Global Innovation Indices...with a grain of salt!

Within the innovation landscape, there are two intriguing questions that often receive a thousand different answers: 1) What really is innovation? 2) How do we measure it? Although there are several ways to define and opine about innovation and its measurements, the one standard that seems to have stuck over time is that innovation is a novelty or improvement (over what exists) and it is a measure of intellectual outputs that are deemed valuable and can be monetized. Consequently, intellectual property outputs (such as patents) have become a proxy measure of innovation in both academia and practice.

The World Intellectual Property Organization (WIPO) just released its Global Innovation Index (GII) report for 2022 to apprise us on the state of innovation around the world.

This year’s GII finds that innovation is at a crossroads as we emerge from the pandemic. While innovation investments surged in 2020 and 2021, the outlook for 2022 is clouded not just by global uncertainties but continued underperformance in innovation-driven productivity. This is why we need to pay more attention to not just investing in innovation, but how it translates into economic and social impact. Quality and value will become as critical to success as quantity and scale.

-WIPO Director General Daren Tang

The report consists of meticulous details and reasonable categorizations of the findings. For example, it has separate rankings for high-, medium-, and low-income countries. This makes sense as the productivity and inputs/outputs of innovation vary by the per capita GDP of the countries. Yet, somehow this type of measuring technique seems to miss a few key elements that might help more accurately capture the spirit of innovation in those countries and contexts. For example, even if a country is classified as low-income and does not have high patent output, it might be great at innovating for the needs of its population within the constraints that it encounters within its contextual boundaries. M-PESA in Kenya is a great example of early "fintech innovation" with SMS-based money transfer capabilities because the country lacked adequate number of physical bank branches. Today, around 30% of Kenyan GDP flows through M-PESA . Did M-PESA file any patents? Perhaps not. Would the strength of such a powerful innovation have made it to any innovation index? Definitely not! So, back to our question then of what is innovation and how should it be measured?

This also reminds us of the iceberg of visible innovation and invisible innovation that Prof. Nirmalya Kumar has discussed in the past. The tip of that innovation iceberg is what is easily seen, and thus is quantifiable in innovation rankings, indices, and measures, but what is invisible is, in fact, more important than what is visible. Some amazing insights there to further question whether we are capturing the true essence of innovation by counting only that which is quantifiable - albeit with arbitrary proxies, such as patent filings. Similarly, Reverse Innovation , coined by Prof. Govindarajan, happens when a multinational corporation learns to generate successful innovations in emerging markets and then exports that knowledge and those innovations to the developed world. How do innovation rankings account for this? Does the country of origin get any credit or IP?

How about the whole social innovation movement? Is that part of innovation? Going by the measures and evaluation criteria used by GII, this type of innovation does not count for much! So, if a country would invest a large amount of inputs into the social sector, because that is what is needed to ensure that the vast majority of its population is able to take the leap towards livelihoods, eradication of poverty, health, and education, the rankings simply won't reflect this because there is no IP produced by such innovations? Yet, social innovation at scale has the potential to positively impact many more lives and people than value capturing through patent filings ever will. Yes, the patent itself might lead to a product/service that can solve a bigger problem for humanity (for example: a cure for a certain chronic disease), yet the process, when complete, will result in a huge imbalance in the value capture with the patent owner appropriating a huge portion of it, even if the downstream effects for the end-users of the innovation are tremendous, by the time it has reached them the returns are diminished. Some might argue that it is profits from patent-based innovations that fuel the social innovation sector. This might be true to a certain extent, but this is where newer business models of social value creation and social IP production need to be introduced. Hopefully, social innovation that is profitable and equitable can prove to be a powerful tool that could one day be included in global rankings on innovation.

There are many other types and forms of innovation that organizations and countries champion today. For example, there is grassroots innovation , inclusive innovation , frugal innovation , responsible innovation , open innovation , and business model innovation to name a few. These are different from the more fundamental (and academic) concepts such as product, process, radical, incremental, and disruptive innovation. Countries that follow these models of innovation, some out of choice and others out of desperation, have shown some great impact, especially during the pandemic. For example, some universities in Africa created ventilators out of 3D printed parts . Yet, "innovating out of crisis " was not an evaluation criteria in the rankings, although there were calls to improve the quality and value of innovations. A follow-up question to the rankings agencies should be - what qualifies as value? Who accrues it? Does this have a bearing on "impact" and rankings?

Another fundamental aspect which could enhance innovation rankings is the consideration of digital public goods and infrastructure. This is an important criteria in rapidly evolving digital economies that are too dependent on private digital goods and infrastructure and thus risk excluding large populations from the digital economy if they are unable to afford or access these digital goods. The Digital Public Goods Alliance describes digital public goods as "open-source software, open data, open AI models, open standards and open content that adhere to privacy and other applicable laws and best practices, do no harm by design, and help attain the SDGs." It is a great opportunity to achieve impact at scale by involving policymakers and other stakeholders in the innovation process and decision-making. However, instead of focusing only on SDGs, governments and citizens can focus on digital public goods and infrastructure that solves everyday problems. For example, I recently posted about how India has created something called the IndiaStack which is a suite of digital public goods, infrastructure, and platforms that enable everyday business and social transacting for very little or no cost to the users . These are digital tools that are built on easy-to-use, plug-and-play architecture and the IndiaStack is now being offered to other countries as India assumes presidency of the G20.

The complexity of innovation itself is greater than what a single ranking or index can capture. To this effect, the Global Innovation Tracker is a good step in the right direction by WIPO, but it is certainly not enough. The evaluation criteria needs to be diversified to be able to truly represent the on-the-ground realities of innovation instead of blindly counting of patents as proxy. Patents by themselves are a necessary measure of innovation, but are they sufficient? This is a question that remains to be answered and perceptions about innovation need to be changed. Instead of thinking about it as an "add-on," perhaps it should be inculcated as a value in curricula and training of those joining the workforce. Hopefully, this will force the ranking bodies to have a more inclusive and holistic definition and measurement of innovation in the future!