Transcript: CEO podcast - Francis Gurry
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>>Bruce Gosper: Good morning Francis Gurry, Director-General, World Intellectual Property Organization.
>>Francis Gurry: Good morning Bruce.
>>BG: For those listening, WIPO – the World Intellectual Property Organization – is, of course, the UN agency dedicated to the use of intellectual property as a means of stimulating innovation and creativity. Innovation of course is something that’s on the lips of every firm and nation around the globe at the moment and something that’s important for economic growth and prosperity, and I thought it would be useful to talk to Francis, given of course the role of WIPO and WIPO’s recent release of its Global Innovation Index for 2013 (http://www.globalinnovationindex.org).
So Francis, perhaps we could begin by talking a little bit about the trends in the innovation landscape around the world.
>>FG: Yes indeed Bruce, but the first thing to notice is of course the massive investment that goes into the production of new knowledge now leading to innovation. We’ve got about 1.3 trillion US dollars invested in research and development annually around the world, which is a massive amount, and why is that happening? Well, of course you know the value of intangibles is increasing. On the Standard & Poor’s Index for the Top 500 Countries, about 80 percent of the market value is in intangibles. So we see, I think, increasingly, that innovation is perceived by enterprises, and indeed by whole industries and countries, as the way in which they can gain competitive advantage. So that I think is the first thing, a very clear trend that’s coming through. For example, the Wall Street Journal published last year in May an article in which it had analysed the quarterly and annual filings at the SEC and the word ‘innovation’ featured in those 35,000 times. So as you say, it’s on everyone’s lips, it’s the basis really of competition.
Secondly I suppose a major trend is the changing geography of innovation. We see this, just as the centre of economic gravity is moving to Asia, we see that the centre of innovation is shifting a little bit more slowly than the economic centre of gravity, but it is definitely shifting. If I give you one statistic – in the International Patent System for example, in 1994 – nearly 20 years ago – Japan and China and the Republic of Korean accounted for 7.4 percent of the total international patent applications. Last year they accounted for 38 percent. This is a massive shift that we see.
The third thing I would mention is that there is more openness in the innovation system – open innovation of course is another big trend. It’s based on the very simple premise that it’s unlikely that you have within your enterprise as much skill and talent as exists in the outside world, and so let’s look for ways in which to partner and collaborate to take advantage of the skill and talent that exists outside to furnish your own innovation needs. So that open innovation is something which is taking place not just nationally but of course internationally, and so we have the notion of global value chains also in innovation with the delocalisation of research and development as well.
>>BG: What’s the role of intellectual property in these sort of innovation trends?
>>FG: Well I think it’s there to capture the economic advantage that innovation confers and the economic value. I think it covers all of the aspects of innovation. I think also increasingly we’re looking at innovation as not just a scientific and technological matter but as something that covers all the features of the marketing of new products and services. Let me give you the example of the iPod (sic Ipad), when it came on of course it is reputed to have added $30 billion to the value of the Apple Corporation in 2010, and only 30 percent of that were patents, or technology as it were, the rest were the design, branding, marketing intelligence. So intellectual property, whether it’s patents or design or branding trademarks, covers all of the new features of products and services and captures that value of innovation. There is a certain amount of research to suggest that a key to integrating successfully into global value chains is being able to provide a non-replicable service or product, something that distinguishes you that others can’t do, and that’s the essence of course. That essence is captured by intellectual property because it gives you exclusive rights.
>>BG: There is quite a bit of discussion in Australia about global value chains at the moment, partly in the context of looking at the growth of Asia and the way it has integrated into the world economy and the opportunities that come from that. So when you look at innovation and IP, how does that relate to the international production landscape?
>>FG: Well, I suppose as you say Bruce, there is this increased focus on what’s happening in respect of global value chains and we’re seeing, I suppose, fragmentation of course of the international production line if you like, and I suppose the competition that I referred to earlier on the basis of innovations expresses itself here as a competition to locate yourself at the higher end of the contribution to that fragmented global value chain. Everyone is trying to move up, if you like, the global value chain and to be at a higher end, and intellectual property I think is an important way of ensuring that mobility, moving towards the top end.
>>BG: So does that mean, for instance, the opportunities that might be out there in being innovative might in a global value chain by several points, it might be in the final product, it might be in some research and development, it might be in other parts of collaboration?
>>FG: Absolutely. I think that’s absolutely spot-on. It’s providing something that others can’t provide, or providing something that others can provide but in a better way or cheaper way or more efficient way, and both of those results or outcomes come from of course innovation. I think it’s a question of trying to match the skill sets you’ve got and the resource base you’ve got to the global value chain and see where you can locate yourself. This is of course something that’s influenced not just by enterprise policy but public policy in creating the right conditions to allow firms and enterprises to be able to integrate better.
>>BG: Australians traditionally, or at least have over recent years, thought of themselves as being pretty innovative, pretty good at finding practical solutions, pretty good at applying the good research and pure science capacity of the country to solving problems and doing things in a better way, but how do we actually rate under the Global Innovation Index that WIPO has released?
>>FG: Well overall, this year we came in at No.19, which is up four places actually from 2012 where we were placed at No.23. So it’s by no means a bad performance, it’s quite a respectable performance, remembering that at the upper level there are quite a few small countries and small economies, for example Switzerland comes in first, Sweden second, The Netherlands fourth, Finland, Singapore, Denmark – so you have a lot of small economies that cluster up the top. But you equally have the UK at No.3, the US at No.5 and Germany at No.15 – so coming in at 19 is not bad, but it’s not the top of the pile. It’s a respectable performance but it’s not the sort of performance that we of course would accept in the sporting arena – if we came in at No.19 in the Olympic medal tally I think that would be considered a national scandal.
I suppose one of the things it reflects though is that if you look at the top – Switzerland and Sweden – what they have is a very even and excellent performance right across all of the inputs and outputs of innovation that we map and measure, ranging from the educational system to specific items of intellectual property, so they have very even good performances. I suppose if you look at Australia, we have – and I’m not an expert, you’re much more an expert on what’s happening locally – but we have excellent areas of innovation. For example, the biomedical sciences is an area of excellence, or technology in relation to the extractive industries is another area of excellence. So I suppose what we’re lacking in a sense is the evenness of the performance and it calls for a consideration I think of the idea of smart specialisation, especially when you link it to global value chains – where can you fit in, what is the niche that you’ve got to fit into the global value chain with your smart specialisation, where you have the comparative advantages, because you have this clustering of enterprises and universities and research institutes around the biomedical sciences or around the extractive industries, for example.
>>BG: One of the things we’re trying to do now of course is set up these innovation precincts, which hopefully will result in more collaboration and more linkages across particular areas of comparative advantage, and to help secure that comparative advantage and apply it in particular to some of our export markets. Does that sound like a useful way to address some of the issues that are before us on innovation?
>>FG: Absolutely. In fact, the particular sub-theme of the Global Innovation Index this year was the local clusters and the role of local clusters. That’s extremely important. We’re not alone in following that. For example, Mayor Bloomberg in New York City has given over half of Roosevelt Island to the development of a high-tech centre where, like many parts of the world, they’re trying to replicate what happened in Silicone Valley. That’s a very difficult thing. Nobody really knows the secret to the success of Silicone Valley – if we did there would be others. But I did read an article in the last week or so in the MIT Technology Review in which the argument was put forward very forcefully that human talent was the key to Silicone Value and its power to attract human talent. That’s one of the big advantages of trying to establish innovation precincts, that you attract the talent to come there and that talent interacts extremely well and creates the creative environment that you want to establish.
>>BG: One other thing we’re trying to do, and here I’m talking about Austrade specifically, is trying to map out some of the firm level value chains that are available and working in Asia, so that companies and firms in Australia can see better what those value chains are and look at opportunities to link with them at some place.
>>FG: Absolutely, I think it’s a great idea, and it can only be of great service to the creation of opportunities for enterprises in Australia.
>>BG: Well as our listeners can probably tell from your sporting reference, Francis is an Australian and in fact the most senior Australian in the UN system. Obviously you’ve got a key job there Francis, where many people are watching what’s happening on the innovation front. It must be good to be part of an organisation which does work that’s so keenly looked at by firms and governments?
>>FG: Yes, it’s an exciting time Bruce, actually, as you know. Of course we’re only one little part of this whole big world and I suppose one of the other features of that world is the complexity that’s associated with it now. So whether you’re looking at the policy environment, you see in the policy environment there are very active national, bilateral, plurilateral, regional and multilateral agendas in the field of innovation and intellectual property, but equally for enterprises the sort of investment that goes into R&D that I spoke about before, the focus and attention that’s being brought to innovation, the fierce competition of moving up the value chain, makes that environment for innovation and intellectual property at the enterprise level much more complex.
So this makes it all very interesting but it also makes it very challenging.
>>BG: I’m sure. Well Francis, thanks very much for your time today. Obviously the work you’re doing on innovation and other things is great work and something that we do appreciate.
>>FG: Great, thank you very much Bruce, a pleasure to speak to you.
>>BG: Thanks, Francis, and I hope we’ll see you in Australia before too long.
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