not. It is the ability of understanding and exploring cultural plausibility that Nokia excelled. Similarly for car manufacturers.

The highest "value add" ladder ends in the patented ideas, copyrights of brandings that each corporates held. For example, Disney basically doesn't own any factories but there are tons and tons of merchandise bearing its creative branding. It is this ownership of cultural creativity that makes it earn big....not technology (though it plays a part in the creation process), not factories.... That is why the western developed countries are so involved in fighting copyright infringements.

Thus, the highest value add lies in the "Thinking Process"...more accurately, the "Cultural Thinking Process". If we want to progress into such economic model, we must liberalize our "thinking environment". This includes the liberalization of the political and cultural aspects of our society. We have a wealth of cultural heritage, basically due to our racial setup. Sad to say, we have been suppressing the potentials of the thinking process for far too long, due to the misguided belief of the myth that political/cultural tight control could co-exist with economic growth.

Liberalization of the cultural setting must go hand in hand with political liberalization or reforms. You couldn't possibly encourage someone to walk freely at the same time while you keep planting mines all around the places!

I do not think PAP has the moral courage to make such drastic reforms which will directly or indirectly threaten their monopoly of power. But such reforms are necessary to really bring us to the highest value add level. It is about the delimma of self-preservations and social advancement. In short, PAP is the entity that is becoming the biggest hinderance of our overall development, particularly our economic development.

My only hope for the new Prime Minister is for him to have such political courage to face the reality fast. WE must engage in the whole revamp of the political cum cultural settings if we are to progress and transform ourselves into a truly well developed economy. If not, all are just empty talks, covered in "sybolism" of bar top dancing.

Goh Meng Seng
_________________

goh meng seng SG

The following will be recent reports on how other economies in the world rethinking their economic development strategies.

Oct. 6, 2004. 01:00 AM

Ontario economy needs new strategy for growth

DAVID CRANE

NIAGARA-ON-THE-LAKEIf Canadians are to narrow the wealth gap with the
United States, they cannot do this unless Ontario has a successful
economy, given Ontario's dominant position in the Canadian economy.

This message, from TD Economics in a special report on Ontario, sets
the stage for the Ontario Chamber of Commerce's economic summit,
taking place this week in this centre of wine and tourism. The purpose
of the summit is to draft a set of ideas on how to improve Ontario's
economic performance in a world of increasing global competition and
rapid technological change.

To narrow this gap, and generate the wealth for a high quality of
life, the Ontario economy would have to grow faster than the U.S.
economy, by at least 1 percentage point each year on average, TD
Economics says. But "with Ontario's economy on track to grow at a
slower rate than its U.S. counterpart through 2006, the gap is more
likely to widen than narrow over the near term," it warns.

Moreover, the TD Economics report says, Ontario ranked eighth in
Canada in growth in per capita GDP in the decade since 1992, calling
this performance "mediocre." At the same time, over the past decade
"most low-income families continued to fall further behind in
Ontario," with widening inequality. Ontario has a poverty problem.

A key issue is productivity. Sustained improvements in wealth creation
and living standards deepened on sustained gains in productivity. And
productivity is based on capacity for innovation in finding new ways
to do things or producing new or improved goods and services with high
value added.

This is the real Ontario challenge, and indeed the Canadian challenge.

In a recent report, Exploring Canada's Innovation Character, the
Conference Board of Canada finds that Canada is simply not generating
a high level of new knowledge, as measured by what it calls the
triadic patent family.

A patent family is measured by the set of patents filed simultaneously
in the European Patent Office, the Japanese Patent Office and the
United States Patent and Trademark Office. On this measure Canada
generates 16.5 triadic patent families per 1 million population,
compared with 51.9 for the United States, 73 for Germany, 89.5 for
Japan and 102.4 for Sweden.

One reason is that Canada underspends on research and development.
Canada's R&D spending is about 1.9 per cent of GDP, compared with
about 2.8 per cent for the United States and more than 4.25 per cent
for Sweden. This gap is clear at the corporate level. Canadian
business spending on R&D is just over 1 per cent of GDP, compared to
just over 2 per cent in the United States and over 3.5 per cent in Sweden.

A key factor here is the quality of business leadership. Too few CEOs
have the vision, determination and skills to develop Canadian-based
firms with the scale and scope to operate at the frontiers of
innovation. There are some companies that do this well, such as
Research in Motion Inc. or CAE Inc., but they are too few.

A top priority for Ontario, and Canada, is to develop more strong
Canadian-headquartered companies with the scale and scope for
high-value participation in the global economy. We want innovative
companies that can pay high wages, develop goods or services the rest
of the world wants and make a profit.

Another factor explaining weaker Canadian productivity is
underinvestment in new machinery and equipment. Since the early 1990s,
Ontario companies have invested less in machinery and equipment than
U.S. companies as a share of GDP. Innovative companies tend to be
companies that are at the leading edge of manufacturing and service
systems.

In an update this week on its cross-Canada review of the future of
manufacturing, the Canadian Manufacturers and Exporters association
argues that "tax policies should aim at strengthening investment in
innovation" through incentives that reward investment, such as faster
depreciation for new technologies and an investment tax credit.

As TD Economics points out, there are many other factors in building a
successful economy, including the quality of education, infrastructure
and opportunities to upgrade skills.

But without greater vision and leadership in Canadian companies, with
a sharp focus on innovation leading to higher-value products and
services rather than a preoccupation with simplistic cost cutting, all
of the other things will be insufficient. This is the biggest
challenge for the Ontario Chamber of Commerce.

David Crane's column appears on Wednesday and Saturday. He can be
reached by fax at 416-926-8048 or at [email protected]

goh meng seng SG

Voinovich, Fingerhut differ on economy

By Carey Checca
Gannett News Service

NEWARK -- U.S. Sen. George V. Voinovich and his opponent in the race
to represent Ohio in the U.S. Senate, State Sen. Eric Fingerhut, agree
they aren't far apart philosophically about what Ohio needs.

However, they have different perspectives and different plans to
rejuvenate Ohio's economy.

Voinovich, former governor of Ohio and former mayor of Cleveland,
calls himself the most qualified candidate because of his 40 years of
experience and perspective in government.

"I'm really concerned about you and me, but (also) the legacy for my
children and grandchildren," Voinovich said.

Fingerhut, who has served in the state Senate and the U.S. House of
Representatives, said voters should thank Voinovich for his service
and move on.

"It's time to look at the future through new eyes," Fingerhut said.

Ohio is heading the wrong direction by every objective measure,
Fingerhut said. The state is losing jobs and young people.

And helping small businesses through tax credits, as Voinovich has
done, is "hugely inefficient," Fingerhut said.

Instead, Fingerhut said three things are critical to getting Ohio's
economy growing again:

# Invest in research and technology and upgrade machinery and
equipment so Ohio can be the nation's most productive and innovative
manufacturing center.

# Bring down health-care costs by expanding the use of technology in
managing patient care, including developing a network of electronic
medical records, punishing attorneys who file frivolous malpractice
cases and promoting physical fitness, among other initiatives.

# Create a federal-state partnership to reduce the cost of higher
education and, in turn, attract companies to Ohio.

Fingerhut also proposed a five-year moratorium on paying back student
loans for graduates who start their own businesses after graduation.

Voinovich, who is known as a "fiscal hawk" in the U.S. Senate, said he
will continue to be very conservative on federal spending and work to
reduce the national deficit and balance budgets.

Federal stimulus packages passed each of the last three years have
shortened the recession, he said.

Voinovich said he would:

# Stop the "litigation tornado" of malpractice and class-action
lawsuits through federal lawsuit abuse reform that will make sure
plaintiffs have legitimate grievances.

# Work to keep natural gas and energy costs low for Ohio's
manufacturers and other businesses.

# Propose moving from companies providing health insurance to portable
policies, which move with workers.

As for Iraq, Voinovich has voted for money to support the war.

"Between now and the end of this year, all hell is going to break
loose over there," Voinovich said.

However, the United States can deal the extremists an enormous blow if
it can set up a secular government in Iraq, Voinovich said.

He called for support for intelligence gathering, and said it "is the
best weapon we have against terrorists."

He also said he's working to expand NATO.

Meanwhile, Fingerhut agreed that the country needs to protect itself
at home and abroad.

However, he said the U.S. did not have a plan for success when it
invaded Iraq.

"We have nowhere near the resources, strategy or international support
for what we are facing in Iraq," Fingerhut said.

Originally published Wednesday, October 6, 2004

goh meng seng SG

Wednesday, October 6, 2004
Driving the local economy
by Stephannie Johnson
Main Story Picture
icon icon Linda Hanson, owner of Northern Coffee and Confectionary,
believes that small businesses provide more than an important part of
the economy, they are also meeting places for the community.

PARRY SOUND - "Without small businesses we're doomed," said Parry
Sound Area Community Business and Development Centre manager Bill Spinney.

October 17 to 29 is Small Business week. The theme being You're the
Power Behind the Canadian Economy.

For small businesses just getting off the ground, Mr. Spinney said
there are a few necessary steps that have to be taken, before the
CB&DC can write a cheque.

"It's coming in and sitting down with our lending officers and putting
together a business plan, if they don't already have one, and put an
application into the board for whatever is required, up to $25,000 per
client.

"There's no grant, both the province and the federals got out of that
in the mid '90s, so there's no grants available here, from this
office, it's all loans."

Mr. Spinney said that as far as larger businesses go, Parry Sound
isn't home to a lot of them.

Multi-faceted

"[Small businesses] do everything for the community, they're it," he
said. "It's depending on how you define small business. I don't think
we have large businesses here, if you take the any of what the major
economic think tanks consider small business to be anything under 250
employees and $5 million in sales and that's what we have here. But,
they're not small businesses to the operators, they're their life."

Statistically, the CB&DC has helped several existing businesses in the
region, however, most aren't willing to come forward and say they've
used its services.

Helping hand

"Some [small businesses] are proud to say they've utilized this
service, some of them are a little embarrassed, because we are a
lender of last resort," said Mr. Spinney. "When everybody else says
'no,' we might say 'yes,' that's what we do, we do the high-risk
lending. In terms of the banks these days, anything commercial if it's
north of Highway 7, they don't consider it worthy of their
involvement, which doesn't do much for the north."

Another program available to budding small business owners is the
Self-Employment Business Program that offers step-by-step help to get
that business off the ground in 11 months or less.

It is open to those who are eligible for, or who have been on
Employment Insurance and gives a weekly training allowance of $350
once the business concept has been approved.

The program receives upwards of 20 applications per month in the Parry
Sound-Muskoka region. Of those, usually only 10 decide to stick with
the program following the orientation.

Since 2001, the Self-Employment Business Program has helped 20
businesses in the area and boasts a 90 percent success rate.

More than products

Owners of Northern Coffee and Confectionary Linda and Robin Hanson
agree that small businesses are the backbone of any community.

"A small business offers community," said Ms. Hanson. "A sense of
belonging, it can offer personalized service that is flexible,
innovative and this will meet the customers requests."

Ms. Hanson worked in the shop before she and her husband purchased it,
a little over a year ago.

"I have a background in food and candy purchasing," she said. "When
the business came up for sale we purchased it, because it was a good
match with my experience."

For those interested in setting up, or buying their own business, Ms.
Hanson has a few bits of advice.

"Have knowledge about the business you are going to purchase or start,
love what you do, work hard and follow rule number one, and rule
number one is the customer's always right.

"Socially, a lot of people meet here. It's just one of those community
spots and I think that many, many of our small businesses are like
that. When you're saying what do we give to a small town, we give just
that, a place to meet and greet."
Originally published at
http://www.parrysoundnorthstar.com/story--1097079902/View_Full_Story.htm

goh meng seng SG

Public sector to lead challenge

Oct 6 2004

Dylan Jones Evans, Western Mail

THE news last week that a fire extinguisher manufacturing plant in the
Rhondda was closing with the loss of 154 jobs, whilst a new call
centre was creating 300 jobs in Cardiff, probably tells us more than
we think about the sectoral and geographical shifts in the Welsh economy.

In this context, it was worth noting the results that were published
by the Office for National Statistics in the middle of last week.

The statistics related directly to business turnover within the Welsh
economy and show that for the period 1998-2002, overall business
turnover peaked in 2000 at £68.6bn and declined for the next two
years, mainly because of the dramatic reduction in the contribution of
manufacturing, which fell by £5.5bn.

In contrast, services have not compensated for this dramatic loss in
production, as turnover only increased by £2.2bn in the period 2000-02.

The Welsh economy is not alone in suffering such a decline, as
Scotland also saw a dramatic fall in the overall business turnover of
its economy, although all English regions showed an increase.

Given this, it will be interesting to see the figures for the relative
prosperity of the Welsh economy when they are published next year. You
may think that I would predict a scenario of further doom and gloom
but, in contrast, I expect an increase relative to the rest of the UK,
especially given the growing impact of the public sector in Wales in
terms of capital spend (particularly in terms of infrastructure
projects) and employment.

This may explain where the biggest challenge lies for the Assembly
Government in that it can only control the influence of public sector
expenditure and, without any direct legislative powers, is largely
restricted in its influence over the private sector economy.

To be fair, it can "out-grant" many regions of the UK in attracting
call centres to Cardiff but seemingly cannot do anything about the
globalisation revolution that is quickly transferring manufacturing
out of Objective One areas into low-wage countries such as China.

The only real intervention it can make in the long term is to change
the business culture of Wales to make it more entrepreneurial and
innovative. We keep hearing stock political phrases about "adding
value" to the Welsh economy to make it more competitive, but this
seems to be predominantly rooted in developing or attracting
high-technology businesses to Wales. Whilst important, this ignores
the fact that we already have a business base of over 150,000 firms
that could, collectively, make a real difference to the development of
the Welsh economy, especially if the capacity for change within these
businesses could be improved in a range of areas.

In particular, there has been a failure over the last decade to
improve the management capabilities of Welsh businesses, with almost
no serious investment in the development of high-level management
skills in Wales, especially within our poorer regions. For example,
even with the availability of Objective One funds, there has only been
one serious initiative - the £10m Management Development Centre at
Bangor University - that has been supported to create a centre of
excellence in this area. Even this worthwhile project is allegedly
well behind schedule, over-budget and struggling to attract matched
funding support from the private sector.

As I mentioned last month, other nations such as China have seen the
important link between education and economic prosperity and, despite
the valiant efforts of the grossly under-resourced Wales Management
Council, very little funding is available within the Assembly's vast
education and training budget to promote and support the development
of higher-level management skills within Welsh enterprises.

In this environment, it saddens me that, collectively, our business
schools in Wales seem to be teaching more overseas postgraduate
management students than employees of Welsh firms.

This cannot be right, and if we are to ensure that turnover within our
private sector in Wales improves, then we must start to invest some of
the Assembly's training budget to upskill the managers who will make
our businesses more competitive in the future.

goh meng seng SG

THE INNOVATION ECONOMY -- MANAGING FOR INNOVATION

http://www.businessweek.com/magazine/content/04_41/b3903462.htm

Building An Idea Factory
Inspiration is fine, but above all, innovation is really a management
process.

Ask most people who invented the lightbulb, and they will promptly
provide the wrong answer: Thomas Alva Edison. Truth is, the famous
inventor's 1879 debut of his incandescent light trailed others by
decades. So why does he get all the glory? Mostly because of what he
did next, notes Andrew Hargadon, author of How Breakthroughs Happen:
The Surprising Truth about How Companies Innovate. To get his creation
to the masses, Edison and his team of engineers in Menlo Park, N.J.,
spent years building the entire electric system, from light sockets
and safety fuses to generating facilities and the wiring network. Only
then did the electric light flare into the innovation that lit the world.
Advertisement

In short, Edison beat all his predecessors at one crucial task:
managing the whole process of innovation, from light-bulb moment to
final product. Today that task is scarcely easier than it was 125
years ago. Sure, it's easy to get lucky once in a while. The real
trick is doing it over and over again. "Managing innovation means
cultivating an environment where lightning can strike twice," says
Paul Saffo, research director at the think tank Institute for the
Future. "It's extraordinarily difficult."

To hard-headed business people, innovation often seems as predictable
as a rainbow and as manageable as a butterfly. Penicillin, Teflon,
Post-it Notes -- they sprang from such accidents as moldy Petri
dishes, a failed coolant, and a mediocre glue. It's no wonder so many
executives throw up their hands. "Our approach has always been very
simple, which is to try not to manage innovation," shrugs Silicon
Valley venture capitalist Michael Moritz, a partner with Sequoia
Capital. "We prefer to just let the market manage it."

Yet even in the Darwinian chaos of Silicon Valley, innovations are
made, not born. The world's most innovative companies, from Procter &
Gamble (PG ) and Toyota Motor (TM ) to Apple Computer (AAPL ) and
Edison's own General Electric (GE ), make their own luck. They plunge
ahead on new ideas even though they know most will fail. "You have to
go down blind alleys," says Jeffrey P. Bezos, founder and chief
executive of pioneer online retailer Amazon.com Inc. (AMZN ). "But
every once in a while you go down an alley and it opens up into this
huge, broad avenue. That makes all the blind alleys worthwhile."

"COMMODITY HELL"
Problem is, a lot of forces today conspire against innovative products
getting to market. Small outfits that are often the most innovative
get short shrift because buyers aren't sure they can deliver or even
survive to keep supporting their products. And for large corporations,
there's the "innovator's dilemma" coined by Harvard Business School
professor Clayton Christensen. By catering to their best customers
with increasingly advanced and more expensive products -- a seemingly
sensible approach -- successful companies ignore or even discourage
less profitable low-end products. But as startups produce these
low-end products and they improve, they eat into the core markets of
large companies. Thanks to such innovations as Internet phones,
discount airlines, and open-source software, the innovators' dilemma
is now afflicting blue-chips AT&T (T ), United Airlines (UALAQ ), and
Microsoft (MSFT ). Says Gerard M. Mooney, vice-president and director
of corporate strategy at IBM (IBM ): "All big companies have trouble
coming up with the Next Big Thing."

Managing innovation better may be the only way out of the "abyss
called commodity hell," as GE Chief Executive Jeffrey R. Immelt has
put it. Today, having the biggest factories or running the most ads is
no longer enough to stay ahead. Shorter product cycles,
ultra-efficient contract manufacturers that upstarts can use to enter
a market fast, and a glut of factory capacity that depresses prices --
all of those render traditional Industrial Age competitive advantages
moot. Serial innovation may prove to be the key skill of the
Information Age. "Serendipity is nice, but we can't leave this to
happenstance," says John Seely Brown, a visiting scholar at the
University of Southern California's Annenberg Center for Communication
and former chief scientist and head of Xerox Corp.'s legendary Palo
Alto Research Center. "We just don't have the money any longer to
screw around."

The good news is that crisis is the mother of innovation. The economic
boom of the 1990s produced a raft of nimble new rivals, forcing
established companies from IBM to Procter & Gamble to shake up
longstanding habits. And even if some of those threats looked less
fearsome as the economy soured, the savviest CEOs realized it was a
competitive advantage to continue pushing their troops to rethink how
they develop products and services -- in a sense, to rethink
innovation itself. "We went through a really tough patch in 2000,"
says P&G Chief Technology Officer G. Gilbert Cloyd. "That got us moving."

Some of the methods companies are using to spur innovation, such as
setting impossibly high goals and relentlessly experimenting, will
sound familiar in places like Silicon Valley. But they're often
considered unwise or frilly by traditional corporations. Others, such
as opening up company procedures and research to the outside world,
are new and controversial. One thing underlies them all: courage. The
companies that have endured are those whose leaders bet the future not
just on marketing savvy or manufacturing might but on innovation.

RISKY GOALS
For one, they're not afraid to think big and tackle goals that others
deem too risky. Consider Apple Computer Inc. In early 2001, the
Cupertino (Calif.) personal-computer pioneer hit on the idea of making
a digital music player as easy to use as Sony Corp.'s (SNE ) Walkman
was for cassette tapes. Yet while the iPod debuted just nine months
later, CEO Steven P. Jobs realized that selling hardware wasn't good
enough. That's when he set to work on the seemingly impossible:
providing easy, legal access to lots of songs, something no one had
yet managed.

By April, 2003, Jobs had done it. By painstakingly working out
digital-rights issues with recalcitrant record companies, Apple opened
an online download store that featured 200,000 songs, soon to grow to
an unprecedented 1 million. Now Apple owns tech's hottest product,
with total sales of 3.7 million iPods grossing $1 billion. Says Jobs:
"We can invent a complete solution that works."

What's more, Jobs's big bet has helped him redefine the company.
Apple, with a negligible 2% share of the PC market, has a shot at
becoming a dominant force in the exploding market for digital
entertainment. That kind of radical shift stands in stark contrast to
the safe path too many companies take, says A. Richard Newton, dean of
the College of Engineering at the University of California at
Berkeley. "What's missing today is inspired leadership that has a
lofty enough vision to spur great things along the way," says Newton.

Thinking big is important, but sweating the details is just as
critical to spurring continuous innovation. Several years ago, Toyota
Motor Corp. (TM ) made one change to its production lines, using a
single brace to hold auto frames together instead of the 50 it took
previously. In the context of Toyota's famously complex production
system, it looked almost insignificant. But this Global Body Line
system helped slash 75% off the cost of refitting a production line.
And it is the reason behind Toyota's ability to make different models
on a single line. The change contributed to manufacturing cost savings
of $2.6 billion last year, helping produce profits in the year ended
Mar. 31 that topped those of Ford Motor Co. (F ) and General Motors
Corp. (GM ) combined.

It's a testament to the importance of managing the thousand-and-one
small innovations that together become something transformative.
Through a process called kaizen, the Japanese word for continuous
improvement, the auto maker relentlessly tries to find ways to enhance
every step from design through assembly. "Every day, every minute,
they're trying to improve their production systems or productivity or
quality," says Goldman Sachs & Co. (GS ) auto analyst Kunihiko Shiohara.

That requires perhaps the most fundamental quality of innovative
companies. They never stop hammering away at problems and
opportunities. They know that if they do, someone else will hammer
them. Says John L. Hennessy, president of Stanford University and
co-founder of chip designer MIPS Computer Systems (MIPS ): "It's
better to shoot yourself in the foot than to allow somebody else to
shoot you in some more vital part of the anatomy."

When Amazon.com managers noticed in 1999 that eBay Inc. (EBAY ) was
taking off, for instance, they launched their own auction site to tap
into the same group of sellers -- and the high-margin stream of
commissions. But eBay's momentum was too great, and Amazon's auctions
largely fizzled. Amazon also opened zShops, a gallery of independent
merchants on its site, but that attempt to create a marketplace didn't
catch fire either. In late 2000, an Amazonian came up with yet another
idea: Let other sellers offer their wares on the same page as Amazon's
own products. "Inviting third-party sellers onto our prime real estate
-- that made some palms sweat," Bezos admits.

But the Seattle-based company plowed ahead, and this feature has
turned into a hit. Now some 26% of unit sales on Amazon.com are by
other sellers, who like how easy it is to list items. "The
Amazon-selling platform is second to none," says Scot Wingo, CEO of
ChannelAdvisor Corp. in Research Triangle Park, N.C., which helps
large merchants sell on eBay and Amazon. The 60%-plus profit margin on
the commissions and fees it charges other merchants has overcome any
cannibalization. Bezos says people who buy used books buy more new
books, too. All that has helped the company to log four straight
profitable quarters.

"CONNECT AND DEVELOP"
Bezos isn't just stubborn. He makes his constant experimentation
economical by keeping project teams small and nimble. That way, even
when they fail, they haven't spent much time or money. Says Bezos: "To
the degree that you can get people in teams small enough that they can
be fed on two pizzas, you'll get a lot more productivity."

Increasingly, companies are rethinking where innovations come from.
The best ideas aren't always inside corporate research and development
labs, notes Henry Chesbrough, visiting assistant professor at UC
Berkeley's Haas School of Business and author of the book Open
Innovation: The New Imperative for Creating and Profiting from
Technology. So it's becoming crucial to knock down walls inside the
company -- between research and manufacturing or marketing -- while at
the same time reaching outside the company for ideas. But it's not
easy to do. Says Chesbrough: "There are powerful forces resisting the
opening up of companies' innovation processes."

Nowhere was that more apparent than at Procter & Gamble. Growth and
profits at the Cincinnati packaged-goods company stalled several years
ago, partly because some costly products developed in-house tanked.
New CEO Alan G. Lafley shook things up, replacing half of the
company's top 30 officers and urging product groups to "connect and
develop" by pulling in experts from unrelated brands to help on new
product creation.

For example, when P&G decided to move into a new market, the home
car-care business, researchers didn't start from scratch. They looked
around P&G for related expertise -- and struck gold. The company's PuR
unit's water-filter experts knew how to deionize water to get rid of
minerals, and its Cascade unit already had a compound in its
dishwasher detergent that reduced water spots. They used both
technologies in what became Mr. Clean AutoDry, a $24.99 handheld
sprayer system. It's so popular that it has helped to more than double
overall Mr. Clean brand sales in the past year. It also showed the
company a new way to innovate. Says Karl Ronn, vice-president of P&G's
home-care division: "Innovation nowadays is more like improvisation in
jazz than playing out a score that's already written."

Lafley didn't stop there. He also decreed that half the company's new
product ideas eventually come from outside, up from 20% last year.
That push has produced several popular products such as Olay
Regenerist, a new antiwrinkle cream based on a skin-repair compound
from a French company. The approach seems to be paying off. P&G's
overall unit growth before acquisitions has jumped from zero in 2001
to 8% last year. For the fourth quarter ended June 30, overall profits
shot up 44%, to $1.4 billion, on a 10% rise in sales, excluding
acquisitions.

Other companies are reaching out in more radical ways, such as tapping
their own customers' expertise to develop fresh products and services.
EBay CEO Margaret C. Whitman wasn't exaggerating when she told
thousands of attendees at the online marketplace's annual conference
of buyers and sellers in June, "You are in the room with us whenever
we make a decision." EBay watches what they trade on the site and
flies in buyers and sellers for feedback. Effectively, it lets its
customers decide where to expand next. That approach has paid off: 11
categories, from cars to jewelry, now top $1 billion in annual gross
sales each, and eBay's stock is worth $59 billion.

EBay's approach may be hard for many conventional companies to
emulate. But the notion of bringing customers inside to help develop
new products is catching on in mainstream corporations as well. In
2000, for instance, IBM signed a deal with GM to co-develop a
supercomputer for GM's car design and crash testing. The machine saved
GM $1 billion in product-development costs in the past three years and
cut by as much as 64% the time to get a car from the design stage to
the dealer's lot.

IBM may have gained even more. The work put into IBM's microprocessor
chip, operating system, and other software to make it a leader in
supercomputing also helped supercharge its commercial-server business.
"We got a huge competitive edge," says Bernard V. Schwartz, IBM's
global account executive for GM product development. In late August
market watcher Gartner Research (IT ) said IBM expanded its leading
share of the $11.5 billion server market to nearly 31%.

The ultimate in innovation, though, is not merely to come up with new
products and services. It's to create entirely new markets where none
existed before -- and better yet, to provide something that changes
the way we live and work. Innovation was never just about new gizmos
and gadgets. But in a service economy, innovations more than ever must
transcend objects. Some of today's most successful companies, from
Virgin Group Ltd. to eBay, create not only innovative products or
services but also novel business models.

"THIRD PLACE"
Most people might think of Starbucks, for instance, as a fancy coffee
joint. Not Chairman Howard D. Schultz. He sees the 8,000-store chain
as a "third place" for people to hang out besides home and work.
That's why a seemingly unrelated service -- offering wireless Net
access in its stores starting two years ago -- turned out to be a
winner. Although Starbucks Corp. (SBUX ) won't quantify the revenue
impact, people using the service stay nine times longer than the usual
five minutes, almost certainly buying more lattés. And 90% of
customers who log on are doing so after peak morning hours, filling
stores during previously light periods. Says Anne Saunders, Starbucks'
senior vice-president of marketing: "If we'd only thought of ourselves
as a coffee company, we wouldn't have done this."

The wireless network also inspired a new initiative that could again
remake the Seattle-based company. Its new Hear Music Coffeehouses,
about to be rolled out in existing Starbucks stores in Seattle with
plans for up to 1,000 sites by the end of 2005, feature dozens of
listening stations where people can make custom CDs, at about a buck a
tune, from hundreds of thousands of songs. In addition to offering a
new service to 30 million weekly customers, Schultz has said he thinks
Starbucks could transform the music business. At the least, he's
transforming Starbucks once again.

Who ever would have thought that Apple and Starbucks might compete?
Therein lies a fundamental constant of innovation: Nothing stays
constant. Contending with innovation's disruptive influence requires
what Amazon's Bezos calls a "culture of divine discontent" in which
everyone itches to improve things. "Most people, unleashed, are
innovators," he says. "We're this great species of tool-using animal
who likes to make our world better." The companies that can unleash
that particular animal instinct are the ones that will thrive.

By Robert D. Hof with Peter Burrows, in San Mateo, Calif., Steve Hamm
and Diane Brady in New York, and Ian Rowley in Tokyo

robertteh SG

Many advanced countries are managing their economies by taking a total approach - social, cultural, economic, ecological, resource- and energy-oriented and technological etc.

Those economies that will finally thrive and do well will be those that have the visions and practicality to totally manage the whole of info-sphere, social-sphere and cultural-sphere etc.

Truly thinking or innovative economy is not a dream or ideal. It is being practised by those who are truly thinking out of the box. I agree that such innovative or thinking economy is critical to our next phase of economic success. The traditional merger and diversification or scholar approach does not seem to produce results as has happened to chip industry when we did not measure up to expectation even if we created some big companies to try to run it. It is total management of social, cultural and technological knowledge in various discipline that is the true wisdom.

It is now up to our scholars and talents which are many in the public sector to put up their total plans in simple and easy-to-understand doable processes into implementation in an accountable and transparent manner - with facts and figures for close scrutiny by all.

Rolling Eyes

goh meng seng SG

It is sad that due to the political reality here, we are going to miss out this part of the development.

PAP is unwilling to let go its full contols of all aspects of Singapore, despite many talks of "open" society way back in the early 90s. Ironically, we are stepping backwards in terms of political openness as well as political structure.

The holistic approach to manging the economy is the next important step of economic development for Singapore but we are just not ready, thanks to the nanny PAP.

Goh Meng Seng

robertteh SG

There was a time when people will be treated as assets and contributors to economy and their opinions slightly more respected.

There was election time !!! So better do more homeworks to be ready for election time. Laughing

goh meng seng SG

We could do so much. The rest is up to Singaporeans to make their prudent choice.

Singapore is at the cross road and yes, even PM Lee is singing the same tune as I am; we need the change of mindsets and attitude, get rid of the FEAR factor...etc etc.... but he runs short of saying the PAP govt must actively change itself.

Yes, govt cannot artificially grow entrepreneurs, but for goodness sake, stop those GLCs from stealing other people's business ideas!

And yes, the economy must be managed in a holistic way, but this include the political structure which we need reform badly.

Goh Meng Seng