For many years, the developed world had a near monopoly on technical innovation. European, US and Japanese companies conducted high-end R&D in their home markets and then sold the results at home or adapted them for other developed markets. But over the last few decades, the number of companies with innovation centers outside their home market has grown, from 45% in 1975 to more than 65% in recent years, according to a Booz Allen Hamilton study.
Over time, these emerging markets have succeeded mostly by developing particular niches — wide screen television in South Korea, for example, or distributed computing in India. Now, the Middle East is at a stage of development where it too might become a home to innovation. But in a world awash in advanced expertise, which niches remain unclaimed? The answer is a kind of innovation that’s not so easy to put into a box and ship, or to attach to an email. It is a kind of innovation Middle Eastern companies are uniquely suited to developing: uncodified innovation.
Unlike the innovation that is now developed in markets such as India and China, which focuses almost entirely on technical improvements to products and processes, in fields as diverse as the automotive or chemical sectors, uncodified innovation is the kind of innovation that happens as services and products are adapted to the needs and preferences of a new set of customers.
Cracking the Code
The growth of globally distributed innovation occurred because companies have grown increasingly good at codifying knowledge. Once codified, each piece of the knowledge that made up a product could be sent to the place where the most cost-effective advances on that product might be made. This reduced the redundancy within the system and in essence avoided the need to replicate R&D centers in each market.
A similar opportunity exists now for uncodified knowledge. In other words, instead of just shipping information about a new product and adapting it to the needs of the market almost as an afterthought, one could ship critical cultural understandings about multiple markets to a single innovation centre. Such a center could ease the cultural adaptation process and indeed the entire customer service experience, whatever the origin of the ultimate customer: essentially, to use a software term, to act as a kind of middleware that translates service offerings between cultures, to help insure, for example, that a hotel chain meets the hospitality needs of its Muslim customers, or that entertainment products are designed to appeal to a Middle Eastern audience.
The Middle East at the Innovation Crossroads
The Middle East is uniquely positioned to take up this challenge. Like the successful Silk Road economy of the 12th to 14th centuries, the new Middle East economy is ideally positioned between West and East. Indeed, it might even be said to be both eastern and western, since places like the UAE are now home to people from a wide range of nationalities, motivated by a set of economic incentives no other economy can provide.
In addition, the demand for new products adapted to the unique cultural and environmental traits of the Middle East is pushing many companies to innovate their products and services. For example, the decision of Time Warner to open a studio in the UAE to develop films and video games in English and Arabic is opening up a new market that was previously untapped.
Whether that means developing video games that respect Islamic cultural values, or developing new financial products to meet the demands of Islamic customers, the core activity involved is creating services that begin by understanding the needs of the customer, not the capabilities of the technology. And that particular process of customer-centered innovation is something the new Middle East could leverage to develop products and services for consumers elsewhere in the world who also have specific cultural sensitivities but are now grossly underserved by one-size-fits all services.
Creating a truly international innovation centre
Although this kind of innovation began with the need to adapt services to Muslim consumers and the specific challenges of developing a world-class business center in just a few short years, the ultimate function of becoming a center for uncodified innovation will be to provide better service to many different peoples all over the world. In this too, the new Middle East will have an advantage, in that it can leverage its identity as a uniquely cosmopolitan region, testing service solutions on local sub-markets and ultimately exporting these to other markets.
Tapping into the unique characteristics of this emerging international innovation lab to create a truly global innovation center will require companies to both apply discipline and yet be flexible. As with any R&D, there is a process of sensing, accessing, and melding knowledge, but the key difference here will be that the essential intellectual capital being created will be not be technology or a technical process, but a knowledge of the people for whom the product or service is designed — knowledge about the customers themselves, whoever and wherever they may be.
Fabrice Saporito is a principal at Booz allen Hamilton,