OPINION – Challenging problems require new solutions

The 2020 Global Innovation Index indicates that the Shenzhen-Hong Kong-Guangzhou cluster is ranked second in the world among 100 science and technology clusters. This rank is both an impressive outcome and encouraging news for everyone living in the Greater Bay Area (GBA). Even though the study does not mention other GBA cities, implying that they are not worthy of being distinguished, innovation is at the top of the Macau SAR’s priorities and deserves attention.  

By José Alves 
Dean of the Faculty of Business  
City University of Macau 

In the last decades, the world has witnessed significant scientific and technological progress that have provided plenty of innovation and business opportunities. However, not all progress provides benefits to society. Some progress directly harms humans and the environment, or indirectly creates inequity and risks, raising questions about innovation and responsibility.  

We live in times where both innovation and responsibility are in high demand. Since the coronavirus pandemic, leaders in the public, private, and social sectors have eagerly launched an extensive range of measures to tackle rising economic and social problems. These efforts include recycling old solutions and new experiments, but only time will tell whether they will become innovations. 

The lingering crisis and “new normal” suggests increasing demand for leadership and innovative solutions. The work of the late Clayton Christensen and his colleagues provide useful insight in to understanding innovation and responsibility. They distinguish between sustaining and disruptive innovation. Sustaining innovation refers to incremental improvements driven by existing customers that build on existing knowledge and resources within companies. In contrast, disruptive innovation consists of designing new radical solutions that are typically simpler, more convenient, and less expensive, which appeal to a new set of customers. Radical innovation modifies conditions of use, disrupts the market, and usually implies a radical technological change.  

Christensen argued that radical innovation gives rise to a by-product that is social change. They studied innovations within the healthcare, education, and finance sectors in the United States. They found that investment in these sectors do not address social needs because it is misdirected to organizations wedded to current solutions that serve a narrow range of people.  They propose support for organizations that approach social problems in entirely new ways and provide solutions to a broader population (the article provides examples of solutions to each sector). That is to say, developing a more responsible system needs a radical innovation approach.       

(Xinhua/Ju Huanzong)

A responsible innovation perspective is useful to analyze how organizations deal with the current social and economic crisis. It also provides room to rethink problems that regions already faced before the crisis, such as economic diversification and poverty alleviation. 

The relief programs and recovery strategies that businesses and governments developed to address the consequences of the coronavirus pandemic crisis are, in general, better described as incremental innovations. 

Governments launched a range of programs aiming to maintain public health, support people in need and small enterprises, and stimulate consumption. A broad spectrum of economists argued that this is an appropriate and effective response mechanism. It has ensured not only safety but also confidence in public leadership. 

We also see a generalized effort of companies in all sectors using resources to maintain operations and staff at work. However, as the crisis lingers, we also observe a rise in unemployment and underemployment rates. Following the 2008 financial crisis, Ronald Heifetz and peers noted that crisis solutions are beyond anyone’s current expertise, and added that short-term fixes such as tightened controls, across-the-board cuts, and restructuring plans are familiar solutions of the past. Organizations need adaptive leadership, a process of both conservation and reinvention, where people need to develop new roles and competences. People need to confront loyalty to legacy practices and create a culture of courageous conversations.  

We are all wondering how businesses in Macau and the Greater Bay Area will tackle the crisis, and what they are doing to prepare the future. What kind of innovation do companies emphasize during the crisis – incremental or radical innovation? What sort of policies do we need to promote innovation further? How will innovation efforts impact on the most challenging problem, specifically sustainable development? 

Researchers argued that traditional deterministic models could not address such complex issues. The late Prof John Urry wrote about how we can appreciate and contribute to shaping the future. He argued for a complexity approach to the future that considers history, path dependency, and innovation systems’ capacity to trigger turning moments. (The popular literature calls it tipping points.) In this regard, the economic history of Macau supports John Urry’s argument. We only need to recall that when new ideas and innovations arrived in Macau, for example, those that gave rise to expanding the maritime, manufacturing, and entertainment sectors, the city transformed. In other words, Macau has experienced several periods of radical innovation. Radical innovation is exciting and promising work, however, it requires adaptive leadership. 

Before closing, I would like to draw on research that we conducted on cross-border entrepreneurship between Macau and Hengqin to point to a promising innovation. Macau’s leading investments in Hengqin include traditional Chinese medicine, multipurpose complexes, and living and health services. Among these, traditional Chinese medicine is materializing faster. Other science-related initiatives developed in Macau include science and technology research, and innovations by teams of local academics and universities, academic programs in health sciences and medicine, investment in health services, and constructing a new hospital.  These factors, combined with increasing demand for health services across the GBA suggest a potential turning moment in the cross-border healthcare sector. More importantly, focusing on the human services sector is a strong value-adding complement to the tourism sector, and a path for increased sustainability. Christensen would argue that this requires investing in new solutions and a broad range of people. 

To conclude, sustainable and radical innovation approaches serve the needs of different users and stakeholders. The former maintains the status quo while the latter defies it. Regardless of the direction followed, there will always be people who feel underserved. A responsible innovation perspective helps make far-reaching decisions and, more importantly, communicates those decisions to others. A complexity approach indicates how leaders and communities can prepare the future together.