Innovation is Fracturing

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The pursuit of cheaper, faster manufacturing has lead to an enormous shift in the economies of the ‘old’ Industrial nations. After losing basic manufacturing and support roles, the West is now haemorrhaging advanced development and design functions to the manufacturing companies of Asia; in many cases run by Taiwanese business owners. Most of the major technology brands now have significant development operations in the region, and their role will only develop further.

So, is Western design and innovation dead in the water?

Cultural Exports

The West (and Japan) have proven adept at innovating ‘platforms’. Technical platforms include HTML, GSM phone standards and television. ‘Cultural platforms’ are just as important, though; hip-hop, fixed-gear bikes, haute-couture fashion and social networking all started life in the West, and went on to stimulate globally influential industries around them; as evidenced on the streets of Taipei today.

Fixie

Fixed gear bikes - the idea imported from Europe. The bike made in Taiwan.

Given the amount of technical expertise and knowledge on the ground in Taiwan, you would expect a similar amount of ‘platform’ innovation to be flourishing.  For one reason or another, it isn’t. This innovation requires an empowered workforce, willingness to start small (rather than ramping-up to volume production), great marketing teams, access to sales channels, and amongst a multitude of other economic and cultural factors, the willingness to play – you ain’t going to invent the first MP3 player without first loving music, and you aren’t going to assemble the first mountain bike without ‘wasting’ a whole bunch of time with your friends in the hills.

But there is innovation here; just not in the ways we think about it. For example, the iPhone ‘platform’, while masterminded in California, was enabled by a dozens of Taiwanese technology vendors over many decades, and the gradual honing, optimisation and refinement of the component parts and assemblies was essential in its birth and development. It is this ‘incremental innovation’ competency that companies in the West are exporting to Asia.

Now, ‘Platform innovation’ and ‘incremental innovation’ are geographically decoupling, eliminating  the ‘water-cooler’ conversations between marketeers, designers and engineers that so often lead to leaps of development.

Learning how to work with these guys in China will be increasingly important.

The Last of the Machinists

Consider the ‘old guard’ design houses in America and Europe; IDEO, Frog, Seymour Powell and the rest. The senior leadership of these organisations likely gained tacit hardware knowledge in an economic environment built on manufacturing and engineering expertise; it’s even possible that their own parents worked in technical or factory roles. But what happens to innovative industries when the keepers of this tacit knowledge retire? For economies that pride themselves on ‘innovation’ and design services – the UK and USA included – I believe the consequences are severe.

It’s part of the reason why, seven years ago, I decided to move to Taiwan.

Dual-Stream Innovation

Decoupling of ‘platform’ and ‘incremental’ innovation, difficulty in stimulating the ‘water-cooler effect’, and erosion of tacit knowledge, means many innovation-focused companies will struggle to do business in the way they used to.

Apple and a few others have been able to leverage a split innovation model; offloading the burden of innovating the countless component parts that individually might not contribute much to a product, but together form a synergetic whole; and retaining core competencies of layout, computer processors and mechanical aspects such as part tooling. By doing this, they are able to ride the wave of ‘incremental innovation’ provided by the immense volumes of an entire industry, push suppliers in a very targeted way, and make the platform leaps when they are ready. The result; a product like the iPad delievered to a pretty low cost for the consumer; and still a healthy margin.

Tooling in China

Tooling in China. Supplier in Taiwan. Computer company in the USA. And a customer somewhere else entirely. Complicated!

But what about companies smaller than the Fortune 500 behemoths? For the UK at least, we need to become far more willing to invest time and effort in Asia, forge partnerships, work out what incremental improvements we can outsource, and what platforms to retain.  The resultant development model is not the same as the one we learnt in university, and it is not the same as innovation process touted by the big innovation companies in the 90s.  It’s a messier, more complex, interlinked model, spanning companies and international boundaries.

Western design and innovation is not dead, but it will need to become braver, more flexible and more cosmopolitan.

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