Viva la Innovación!

Innovation Excellence in Latin America

Where is Latin America on the world map of innovation excellence? According to INSEAD’s Global Innovation Index, the whole region is pretty much nowhere. The bleak news from the 2011 index, published about 6 months ago, is that only Chile made it into the top 40 (at number 38). Costa Rica and Brazil followed, at numbers 45 and 47 respectively. Then came Argentina, ranked at 58, and Uruguay at 64. Colombia, Paraguay and Panama were all ranked in the 70s, Mexico, Peru and Guatemala in the 80s, El Salvador, Ecuador and Honduras in the 90s, and finally Venezuela came in at 102, Nicaragua at 110 and Bolivia at 112, which puts these last three economies almost on a par with countries like Swaziland, Tanzania, Rwanda, Cambodia and Madagascar.

But that’s exactly why the Global Innovation Index is so misleading. It’s based on a particular set of variables—such as R&D expenditure, the number of patents filed or trademarks registered, the number of Ph.D.-holders in the population, the number of published scientific papers, and other issues like government policies, fiscal rules, and levels of economic productivity. These indicators are insufficient for measuring the true level of innovation performance inside a country, and they certainly fail to create an accurate picture of Latin America’s activity and potential. As INSEAD admits in a chapter of the index entitled “Innovation in Latin America: Recent Insights”, ‘These variables are undoubtedly of great importance, but they focus on technologically oriented, patentable innovations and fail to capture non-technological innovations and new-to-market or new-to-firm innovations.’ Lourdes Casanova, INSEAD lecturer in comparative management and one of the authors of the chapter, says, “We [tend to] measure innovation in very traditional ways” but “capturing innovation [in Latin America] does not come from traditional sources.”

Mastering a different kind of innovation

I have repeatedly argued that innovation is not just about heavily funded R&D labs, armies of scientists and list of patents. Rather, our conception of innovation must be broadened to encompass radical new thinking across the entire spectrum: processes, products, technologies, services, marketing strategies, customer experiences, cost structures, business models, management practices and industry architectures. And what we find when we look more closely at Latin American firms – both large and small – is that they are actually innovating quite well in this broader sense. As a matter of fact, there is an abundance of innovation across the region. It’s just that it doesn’t show up on INSEAD’s radar screen because it doesn’t fit the popular conceptions about innovation and how to measure it, and therefore fails to appear in the rankings.

Countries versus companies

Another failing of global indexes (another is the Global Competitiveness Report) is that, by their very nature, they focus on entire countries rather than on the individual firms within them. So a particular country may receive a very low ranking due to issues like government policies and macro-economics, but it may actually be home to some very innovative companies that deserve a lot of credit for their business creativity, and for their prowess at commercializing bold new ideas and growth opportunities on a fairly continuous basis.

My own experience in working with companies and governments in Latin America is that many of them are far more advanced in their efforts to make innovation an enterprise capability than their counterparts in the USA, Europe, the Middle East and Asia. Companies right across the region – regardless of size or industry – seem to have deeply understood the innovation imperative.

Innovation – not just a priority, but critical for survival

In a recent business innovation survey conducted in Brazil, 61% of senior executives said they consider innovation to be the most important element in defining their corporate strategy. Indeed, 57% of the respondents saw innovation as “critical for survival”.

In a more comprehensive survey of over 1500 manufacturing firms from eight countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, and Uruguay), the InnovaLatino report of 2011 concluded that “In Latin America and the Caribbean, innovation – the adoption of new products, production processes, marketing methods, and business models – has risen to the top of the agenda for decision makers in government and business alike”.

These decision makers rightly recognize that the burning issue companies face today is not how to optimize their organizations for mass production, world-class quality, and low cost; these were yesterday’s challenges. Rather, it is how to come up with radical new products, services, strategies and business models that create incredible value for their customers.

Meet a new breed of innovation champions

What is exciting is that many Latin American companies are not just talking about the importance of innovation; they are working methodically to turn it into an everyday organizational reality. Companies like Petrobras, Natura, Embrapa, and Braskem in Brazil;  DaVivienda, Crepes & Waffles, and Cementos Argos in Colombia; Casa Andina Private Collection in Peru; Grupo Britt, AdAstra Rocket, BAC Credomatic and Coopedota in Costa Rica, ES Salmon Leather in Chile, Los Grobo in Argentina; Sertecpet in Ecuador; Pollo Campero in Guatemala; the Panama Canal Authority in Panama; Nicaragua Sugar in Nicaragua; and the list goes on. Having focused for years on achieving operational excellence, these companies are now struggling to reinvent themselves for innovation excellence. They are busy recalibrating their organizations to make innovation a “part of the system”—something that becomes reflexive and natural to everyone. They are demonstrating that Latin American companies really can tackle the challenge of innovation successfully in a deep and sustainable way.

Perhaps these private and public organizations are the harbingers of the promised new economic era – the “Latin American decade”. Or perhaps they are destined to be islands of excellence in a region that will continue to be economically challenged well into the future. Either way, their story deserves to be told.

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Image credit: benm.at

Rowan Gibson is widely recognized as one of the world’s leading experts on enterprise innovation. He is co-author of the bestseller “Innovation to the Core” and a much in-demand public speaker around the globe. On Twitter he is @RowanGibson.