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[Music] [Music] or I get into the details of this I hear some of you are students so the answer is citizen all right so we're going to same question but now America so my jury was also once on TV America and this is that a federal level the reason I started with that is because when you look at that and you say don't they have the roads fixed all the schools all the hospitals good governance and so on this media puts their circumstance into perspective right I do this is to highlight how important the role of entrepreneurs is in the world so I love talking about him because he changed the way I came and we're gonna see the world and my job today is to do my best - it seems reduce you a couple of ideas in our book maybe we frame the way you think the way you see innovation role in creating prosperity but one of the big things that played our song is the importance of theory and the focus of today is really sort of combining ideas in his first book with some new ideas we have the prosperity paradox and he applied innovation to competition and industry in the which is of the book that was this type of thing and we have taken that concept and you applied it to economies and how it can impact the Commons and admin groups of all his his books and ideas is the the most of management theory we don't wake up every day with questions in our minds right what classes do I take whatever I go to schools during investor or a manager you're asking different questions right should I buy this company should I sell should we invest in this resource should we hire this person should advise so they all these questions and we answer the questions or based on God or we can use the management theories and so clay has built his career base on coming up with these theories and they act as tools right so depending on the situation you find yourself you say do I need an innovation theory to help me with that job said he done [Music] so we I just wanna share with you today the economy consumption and consumption talk about how all the innovations are created equal and atmosphere the power of market creative innovation and the third is this some people were creating Innovation Lab so what you see here are three centric circles this is so public about the economy a lot of times when you buy the innovation perspective we simplify it and say like if you look at these three circles and just take the population of people in a circle my wealth a ton of access right it's on skill now and as the circle gets bigger you go people would progressively less money less access less skill right and what we say is there is a ton of non consumption especially in the two outermost circles that was a simplistic representation but because of its just years ago my guess is almost everybody everybody has a computer in their pockets right now right because they democratize and they're being further democratizing in lower income countries and so as you as we think about innovation and the impact it's in its ability to democratize access it doesn't mean people they have to use computers so it is that if made practices were so the dominant way we do computation is no way I would have access to in this in this room so this is founded by Steve Jobs and Steve Wozniak right I was at the time he came up with yeah yeah it was actually working at HP and he idea of the personal computer five times two people and it just kept shuttin it down if they didn't see the value ARCA didn't exist and they just didn't see what the point was actually in to see the characteristics of these different markets and how when you pitch and innovation to a circle where there's no product or service yet oftentimes you but there are ways that you can even figure out how to democratize access to people in markets and so how do we do that that's what we're the next point is and that's where for us at the Institute and clay he also clay is so the signal values especially father of the innovation especially one of the worst he hates the most is innovation because they would even others it needs so many different things to different people so he actually so for us is its ability to democratize access from one surface to another here's the thing transitioning from one circle to another fundamentally that's just a fancy business word for how you did your products might be right and so if you think about it personally every products this there's a group of people who sit down research and design it and it figured I was a very suggestive of value chain about the network manufacturer and distributor market itself and if necessary use of a self-service with each component in the value chain right you're adding costs to the product for you to go from mainframe computers to personal computer or smartphone you have to change the value network and this is where you normally for people in society as you change the value network from mainframe computers to the personal computers to smartphones right into what ultimately happens it's because you're serving so recipe larger circles the product the product the product so as we think about our work every single model is how do we democratize innovations that make life better for people how do we increase the number of people that have access to in doing that it find it's sort of a business can help us do that what ultimately happens is you create a new value network that hires a lot more people and as that happens you see society become prosperous and it's an evolutionary process cars are about the same thing you know 100 years ago cars what I private jets today they're extremely expensive and difficult to surprise or has hearts hundred years ago before it comes around said help me the car for the average American many people who told said that's some of his investors walked out of him and said how unique our laws work but you know created an entirely new value network was able to protect access to cars and that led to so much development in the US and you know how many folks know how we actually pay for our roads today building those some taxes okay so that's true right total taxes taxes from gasoline and rubber tires and so think about paying for obese so we need about four countries right and it won't have good roads so they can't maintain their roads when you begin to think about how many cars they have on the roads versus eight cars wealthy countries I want the roads he would begin to draw these connections and see oh there is a link to the construction that infrastructure to the democratization of innovation right you begin to even estimate when you read a report and Wall Street Journal this country built this new road and just you've actually seen years because it makes it sustainable that's the important that's why we got very serious is this how we see and so the three main types to stick around that out the first are market creating innovations these are innovations that transform complicated and expensive products it's a part of simple and affordable so many more people in society could get access to them at the core they create growth development they create jobs but they need capital manager requesting capital for a market that does not get this so this is where it was an equal status issues to democratize computing for a market the second type of innovations which are also important what we call sustaining innovation the occur innovations that make good parts there and so if you think about if the University of Michigan had resources from and updated and updated the Student Center yeah you could still taking a lot of students but it would be as vibrant the place will be as exciting place to go to school and so sustaining innovations are important any good products better but you said back and think about it access point especially they don't create entirely new access if you could afford more features on the iPhone the engineers at Apple or excited it's what you find is that the cash typically goes to so these are the three types of innovations and what we try to do in the book in Chapter two development I've talked about some of these ideas with marketing innovations the internal process misalignment because every company is designed to do what it does if you're a company that makes cars you are design but they have to make themself better cars be more efficient but how add features that keep your customers excited many companies are not designed to focus on creating new markets especially markets that may ultimately undercut their existing products so there is this other internal process misalignment in organizations to go after market creating innovations answer you know some different graphics see you and if you can tell me what country do you think this is so this is the country the average household sends more than half their income on food 25 kids dies in Florida fifth birthday 10% people though secondary school electrification is subjoin percent right 10 percent of life expectancy is 45 years missions I would be much about years now if I love you chuck so what if you will read a report in the newspaper and you saw these demographics what countries would come to mind DRC that's excellent one just two more I'm sorry so this this the demographics of these United States of America this is probably my favorite slide whenever I saw America today this happened but this is the u.s. anywhere from 150 years ago and the reason I like this it's not to say you know watch one map of America and in many countries today but the reason I love this is it just shows where America has come from and how development is possible for many more countries it's an evolutionary thing that can happen but if we'd have to get with mechanism right because when I could have these demographics and you looked at how much the government sent per citizen it was on par with many more countries today he looked at corruption in government which we we explained in chapter look you will see widespread corruption and mismanagement America if you look at the level of the state of American institutions maybe even exists but the ones that did look at infrastructure projects there's a book called the big roads it says you know for municipalities a worth of growth for every dollar they spent and so just sort of look at this state of things and whether it is a day Erika's not perfect country but it's very different from where it has come from and what we found as we were doing researches on that one day everyone government had it sort of come to Jesus moment and they said you gotta stop stealing money you gotta build the vote right we gotta take care of the poor what happened was market creating innovators created new markets employed at those people became more prosperous over time and began to fight the government saying keep doing this you can't keep behaving this way that's a very quick summary of American history I would be prosperous but would you look at that mechanism right you you can't divorce the power of market create innovations from America story and so I think it's important for us to step back and look at where governments are today almost they have to spend and what is prosperity so what does this look like actually so I grew up in Nigeria this is a very famous movie in Nigeria I'll tell you the story and why I think democratizing access is absolutely critical so 30 years ago 1988 peaceful brothers look at Nigeria and they say and it's a lot of poverty in the country freeze rule but military regime eight people live on less than $2 a day they said you see how I could get as possible at the time to appreciate this whole Center as if noodles so laughing but these guys just give you an idea of the impact trying to get a pack of news to the average person in Nigeria's had a country big news you know have like say see another of their companies that are making it means you've got over a half a billion dollars in investments to build factories has this part of their division and so the point of showing this is a product this has this economic weight and activity behind it now as we save the book right while pack of fools is not going to create prosperity measure what Model T is but the mechanism of the process by which they went about creating this market is what I think is exciting for us and we can share this message for our wine to begin to change how you think about development the same thing happened with cell phones this is the story that's been told one too many times but it's a good story because you forget how improbable it was 20 years ago go into Africa was a country to have any best business above us in telco infrastructure in an industry that has to interplay with governments with corruption and poverty and so on to democratize access to phones right it was highly improbable more Ibrahim scribed my singular that many of these guys said I love you this is shock and now you sort of see the impact it's happened many other innovations are built on top of this again this is all going to create prosperity for the entire continent but I think this it gives us an idea of how prosperity can begin to emerge after you create so many jobs we create an entirely new industry that expires new generation the innovators to see how how this all right sorry this is annually I realize that I sent the slides I didn't put annual you'd be surprised how many people globally that's all right so we're about thirty one that's about right yeah so get the hang of it it's about sort of already this is us it's a percent huge search did a study they found us because we've already put this in perspective maybe that means the majority of people in the world Georgian people can't stomach a major catastrophe that happens today in societies where they can't even fall sick and I know we have issues with our healthcare system but they live in countries where they and so far for me for us the skills how think nation's role in creating these products and services for people if you remember how I started this as much as let's even assume for one second governments want to help wake up every day thinking hundred one hundred fifty dollars a year per citizen yeah I would argue it's impossible for them right and so it's incumbent to us to figure out how we can democratize innovations I can have access here there's a few companies doing this and I met these at my lab strips and Jerry Covell 360 is democratized and distribution of logistics AXA ng similar with urban transportation micro insure with insurance they over six insurance platform these are people who earn less than three to five dollars a day and they're able to get some form of insurance for this health insurance life insurance or accident insurance policies all gonna pay out black our policies pay out but again I over time that Jeff is investing in Aiken pharmaceuticals more or affordable whatever my head with is what we're trying to do at the Institute we didn't want to create a lab where we can make it a lot easier for people to democratize access if you're an entrepreneur you want to go figure out other democratizing innovation we want to create the resources and tools to help similarly if you're an investor thinking you know maybe return a hobby democratize access innovations we want to create a space where there are there are entrepreneurs that you can okay his head with his quote from heaven for so FDI foreign direct investment its capital that comes into your country so this foreign work which is a shortage so companies that would invest in the stock market for instance quicker than if I build a plant right so my aunt FBI sucks FBI it's the best decision so to answer your question I think I need the pants now why does it depend if you look at our numbers many African countries have attractive FDI over the last four years but the reason it depends is what is that get excited when I see a child market creating visions or sustain more efficiency innovations so bring back the light sorry for all my assumptions I would assume many of us are familiar with NAFTA and if you were not sure president after it was signed 1994 President Bill Clinton so it's a trade deal in u.s. Mexico now at the time many experts saw it as an opportunity for Mexico to become wealthy like [Music] so the us go back mu
h farther but if you look at how we've taken like Huff is taking so look at what is here I would say hi We're from Hollis and Anchor the question of that which is I'm also curious for policy makers so in terms of irony to support or the three types of innovation is there an area policy makers should focus on if we provide cars than the roads will Pablo or is this not just a focus on one issue yeah so that's a good woman and I'll be the first to tell you I cringe whenever I get questions about what policy makers do because this sort of short answer hundred percent sure the way that I would respond which I hope doesn't sound like a cop-out is the first thing is just understanding any event that you you care enough to understand this actually that I say that because many policy makers these Democratic they have this super six recycle they raise a lot of money to get elected when you get elected they sort of have papers they have to build out and so those are real pressures that they are under the event that they can overcome those and say okay I want to actually make change and policy for the better the understanding and the second is focusing creating policies that prioritize productivity not just corporate activity so what does that mean if say there is a pharmacy in the biggest pharmacy my policy would essentially be you have to make sure all the next five years this many people have access to drugs so that's forces the companies to develop or create new markets look that looks like on the ground how it plays out I don't know but when you look at policies and regulations [Music] and what happens is today today China does not just make cheap t-shirts and made an attractive the conditions good for investors I also noticed when it comes to innovation you also encounter resistance to a change so then how do you best balance kind of wanting to be pro collective protein while also having the perseverance and resistance to continue to push forward I understood the question correctly I thought what this kumbaya together all of these different people's journeys there's always this moment where they're in a room so education is a big part of it that's like the side of our Americans come from is really important that's why I wrote the book the way he did there's a third section of the book we call the battery reception and it really focuses on institutions corruption and infrastructure and we try to talk about these things in a way that help people see I wanted a process but in order to be successful we have to get with mechanism right and we did try to sort of get the conditions in place for decades especially countries try to build institutions so it's the focus for a particular region in trying to identify these individuals and then even that language to be able to explain what they're trying to do in a way that could resonate with investors people with capital and then we're also very well-placed to to get access to these investors connected to our business who we are and so figuring out the infrastructure to connect that is what the answer to that is I am Martha thank you I'm from I'm a PhD student in the School of Education and so one of my where does that where and how would collaboration with educators if you think about education as a as a way for people to improve their knowledge in an economy right then you begin to see a lot of education in what countries are just useless it's just you've got kids who go to school for computer science they never seen you go kids studying biology from the standpoint of how impacts if is [Music] and so insofar as we create education in that context you cannot develop without education absolutely practically speaking I will be just continuing to evangelize this message business schools that teach policy work or public administration talking about the impact of innovation and those kinds of things and ultimately make education [Music] and then some of the others you think about the efficiency the lowering cost so it seems like they each have their place and which one was good in particular situation so yeah I'm glad you actually are struggling with that because I didn't make a comment on which was good or bad I think we are somewhat agnostic I'm not going to moralize the impact of an innovation I think we as a visitor we call it what it is and so efficiency innovations we look at it from the standpoint of where the investment is happening and so if I invest in efficiency innovation we saved the University of Michigan and I invested in a technology that eliminates 20% of jobs here I'm focused on how that efficiency innovation affects the University of Michigan now the idea that there's 90 percent of jobs that are lost they would go somewhere else and find other jobs I think that's it's it's a consideration but I think from the University of Michigan standpoint I think it's important to think about how the jobs are lost would expect that economy and so and I say University of Michigan but if you think of it as a local economy if I'm a mayor or a governor right how will the efficiency innovations even though the jobs lost here and gained somewhere else it doesn't mean people who lose their jobs what programs are in place to get them either retrained to get other jobs how should you be making investments during for structure to make sure that whatever efficiency innovation of shops happen it doesn't I think just understanding that I think what we tried to do with the book is really see market create create innovation good all these others back we just try to illustrate the power of market creative innovations I think that's where we spend a lot of our time the last thing I'm saying efficiency innovations is it reduce the cost of making a product but they don't necessarily reduce the price of the prize and so when they make me more efficient typically I take that money and I give it back to my shareholders or I figure out what I want to do with it but we talk about market creating innovation there is a a seismic shift in the price of the product yeah it drives the price down but from yeah so from a development standpoint right if if you couldn't afford a car no matter if you can't afford if you couldn't afford afford last year no matter what kind of competition on this you can't afford a for it this year right and so on until the fundamental value network right on how you make changes and so people who couldn't afford $2,000 computers some of that can afford $100 smart phones right I think that's the I'm talking about so the fact that the computer goes from 2000 there's always a window to nineteen if you look at Mexico there's a guy in chapter 7 we talked to he's changing the way in myself there are a lot of hospitals and clinics that treat diabetes but it cost the average Mexican about $1,000 a year he is fit our model is incredibly difficult for him oh sorry right it was nothing like it and many people said impossible is not gonna work but now I I had a question about what happens so like once prosperity kind of goes up in poor countries what do you think is the next step in addressing corruption that may still linger in governments so I think if we write about corruption is is it happens up this spectrum right and so the first most obvious well the second phase is what we call covert and predictable that phase is where I would say a China today or South Korea 15 10 15 years ago and the third phase is dispersed parent where this little corruption happening and is corruption in and everywhere you have people in Russian but have the systems being developed to help us reduce corruption oh it's it's a hatchet in a way that kid that can build trust in society right so those three phases the mechanism in which you move from phase 1 to phase 2 is really by creating these new markets right it's often [Music] [Music] thank you so much for this talk I'm curious your thoughts on the goal of achieving lasting prosperity in the countries we're talking about how important it is that these market creating innovations ultimately end up being homegrown innovations so you use your example I guess I'm a Nigerian and my noodles are made by Nestle instituted by Nestle and I'm using a sample I'm voting on the Airtel network and I'm driving on a Chinese name Road to my job at Shell Oil you know is there a captain on how much prosperity my fellow countryman can achieve when so many was yes I think there's no free lunch yeah for being able to do really difficult things well that many people want alright and so if you if you think about that it's really hard to give something and many people part of why market create innovations are important is not only do they inspire copycats most of they there's this this transfer of technical know-how or business that happens as a result all right and so if I import all my Samsung phones I import um I don't I don't add value in country absolutely as mu right this in some ways when you make a product from another country and you ship it to a different country you are essentially importing the cost structure that that made the product in that country so if a German person in a manufacturing plant is making your car you who's I in our car today I think with you when you transfer that technology and make it locally which is a process it doesn't happen overnight then you can begin to make a lot more games so it's absolutely important but it does not have to start with a local person already lost burning questions if not let's stop here [Applause] [Music] you [Music]
