Can emerging markets conquer innovation with software?

Netscape co-founder and venture capitalist Marc Andreessen famously wrote in 2011 “software is steadily eating the world ”. Digitisation, he argued in a Wall Street Journal article, has disrupted and transformed industries as varied as travel, books and genetics, a trend that will accelerate as the computational power of software increases and its storage costs plummet. Just as Pandora and iTunes altered the business model of the music industry, and Amazon and Groupon displaced processes and brokers in the retail industry, every industry will be transformed by software.

This trend has not gone unnoticed by growth markets, which are redoubling efforts to encourage and attract software skills and innovation at home. Singapore, for example, is taking a highly proactive approach by setting up high-speed broadband services, technical education institutes and subsidised incubator spaces like Blk 71. The government also runs a Technology Incubation Scheme, where it co-invests up to 85%, or a maximum of $370,000 , in start-ups that have been vetted and approved by privately run incubators.And its 2015 budget includes a $6m fund for co-investment in start-ups involved in robotics, Industrial Internet and clean technology. Such policies have helped increase total venture funding in Singapore’s technology to $1.8bn in 2013 –  below China’s $3.5bn but above India’s.

Multinationals, too, play a large part in stimulating software start-ups in emerging markets. Google, for example, gave the Israeli start-up ecosystem a huge confidence boost when it acquired Israeli mapping service Waze in 2013 for a reported $1.1bn. Last year, Corporate Executive Board bought Bangalore-based analytics start-up Talent Neuron for $15m.

Beyond acquisition, multinationals can also promote an innovation ecosystem by opening local offices, hiring local workers and forming partnerships with local companies. PayPal, for instance, opened its first office in Dubai in 2012 to access more of the Middle East’s e-commerce market . A year later, it partnered with Google, the local logistics provider Aramex and a Jordanian start-up ShopGo to launch the website ezstore.me to help businesses build online stores.

Similarly, in Vietnam, where Intel is now building most of its Haswell CPU chips , the company is simultaneously also engaged in bolstering the national education system to increase the pool of engineers who will work in its factories. As part of its efforts, and in partnership with USAID and the Arizona State University, the company has launched a $40m program to improve tech education in Vietnam. It also launched a $7m scholarship fund for engineering students to study in the US.

Although an increasingly digital world suggests that innovation depends on software, the key to capturing innovation’s potential may, in fact, lie in public-private partnerships that drive human capital development and shared knowledge.

 

This post first appeared on GE LookAhead. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Holly Hickman writes for GE Look Ahead.

 Image: A laptop and USB cable are seen. REUTERS.

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