Innovation as a driver of growth
By Namir Sioufi, Shareholder and Regional Head of Patents, Saba & Co. IP
In today’s global economy, innovation plays a vital role in driving growth and fostering development. Countries that invest in innovation can create new products and services, improve productivity, and stimulate economic growth. The innovation index is a tool used to measure a country’s innovation performance, and it has become a key metric for policymakers and investors to evaluate a country’s economic potential. In the GCC region, innovation is an integral part in the different countries’ forward-looking visions for growth and sustainability.
Table I GII rank and score of the top 10 economies and the GCC economies.
Source: Global Innovation Index Database, WIPO, 2022
The innovation index is a composite indicator that measures a country’s innovation performance. It takes into account factors such as research and development (R&D) investment, patent applications, and high-tech exports. The index is used to rank countries based on their innovation performance. The higher a country’s innovation index, the more innovative it is considered. Research has shown that there is a positive relationship between innovation index and economic growth. Countries that perform well in the innovation index tend to have higher economic growth rates. The top 10 economies in 2022 based on the Global Innovation Index (GII) can be found in Table I, which also lists the GII for the GCC countries. As can be seen, since the UAE’s vision was launched back in 2010, the earliest country in the region to launch such an initiative, the UAE presently ranks the highest of the GCC countries, coming in at rank 31.
Policymakers can use the innovation index to identify areas for improvement and develop policies to promote innovation. For example, a country with a low innovation index may need to increase R&D investment, improve intellectual property protection, or develop a more skilled workforce. By promoting innovation, policymakers can help stimulate economic growth and improve the standard of living for their citizens. Having recognized the importance of innovation, the GCC countries have made significant strides in promoting an innovation culture. Now, it is crucial for the private sector to capitalize on these government initiatives and foster a culture of innovation within their organizations.
Innovation can drive economic growth through various means. Firstly, it spurs the development of new products and services, which can create new markets and boost demand. This can lead to increased business activity, job creation, and higher incomes. Second, innovation can improve productivity, which can lead to cost savings and increased competitiveness. Finally, innovation can lead to the development of new industries and sectors, which can create new opportunities for growth. Innovation, more so than diversification, is key to unlocking value that cannot be reached by competing in the same playing field.
The essence of innovation may be described as change that unlocks new value. The process of unlocking value is built on well known concepts and practices such as creativity, experimentation, prototyping, and others. A culture of innovation refers to a workplace environment that encourages employees to share and discuss creative ideas. This culture begins with a leadership of innovation which introduces, enables, and empowers individual innovation within the organization.
GPCA held its 7th IP Awareness Workshop on 24-25 May 2023 under the theme ‘Transitioning from a Technology Licensee to a Technology Leader.’ The transformation from a culture of users to a culture of innovators requires significant time and resources. The workshop provided an understanding of IP, including its associated rights, strategies, and protection mechanisms in the GCC with real world examples and case studies. During the workshop, participants explored various aspects, including different types of technology and IP, effective management of existing assets, and strategies for developing, protecting, leveraging, scaling up, implementing, and commercializing new technology and IP. The aim was to help companies derive maximum value from their IP while minimizing any associated risks, which is crucial in today’s competitive global business environment.
To create IP, first, a company needs to innovate. Whereas innovation may take place locally, within a company, its impact is global. Hence, a successful innovation requires answers to a solution for an unmet customer need, which solution should be built on a business model that allows for the solution to be monetized.
In a recent article published by McKinsey & Company, the authors found that “companies that harness the essentials of innovation see a substantial performance edge that separates them from others—with evidence that mastering innovation can generate economic profit that is 2.4 times higher than that of other players.”[i] There is no doubt that innovation, possibly more than diversification, is key to unlocking value that cannot be reached by competing in the same playing field. Innovation, by its essence, is the process of creating change that unlocks new value. The process of unlocking value is built on well-known concepts and practices such as creativity, experimentation, prototyping, and others.
Innovation and creativity are closely related but not synonymous. Using creativity in business is important because it fosters unique and novel ideas. This novelty is a key component of innovation. The importance of innovation becomes more apparent during challenging times. Three typical reasons why innovation is crucial for any business are: (1) it allows adaptability, (2) it provides growth, and (3) it distinguishes businesses from the competition. There are many tools and instruments that can help guide an organization into becoming an innovative hub, capitalizing on its own human resources to drive innovation and growth.
In an article published in 2021 in Forbes[i], the author tackles the topic of “Why Innovation, Not Diversification, Is Key To The Oil And Gas Industry’s Survival.” A quick survey of patented technology in the oil and gas and downstream industry shows that the most common subject matters relate to exploration, production technologies, drilling and completion technologies and enhanced recovery methods. These innovations have undoubtedly ensured sustainability in a crowded industry competing for some of the same resources. More recently, innovators in the environmental and safety technologies are starting to see a spike, ushering in an era for disruptive technology. Be it carbon footprint measurement and reduction, alternative treatment methods for cleaner derivatives, advanced management software or others, the innovators in this area are the ones addressing the needs for the clients of the future, thus ensuring continuous growth.
According to a GlobalData Patent Analytics surveying patenting behavior, the oil and gas industry sector witnessed an average annual drop rate in patents of about 7% between Q1 2018 and Q1 2022; whereas the power and utilities sector witnessed an average annual growth rate in patents of 14% during the same period. The highest share in power generation relates to using solar-based technologies, but also key patented themes included climate change, emissions reductions, renewable energy, industrial automation and electric vehicles (EVs).
In summary, innovation is a key driver of economic growth because it helps to create new value and drive progress in a wide range of industries and sectors. It is crucial for economic growth because it leads to the creation of new products, services and business models that can increase productivity, efficiency and competitiveness. It can also lead to the development of new industries and the expansion of existing ones.