 Good morning, ladies and gentlemen. Welcome to the age of disruptive innovation. I'm Vijay Vaitheswaran. I'm the China Business, Finance and Technology Editor for The Economist magazine, and it's my great pleasure to be your moderator, but also, hopefully, provocateur, as we have this terrific panel of experts and business leaders to talk about, I think, one of the most important dimensions of the new global economy. Now, when we talk about innovation, in my experience, it is one of the most abused and misused words in the English language. Let me take a show of hands. How many of you in this room are in favor of innovation? Put your hands up high. Okay, now hands down. How many of you are against innovation? How many of you are anti-innovation? I think it's a terrible thing. Exactly. You see my point. So we can have an hour-long discussion and everyone thinks they agree and they leave, and you find out that, in fact, you're talking about different things. So let me not make that mistake. Let me offer you a definition of innovation. I've spent 20 years at The Economist thinking about this subject. As an old MIT engineer, I've thought a lot about the technological dimensions, but also about the economics, business, societal aspects of this. We'll be coming out shortly with a book called Need, Speed and Greed, available at a good bookstore near you on the future of global innovation. And in that experience, I came up with one simple idea. First, what innovation is not? Innovation is not just technology. It's not IP. It's not gadgets and gizmos and patents. Although it's often conflated with invention, it's different from invention and bigger than I think. All those things are important, but in fact, if they don't create value for a customer, for society, for your employees, your shareholders, in my opinion, it's not innovation. Innovation is fresh thinking that creates value. And this doesn't have to be new technology. It can be an old idea applied in a new place. Let me just give a small example. We know the premier this morning talked about innovation and how important innovation is here in China. I would even posit that if we were to tackle the grand global challenges, be they ranging from resource constraints, one of the big themes of this summer Davos to climate change or the threat of deadly pandemics, to an era in which urbanization, demography, aging are posing enormous challenges to our health and other systems, we need to accelerate the meaningful pace of innovation in the world, I would argue. But it doesn't necessarily have to be just technology. 140 years ago, America faced an energy crisis. But it's not what you think. It wasn't about transportation. The whalers in my native Connecticut managed to kill off most of the whales in the world for the blubber which was used to light the lanterns of New England. So there was a major lighting crisis and they sent, they knew there was some oil in Pennsylvania coming out of the rocks. And they thought, well this could be a substitute fuel. And so a group of investors from New Haven sent a very shady character named Colonel Drake to Pennsylvania to see if he can find a way to harvest this new fuel. And like everyone else who was there, he started digging for oil. And of course, it didn't work. For months and months, he tried different places and finally the investors gave up. They said, Colonel, we're out of money, come home. And on that day, out of sheer desperation and a flash of brilliance, he remembered his history books. He remembered that China had for centuries drilled for salt. And he said, let me try that, what the Chinese have tried. And of course, on that day, he hit a spectacular gusher of oil inventing the modern oil industry, transforming the fortunes first of lighting and ultimately of transportation and empowering the century of oil. Now that is innovation. It wasn't a new technology, but it was an old idea applied in a new place, a new context in a way that met an unmet need. I think that's really the essence of innovation. And when we talk about disruptive innovation, what are we really talking about? We're moving towards an era in which established business models, established technologies, can be upended much more quickly. And even at the level of industries, perhaps even with the rise of China and a number of other BRICS economies, could it be at the level of countries? That's the question that many people around the world are grappling with. I'm delighted to say I have a distinguished panel here to help us think about this. But let me turn perhaps for a little bit more clarity and to help us think about this in a broader fashion than I have to Joseph Schoendorf, who's a partner at Excel Partners, a leading venture capitalist, is a member of the Foundation Board here at the WEF to help us think about disruptive innovation. Joseph. It's exciting to be here. This has been a bit of a momentous summer for me. I just finished 45 years since I came to Palo Alto to go to work for a little innovative, almost startup called Hewlett-Packard that was a $200 million company about to get in the computer business and companies like Intel, et cetera, et cetera, hadn't even been thought of at that point. So I've had a fairly good seat, if you will, at what's happened in the technology world. It occurred to me to just start by thinking about this subject by talking about some of the members of the forum who were not in business when Klaus started the World Economic Forum in the early 70s just to make an example of disruptive innovation. And three that came to mind are Microsoft started in the middle of the late 70s, Cisco started in the late 80s, Dell started in between those two. The forum was started in the early 70s. Now, what did Microsoft do? We tend to take it for granted now, but in pre-Microsoft, the world ran on mainframes. There was a centralized infrastructure and employees were told what to do. Microsoft was the first Freedom Act that basically let people with PCs be empowered to solve their own problems. Dell wiped out, if you will, by selling Direct. They disrupted a whole retail chain of events. And Cisco a start-up and most people don't know this story ended up buying IBM's networking business, SNA because IBM would not change to an open standard. Now, as I think about it, and if we have time, you could look at all three of those companies who've become world leaders and say now where are they threatened by the next wave of disruption. And we'll talk about that hopefully more, but I wanted to set the stage a little bit. Absolutely. You bring up a great point, and if we extend to the Fortune 500 or any of these other sorts of measures of leading companies we know that large companies are dying by and large for various reasons and most of the job growth, for example in a country like the United States although last month there were no jobs created here to take a 10 or 20 year perspective almost entirely created by small companies, new companies, new ideas, new businesses, and increasingly we're also finding that the engines and drivers of this disruption is coming from the emerging world, of course. And one of the great trends is in frugal engineering. And here we have a wonderful example of a company that has grown to tremendous prominence by being a disruptor. We have Liu Jiren, chairman and chief executive of Newsoft. If I can turn to you to give a couple of thoughts on disruption. Okay. For disruptive innovation for emerging nice and means you know as a business we try to new market space. So that means by provide low cost services like our product, like our customer easy to access our services or product and by value the society development to grow in our business, specifically drive the consumption of the business. I can give you examples about healthcare. In China if you see in past 30 years the people accumulate the wealth, but at the same time the chronic diseases also increase very much. They use almost double digital growth, much higher than GDP. The people before is hungry but now they have money, they eat so much, they don't spotting and the people's potential the risk of people or heart disease is number one in the world. We have 90 millions people have diabetes the problem. We have around 200 million people have blood issues. So if we look at the trains who can pay this money and we learn from US if today we say Obama government the headache of our budget of healthcare I can say that kind of story will happen in China in next 10 or 20 years. That budget that kind of money will make this country like a bankrupt because we cannot afford 1.3 billion people to spend a lot of money like US today for healthcare. Tell me the potential because I spent the last 5 years covering healthcare including the US healthcare reforms. A country that spends 18% of its GDP on healthcare has a tremendous chronic disease problem. Can't possibly afford this wave and as you say, China, India are following right behind with the chronic disease problem. Is there a potential for the technology, new business models the things you are working on to come to the rescue? What do you have in mind? Firstly of course you need to have the knowledge which is cheaper and easier to access. We are lucky today we have a clock computing we have internet, wireless communication like we develop small terminal in rural areas that is increased all kind of measurement of the body information which can be sharing by thousand family in small village. So we spend the knowledge of medical care to the last 200 to nearby the customer we develop like a watch that watch with various function you can measure all your movement the function you can got real time otherwise based on the doctor's knowledge. So that is the way I can say we disrupt traditional healthcare model we like the people spend only a few you know dollars they can take high quality healthcare in the whole. So I think that is the way we can solve the problem of cost of healthcare is not only just a budget a lot of money for that. Let me pick up on that example I think healthcare is a wonderful example energy would be another big asset intensive inefficient industry that is quite ripe for disruption and we may hear from one of our other speakers about some energy ideas from Korea but just on the healthcare point I want to underline it is not just about the technology although the advances in technology are fantastic with miniaturization, the electronic medical records the use of the cloud real time sensors miniaturized diagnostics and portable diagnostics there is a revolution coming putting them together is a huge technological task but ultimately the insight that the great Clay Christiansen a Harvard professor who coined the phrase disruptive innovation had it is not just about the new technology cheap hard drive storage was the one he looked at 30, 40 years ago a world that is attached to that and that can sometimes kill even the best technologies or most promising technologies if you don't find a good business model that offers good enough services and I learned this myself very briefly on the question of medical devices China is a great frugal innovator as is India countries that are developing wonderful cheap and cheerful technologies that are just good enough rather than the gold-plated scanners that might be very, very expensive and just a little bit better than the previous edition GE is one of those companies Philips, Siemens, a number of western companies are learning from Chinese counterparts how to do frugal engineering but are they taking it back to Europe and America and Japan where there are very high costs so in fact, at least in the case of GE I had a chance to interview Jeff Immelt recently and I asked him why are these not being sold more prominently in the US and one of the answers from his own health care chief was this new product cost $10,000 my salesmen make more on a commission on their current $100,000 product that they sell than this new product's value so I asked the chairman, Mr. Immelt what do you say to this, he said I'm going to have to find another way to pay my salesmen I think that gives you a sense of the challenge to establish businesses because the wave is coming as happened early on, for example with Japanese cars that initially were not so good but ultimately came to dominate the US and other markets and we saw it in steel, we saw it in shipbuilding it will come in other industries but what will the established industries giants do? We have in fact a company that is now an established firm and even though it's done its share of disrupting let me ask C.P. Gurani, chief executive officer of Mahendra Satyam as an established company now you have assets to defend you have quarterly profits to worry about what do you do about disruptive threats from the new upstarts that are enabling at your heels? I guess with Joe here on the panel it's difficult to argue whether established, global multinational is doing enough to look after the challenges that can come from any quarter Joe talked about Silicon Valley and how a few companies have gone, how the few companies have seen grow let me give you another perspective the perspective is that a firm like us in IT sector we employ about 65,000 people if I look at the whole of Mahendra's right from farm equipment to holidays we have 130,000 people so yes having a presence in over 40 countries you do realize that the culture of innovation the culture of disruptive innovation the culture of challenging your own business paradigms I mean it is not by serendipity it has to be cultivated so the right model that we work on is that we recognize that there will be a challenger group which will come and challenge us instead of waiting for somebody else to challenge us the way we foster that disruptive innovation is A, we focus on our own costs, we focus on our own growth but more importantly is that we have within our own firm people who challenge the conventional thinking people who are challenging the current paradigm and I can give you many examples as we go along but the point here is that we have to recognize that existing processes existing value systems existing structures are designed for sustainance and if you have to recognize that there is a new player going to be in the market which will challenge you whether it is healthcare I mean I agree that there are China and India have a similar examples I mean when we did a social inclusive project for emergency healthcare we didn't copy US, US cost us $400 a 911 call I mean whereas we couldn't afford more than maybe $1 I mean now having identified a need we decided how we are going to innovate, how we are going to do it differently and how we are going to definitely be a challenger to a technology that is coming in from US I heard two things there first and last you said you see the potential for leapfrogging by not following the same path of maybe a gold plated or asset intensive ways that are done in the OECD countries I think that is a great theme of modern business everyone in this room is certainly familiar with that but the other point you said was that even within your established organization which is really about incremental innovation about delivering and sustaining profits you do have individuals who are troublemakers who will come up with provocative ideas and what I would encourage as a chief executive and for other senior managers is to nurture those people because the organization has antibodies and I see Joseph Snotting has said he used to be at Hewlett Packard, a big company and Xerox would be another big company where lots of great ideas came but not necessarily were financially beneficial for the company much of the internet it is claimed in law was invented at Xerox Park but the company didn't make money on much of it again this is a hypocrite story but how do you sustain your current profits even as you encourage and nurture those that might disrupt them so that you have the businesses of the future I know that Professor at Keio University Japan you've thought about this question about the incumbents and how you deal with disruptive threats I think you might be a little bit more skeptical than some of our panelists actually if you look back at the history of the Japanese industry they are very good at nursing crazy ideas and provides funds and money to crazy guys and actually that was the source of disruptive innovation as well as incremental innovation these top executives didn't expect a lot from the bottom up innovation for the first time but after they found out that this innovation really works then they set it up platform for innovation both in terms of money and the incentive because of that a lot of innovation came out from the industry but now big companies in Japan started to save R&D cost started to save cost as minimum and because of that the money is not going to the innovative guys or crazy guys so that is why innovation from Japan is now decreasing so what I'm hearing is that there was a time where there is enough money and tolerance for the crazy guys at the bottom not just the design from the R&D team but unexpected surprises but as budgets have been cut internally that's not happening and let me turn to Joseph Shondra for a minute because this connects with the point we were discussing in the green room behind that you think actually the cut in R&D across the world is changing how innovation happens I haven't seen the aggregate numbers but if I just look at what I do see give you some quick examples Hewlett Packard when I worked there in the 60's and 70's and I was there 18 years we spent 10% on R&D you got the laser printer out of it you got the handheld calculator you got all the good products you know they're down to 2% and one of the biggest companies in this world was Bell apps you know from that you got the transistor which produced trillions of dollars of economic value you had IBM Yorktown I will just say to you all the companies I've looked at that have been big technological innovators are in a process of decreasing not increasing R&D and what that's resulted in is a lot of the startups that we do are now being purchased by those bigger companies as a safer way to do R&D i.e. the product is market tested it sounds like you're a little bit regretful that an era has passed but let me challenge you a little bit if indeed that's what you think isn't it also true that at the same time thanks to globalization and Googleization the trends that have upended the global economy we are actually in a world with much more open innovation where collaborative methods are actually the way forward you know as Bill Joy famously said co-founder of Sun Microsystems the smartest people in your industry don't work for your company and that's even more true today than it might have been before as we move towards an age of much more democratic innovation many more countries many more bright ideas from around the world can contribute to the innovation process now isn't it perhaps good that you don't have ivory towers and instead have maybe beacons attract the best talent to be able to work with Tsinghua University or with a leading institute in India or Brazil but nevertheless be able to work as a partner and collaborator not in-house I don't want to leave you with the wrong impression we were talking specifically about Big Company R&D in the 45 years I've been in Silicon Valley I have never seen more innovation underway in the valley than I have today in order magnitude and I wrote down quickly five areas most of it is you look at Infotech as we move to the cloud the number of companies that are in that area that are doing some pretty spectacular things I was at a conference on Saturday Neurotech there were 100 startups in a conference that's going to happen Brain Science Gene Tech when Craig Vanner and Francis Collins decoded the human genome they spent $250 million to do the first one we can do it for under $1,000 today Silicon Valley startups and the cost of decoding the human genome is coming down at five times the rate of Moore's law we don't have a name for the law but it's five times faster you look at clean tech innovations that are going on there I've never seen so many parallel tracks it's just not coming from the traditional sources and that's my point great so in some sense a golden age for innovation I want to come to the audience in just a moment after I turn to our final panelist so I just want to alert you please get your questions together we'll put them to our good gurus on stage let me turn to Sam Pyol who is president of Christ University the Korea Advanced Institutes of Science and Technology you've certainly had a great perch in which to look at Korea's sleep frogging but I wondered if you could start by connecting the dots to the startup culture that has been just talked about Korea historically has made its way through Chai Bowl and large institutions can you tell us is that changing you yourself are involved with some startup ventures I know are we going to see a big startup culture in Korea is it going to tap into the trends that Joseph Schoendorf just mentioned well I'm not sure if I can respond to the way you phrased the problem we started out to solve most important problems of the 21st century for a university that's a luxury we have we are not looking for making money but we wanted to solve problems of the humanity of the 21st century so we identified four areas E, E, W, S energy, environment water and sustainability and as part of this effort we are lucky to get fairly major funding during the last two years we started this particular project two years ago and we spent about 50 million dollars and today we created what we call OLEV online electric vehicle in two years we installed complete new ways of running automobiles the purpose of this project was to eliminate internal combustion engines that's a very ambitious goal eliminate internal combustion engines from our streets so what we do is we provide power electric power from underground cable to the moving vehicle so the moving vehicle has only small battery so it can go anywhere so as a result of this effort in the way that it can be done we installed three systems taking passengers around Seoul Grand Park and now there is a company in the United States and there is a company in Korea trying to commercialize these new technologies so just to be clear is this a university venture or a joint venture we own 30% investors own 70% and this is the following there are many different ways of introducing disruptive innovation and we studied that as a research goal trying to see how we can replace internal combustion engines and most big companies did not take us very seriously in fact we approached large companies that make automobiles they all turned us down they did not want to talk to us because they didn't think that this is the kind of technology they want to see developed so today it's a major accomplishment in my opinion that in two years we developed technology we deployed it in Seoul city and then we have investors trying to make it work do you think that this is going to be a more common phenomenon in Korea? I hope so because most big Korean companies succeeded by taking on technologies in the marketplace and then they became more competitive made better products and then they were very successful in competing DRAMs to cars and that has been the Korean formula for success now we are saying that Korea cannot grow anymore based on that kind of strategy they need to innovate so this is where we come in many follow-ups for our team but let's see if we can get some questions in from the audience I see a gentleman with a hand near the front let's get a microphone again the ground rules as ever please identify yourself and I ask you please make it a short and sweet question not a long gas bag intervention nobody likes that I'm MK Singhi from Shri Sement India a sustainable company my question to Mr. Gurnaani how do you manage failures in innovative process thank you sorry Mr. Singhi you'll have to repeat the question how do you manage failures failures in innovative process I think again you know just a small background to the world around us the way it is changing the fundamental fact is that you know the sector IT or the technology sector that I represent it is evident that technology at home today is superior to the technology at work the examples are that at home you use a tablet at home you use the Microsoft skin X or the Wii kind of a games at the games that you use the user interfaces are a lot better and better in real time now the only way to do it as I said is that internally within a large organization you create a fractal you create smaller groups which are challenging and sometimes it could be two or three groups addressing a similar challenge now if this is a can you give an example of one that has failed where you didn't fire the guy in charge many of them I'll give you an example now mobility has become the buzz word today whether it is enterprise mobility or whether it is in terms of you know seeing the smaller screen or the big screens now we invested a fair amount on a technology called YMAX now the reality is Intel Motorola and some of us invested a lot on that YMAX technology and that technology because of the 2008 crisis and eventually an LTE which is a 4G what we now know as I mean got enough time to catch up now one way of looking at it is that my investment of where I was looking at disruptive innovation for YMAX was a failure and I you know I write it off but the other way was that we learned so much in mobility that we were able to reach analyze that energy into LTE so no we didn't fire we actually promoted the vice president to us running YMAX lab that's a great example one of the key lessons about how to think about innovation is of course to learn how to fail gracefully this is easy to say but it's very difficult to do you know the endless number of books in Harvard business school and other kinds of INSEAD case studies written about failure and why managers need to learn to manage failure it is very difficult to take type A driven people all of whom want your CEO jobs your deputies and tell them that it's okay to fail they don't like to fail we like to hide our failures and most importantly the lessons that could be learned by sharing failures more widely with the organization are typically buried and so a sign of good companies are ones where they actually and one company I know actually throws a party just to celebrate shutting down of a project that didn't work but it does stress and disseminate the findings so that other people in the company don't make that mistake again I think that's the kind of new age we're living in as innovation and the metabolism of disruption increases around the world there are more and more chances now or shots being taken shots on goal against established businesses it's not that the powers of incumbency have gone away it's that the barriers to entry are dropping and so you're getting more and more new ideas new technologies, new contenders more often and be a little bit more resilient with those failures I think that's one of the lessons that the experience just described highlights let's take another question from the floor I see a lady on my right let's get a microphone there and then I see another lady here right in front of me we'll come to you next again please identify yourself in a question rather than a long comment Thank you Stephanie Loder I'm from Rio Tinto in India I'd like to understand and perhaps I'll direct this question to Mr Natsuno with your understanding of innovation is it better to give somebody a target like I'm going to use the Indian example of the Tata nano car there was the one like car is it better to give people a target of what they need to achieve or to give them a concept actually you know if you look back the industry history you know so many around these things took place in the history of the Japanese auto industry and the other common industry and many industries but you know if you look back the load maps they made in first nothing was on the load map nothing and you know some project was accelerated and some project are not not progressed at all but you know all the managers actually always knows these innovative culture as it is regardless of failure over success and as you know Japanese companies are very famous for seniority system and long time employment lifetime employment system and in the system they not crazy guys as a result as a result they didn't expect as a result but the recently this tendency has changed because of the economic crisis actually and they didn't allow they are not capable of allowing these crazy guys still living in the company and they are making down the money and because of that investment to new world investment for efficient things would be less and less and on the contrary you know the banking system and the financial system in Japan is also big company oriented and it doesn't provide anything to startups because of that you know as a total number of innovative things from Japan is decreasing as a trend but Japan has money as a country so if we change a little bit for the financial supporting system then I believe these new innovations would be divide again let me just add a small thought to that of course you are talking about the tension between top down one of the schools of thought that has come in fashion and thinking about innovation is design thinking and one of the arguments there is that if you give innovators a blank piece of paper it is actually quite difficult whereas designers love to have some constraints to your point about targets or goals giving some constraints but not too many is a way to unleash creativity whereas just giving a blank piece of paper may not produce the results that you want I think there is another question I saw the hand before and we will come here to you next and then we will go to the back next Hi I am Mary Kay Magstead I am the China correspondent for the BBC public radio international program the world this is a question for Liu Jiren we were talking about failure and the need to accept failure to be able to promote innovation I am wondering how you feel that is going in China there is a lot of pressure for researchers to come up with patents to come up with journal articles to come up with innovations and it is sort of up or out how do you deal with it at your company and what sorts of evolutions and changes are you seeing in the broader society related to this question I think the driver for the news app to take activity of innovation is we try to understood what is demand from a marketplace how to value that society so that is a way we are not easy to make a mistake so if we say what is the demand big demand of this emerging nation when GDP for each family they got more income I think two areas we are very much focused on why is healthcare a nice education that is money should be paid by each of family each of individuals and also this government if we look at what is the pressure of a government to make like 12 5 years the planning I do believe just like a premier Mr. Wenjiabao mentioned a lot of money we will invite for that area so then we are thinking about how to like normal people I mean the people have very low income in the rural areas they can access high quality services by pay very very low price and then we try to integrate the tech knowledge by open innovation we don't do everything by ourselves let me jump in I think you have certainly persuaded me and many people in the room this is a great thing to do but to the questioner's point are you taking risks will you allow your researchers to fail the innovation process is the question in this process are you designing the opportunity to make mistakes without paying the ultimate price that is I mentioned so the risk means if you have wrong direction you will take a big risk if you have right choices you need to very much a patient you need to invite to continue to do that for long term arrangement for your manager so I think most of the risk is because the first big risk is you lose opportunity you don't take a risk that means it's a big risk if you don't take a risk so another thing the opportunity will come in a little bit later so whether you have enough resources whether you really arrange your resources to waiting some days coming so that is what we did so we are not enough money from resources from capital comparison multinational company we are still small but every time I do believe we caught a lot of new opportunity in this country because we wake up very early we are very much a patient we know how to build innovation plan form by copied with many of stakeholders not only ourselves let's see this lady here who is very patient and then I'll go all the way to the back where I see a gentleman's hand for now let's get a question here please identify yourself can I speak in Chinese I want to ask a question to President Liu of Chairman of Newsoft I'm with China Business News just now you talked about innovation you used to be a B2B company and now you are switching to B2B plus B2C so my question is why are you carrying out this transformation is it because you are facing new business barriers new business challenges that's my first question secondly please thank you the people in here mostly understood English so I respond to English if you talk about a business model we are talking about disruptive innovation is not only a business model not only technology to integrate the demand of the society integrate a business model integrate a technology we are talking about before like Newsoft we take a B2B model it's our model but today we take a BBC that means B2B B2C why are we doing that it's because we have 3,000 hospitals it's our big cluster if we expand hospital services we come to each of individuals to the home so we make exactly different model that is BBC so that the B will value I mean we value of that all the hospitals will be very much happier because they got millions customers that cannot be used a transition model they cannot afford for millions customers to come to the hospital but today they use their knowledge they use the internet you can manage all the patients especially for aging society of China so that is we are talking about that is a new marketplace that place we got a lot of customers in very low income but our customers we value not only ourselves 3,000 hospitals is very much happy to say today the hospital can manage millions people who stay in home use their own facility use their own room but they can exercise high quality healthcare let's go to the back row this gentleman has been very patient your name please let me ask a question in Chinese I'm with Chinese online banking magazine I have a question for the moderator in premiere one speech this morning during the 12th 5 year plan period China will become a highly innovative country the US speaker and the Japanese professor are also talking about the disruptive innovation and the gradual approach innovation so in your opinion which approach in innovation would be most suitable for China thank you I think the real experts are here on the panel so I will defer to them but I'll give you one or two sentences of my view I think China is already a tremendously innovative country but one has to look at economic history and see what is the way that countries develop and traditionally it has been through catch up growth to use the phrase of the economists that is leading economies spend the money and the expense at the technological frontier the so-called bleeding edge to invent new breakthrough technologies and ultimately the rest of the world benefits it's not a zero sum game the fallacy a lot of people have when they posit that the rise of China is bad for America or some of these arguments one hears in US politics I think that's fundamentally wrong the rise of Japan was not bad for the west on the contrary it's a rising tide that lifted many boats and similarly the rise of China as an innovative economy can be a rising tide that lifts the global economy but historically I think it would be a mistake to think that China's innovation will be exactly the same as the Silicon Valley in every way historically it has been through adoption and diffusion and advancement up the innovation curve the countries have moved up the innovation channel the great question mark today and why we're having this conversation about disruption is could there be something new under the sun in other words is it possible to leapfrog and we have seen with mobile telephony in Africa for example we're going without fixed lines going straight to the cell phone or mobile phone there are examples and health care in the rich world might be an example of very asset heavy industries that are slow to move and such is the pace of exponential technology growth these days that developing countries can leapfrog to the latest and best technologies with better business models and that's really what we've talked about and I might turn to Joseph to offer a thought on this question since I know you spent a long time thinking about this I want to go back to to answer that I want to go back to the failure issue because failure is actually the key to innovative success people ask me all the time you know what is it about silicon valley that makes it silicon valley well first of all it's nothing about the people because if you go into silicon valley today it looks like this room meaning there's somebody from everywhere working there we have funds in the US our 11th fund in Europe, Israel our third fund in India our second fund in China we only work with early stage companies that's what we do some of the companies we have started that you might know about Facebook, Groupon Dropbox take a famous company look at its IPO look at the management team that built that company Google or study their background many if not most of them were in a company that failed that shut down i.e. the key to great innovation is the ability to tolerate and even celebrate abject failure and unfortunately as we go around the world that culture is not in place everywhere in the spirit of Davos and being open while in silicon valley if we fail you to one of the prime ministers who was very much against the failure model because it created unemployment and you can't shut down a company I said most of the people in silicon valley can change jobs the next week and stay in the same carpool you go to Germany just to give you another example failure there pretty much puts a lifetime stamp on you in the society which takes away the ability to take risk and great innovation requires great risk and it requires the ability to fail because most companies the majority of companies in silicon valley fail great answer let's go to this side of the room where I've been very neglectful and I apologize prove me wrong by showing lots of hands and good questions on this side anybody over there so I've neglected you for a good reason let's stick with the back row or near the back I see a gentleman there yes right where the microphone is please identify yourself I'm Shingon Fen from international food policy research institute could you the panel the panelist and the moderator to look at the role of international property rights making sure that small innovative ideas can be translated into large large scale innovations that can serve the whole society ideas like golden rice well not including golden rice biofortification crops innovations anyone want to tackle this question on intellectual property rights to a start that you're not going to like we see hundreds of business plans that come into us somebody comes in and says here's a great piece of IP and the front of their pitches and here's our patents we tend to go to sleep because yes we hear all of this about patents and Motorola just got bought by Google for billions of dollars for patents and patents and patents and patents for little companies to succeed they have one thing that causes them to think about this we do startups and all of these companies up here are billions of dollar companies and have lots of resources I'm talking about the Fortune 500 what do little companies have speed that means they've got to innovate and then they've got to innovate again and then they've got to innovate again and if they're counting on patents to protect them the next thing you know they'll be caught up in patent fights for two or three years which they can't defend so what we want is teams that can quickly innovate and then replace that innovation with a better innovation I see Liu Jiren has been shaking his head positively do you want to add a small thought to that I think people ask IPR issues mostly they're concerned about how to use the IPR in China because many of the multinational companies worry about IPR how to protect the IPR in China we are a software service company we have same kind of issues when I found this company 20 years ago I make a first software company I try to sell the copies but that software will be copied by somebody else just one year I caused almost all our investment but I learned something if you really want to make business success in this country move more fast you don't just keep something in your hand you say you have something valuable and then from that day we just like a runner every day we wake up early we are wrong and we look at the bike we say what is our target so you don't try to protect you just nothing today's technology is commodity so you can find something two solutions, two answers one thing you don't know other people already somebody had secondly you find something never have value you try to keep that you say that is your wealth that is totally mistake I think to protect yourself the interest of business move fast always fast then you are competitive that is our solution that's a tough advice but I think very much consistent with the world in which the very rules of innovation are changing where thanks to openness thanks to the risk that's involved thanks to the way that we connect more rapidly the metabolism innovation changing I think it's very powerful advice it's hard to do it's easier in software for example than if you are making cars or steel or developing biotech drugs that might take many years it is more difficult but I think inevitably my argument is some less important even as we continue to reward innovators in other ways and so I think innovation deserves its rewards but it may not be through the traditional notion of keeping patents close to your chest I think that's the picture that's emerging let's get another question here this gentleman here straight ahead in the blue tie has been waiting for a long time back with the grey suit my name is Eva Kessensen from Nordic Innovation in Norway I have a question to Gannani about when you are a big company developing a new disruptive business model at the same time as you have a profitable ongoing business model how do you from a management point of view handle that challenge having a new business model coming and at the same time have a profitable business model running to give you an example not so much from my own company but from one of the most well coated you know innovation disruptive innovation case studies from India which was a nano car a $2,000 car which was ultimately going to disrupt the auto sector the completely disrupt the scooter industry and the motorcycle industry now when you look at that creation I mean it is not that Tata Motors went out of business and did not produce their trucks did not produce their other cars did not produce their multi utility vehicles now if you look at that case study it is clear that you can coexist and you can decide to be disruptive or replace a certain set of the market now two years later of that launch you may come back and say maybe it was a failure because the plant which was designed for 100,000 cars a month is currently maybe producing 20,000 cars a month now when you look at that again as a case study you would realize is it wasn't a fault in creating a product it wasn't a fault in bringing in a product it wasn't a fault in being able to deliver a $2,000 product but the fault became in marketing marketing and positioning is that it got sold as a fourth car or a third car to an existing family instead of replacing a motorcycle or a scooter so my personal submission is that I again I am repeating is that innovation can coexist can be a part of the DNA of a large company but it has to be driven from the top and you need to address and you need to make sure is that you have a balance of Mavericks you have a balance of people who are devoted to it and a CXOs devote sufficient time to challenge what they already have yes the gentleman very animated in the second row I think might be one of our last questions please short and sweet David Chen from Microsoft China's new priority is to change the pattern of the growth from a labor intensive to resource intensive to innovative knowledge based however people concern that the China cannot do that very successfully because of lack of IP protection or IP environment China is full of talents but not a great software company or for reasons that you mentioned questions that what's your view on that if you agree what's your advice to China again it takes a long time to build a services business and the main reason of building a services business is because it takes what you're trying to earn is that I call software services business as a risk management business the reason I call it a risk management business is that when somebody whether it is a new company giving you a product development or whether it's a large company like General Motors giving you their maintenance and testing services they're basically asking you to take over their risk because it is not that they don't need the maintenance it's not that they don't need the testing they need a 24 by 7 it is mission critical now but just because time is short let me get to the sharp point that the gentleman put which you're very effectively ducking are you worried for example in China your crown jewels will be stolen sorry the crown jewels of your IP will not be protected in this country I think that was the point of the question I believe that you know there are two things obviously that number one is the time that you need to be able to develop the confidence and number two I think is that while all of us believe in China has the largest a fairly large English speaking population but I still believe that there's a huge gap in colloquial English and being able to communicate effectively and number third is that for many companies there is a perceived notion that their IP or their assets are not safe out here so I guess it needs to be addressed alright I think that's going to be the last word from the panelists just because we're just about out of time let me just take a brief 60 seconds to summarize it would be impossible to summarize all the points but I think you get the flavor we have a whole track on innovation during this summer Davos to which of course I expect to see lots of you here with so many questions I can see this is a topic that you're interested in deeply we're in an age of tremendous grand global challenges we know this is one of the great themes of the Davos conferences dealing with them I would argue requires accelerating the piece of global innovation and we're beginning to see in the ways that we've discussed on this stage a faster metabolism in the way that innovation happens and as well the greater potential for disruption I think that we can expect a lot more coming this creates both peril as well as opportunities I think that's really the point for those companies that are complacent especially the established companies you can expect to go the way as Joseph pointed out of the founding members of the World Economic Forum who are no longer members or who weren't there at the creation let's put it that way or of the Fortune 500 companies that no longer exist but equally think of the new Microsofts to come and their Chinese and Indian and Brazilian equivalents these are being created every day as well so it's a time of extraordinary risk but equally extraordinary opportunity I think you'll agree that our panelists have done a wonderful job in taking on these big issues join me in giving them and the organizers a round of applause thank you very much