A New Age of Strategic Innovation
Industrial Revolution 4.0 : Asia’s Next Policy Moonshots.
On the occasion of the launch of the new UN Development ProgrammeRegional Innovation Center in Bangkok, we reflect on how Asia in the past decades has demonstrated previously inconceivable levels of change. The next decades of ‘directed improvisation’ could make a decisive impact on the future of how humans, machines and the natural world live harmoniously together.
“Five billion people, two-thirds of the world’s mega-cities, one-third of the global economy [42% at last estimate], two-thirds of global economic growth, thirty of the Fortune 100, six of the ten largest banks, eight of the ten largest armies, five nuclear powers, massive technological innovation, the newest crop of top-ranked universities. Asia is also the world’s most ethnically, linguistically and culturally diverse region of the planet, eluding any remotely meaningful generalization beyond the geographic label itself. Even for Asians, Asia is dizzying to navigate.
Whether you gauge by demography, geography, economy or any other metric, Asia is already the present — and it is certainly the future.”
Parag Khanna, The Future Is Asian: Global Order in the Twenty-first Century
The incredible diversity across this vast continent means that people, places and cultures across Asia often appear to have little in common. However, we do share two realities: firstly, an incredible pace of change — in urbanisation, economic development, human development education, product innovation etc — and secondly, governments and state players who still believe in an intentional, powerful and proactive roles, confidently shaping and accelerating development, markets and missions — whether through physical infrastructure development, market structuring or educational policies and beyond. In this reality of rapid social, economic expansion and industrial innovation, nothing seems off the table.
This means that when it comes to new products and new economic organising principles, Asia is set to leapfrog the West. Already, players like DJI, which have 70% of the consumer drone market, and countries like China, which may well become the dominant AI superpower, are leading the technological advances of the Fourth Industrial Revolution, often challenging the prevailing innovation narrative in the West. Across Asia, robotisation is progressing at speed: Asia currently sees an estimated 65 percent of the world’s total industrial robot usage, and Korea and Japan are the world’s top robot producers. Meanwhile, multifunctional mobile messaging app WeChat has enabled the digitisation of micro businesses with a much greater level of integration than comparable apps in the West, allowing for future SME micro sales and supply chain digitisation. These examples, though far from comprehensive, exemplify a particularly powerful combination of energetic start-ups, established industry giants, large-scale state-supported investment and fast market take-up of innovation by populations eager for the next thing, though of course millions are still left behind.
There is a flip side of this dizzying progress. Asia is also facing a previous unknown severity of strategic risks caused by global mega-trends — whether rapid demographic transition, the growing consequences of climate change, air pollution or soil degradation. Japan’s resorting to robots to look after older people; Jakarta’s rapid sinking resulting in the risk of permanent flooding, and China’s dust bowls are just the start of things to come. And in the near future, some aspects of the Fourth Industrial Revolution (such as the ‘re-shoring’ of manufacturing activities in the West, making Asian export-led growth model increasingly unsustainable) may well diminish Asia’s capacity to tackle these wicked problem. A recent UNDP/ Economist Intelligence Unit report highlighted some of these emerging dynamics.
This confluence of growing innovative capacity and mounting shared challenges means Asian societies cannot limit themselves to a focus on technological growth, industrial might and B2C or B2B product innovation.
Asia’s Industrial Revolution 4:0 must go further. It must, beyond iterating and upgrading new machines, fundamentally reconfigure and evolve our human-machine relationships. This requires new means of governing technology, improving our human development ecosystems and remaking the conditions for human development — whilst facing up to our ecological realities and addressing risks like air pollution and sea acidification, along with creating inclusive pathways for democratising access, participation and innovation in the next industrial revolution itself. Parag Khanna is right that ‘Asia is already the present — and it is certainly the future’; and if Asia achieves this to succeed in addressing this compound challenge, it will be a future that the entire planet and its diverse societies will welcome and need.
The future’s already here, but…
It is important to reflect on some of the particularities of East Asia’s current development patterns. They show in several ways that, as the sci-fi writer William Gibson famously said, “the future is already here — but unevenly distributed”.
We are seeing truly ground-breaking examples that go beyond technological progress and create institutional evolution.
For example, during the ever more pervasive flooding of Indonesia’s biggest city, PetaJakarta provided a civic-led early warning platform which was eagerly taken up by the city’s emergency management agency. In Singapore, where a Future Economy Council is focussed on driving beneficial impact of economic transitions and future-proofing its public services, new participative structures are built like the OneService app, built on a shared API exchange. In South Korea, the newly elected president established the People’s Transition Office on the promise to put citizens first, collecting almost 200,000 proposals in the first 49 days, of which over 1,700 were integrated in the government policy. India has moved beyond this, setting up the MyGov platform via which its citizens can contribute to national policy-making, engage into discussions, and participate in tasks posted by the government notwithstanding electoral cycles. And, in the private sector, Fisheries giant Thai Union is actively participating in the development of Fishcoin in order to create more sustainable supply chains and reduce waste. Innovations as wide-ranging as digitising micro payments, transparently verifiable supply chains, peer to peer energy markets, boundless leaps in logistics robots and smart citizen engagement could unlock greater small business market entry, sustainable commons management, increased industrial productivity and public services that are more personalised, predictive, and participatory.
In discussing this future, much is made of the investment required to accelerate technological growth whether through VC funding, investment in global AI wars, opening up of fab labs or sandboxes for testing new corporate futures. But we need to avoid over-exuberance, for at least four reasons.
Firstly, many point to emerging ethical risks, with long terms strategic implications for diversity of thought, resilience and structural inequality. Increased surveillance and a post-privacy reality loom large over our collective imagination, as do Crispr Babies genetically coding in inequality at a societal level. Already, it is becoming clear Sesame’s credit rating systemcould be used repressively if its ‘social’ ratings establish people’s all-round ‘trustworthiness,’ algorithmically enhancing or severely limiting people’s everyday life choices. Moreover, the monitoring of employee brainwaves(using wireless sensors and AI algorithms) might enhance continuous productivity and staff welfare, but comes perilously close to the ultimate workflow surveillance. As ever, the incredible growth in technological capability is a double edged sword.
Secondly, if data is the new currency, we are looking at new dimensions of inequality risking to leave billions behind. Consider, for example, that over 60% of salaried workers in Indonesia, the Philippines, Thailand and Vietnam occupy positions at high risk of automation. Or that around 900 million people, above all women, remain offline in China and Indonesia alone. This digital divide is already driving a growing wealth and income gap across south-east Asia.
Thirdly, such new challenges intermesh with unaddressed un-equalizing, and de-stabilising, dynamics. For example, un-linked from ‘tech’, globalisation is forever driving employers to seek lower-wage locations for industrial production — and this is occurring within Asia just like it was driving western firms to Asia. There are now clear signs of wage stagnation in more traditional industrial sectors in fast growing economies like China.
And finally, the threats to macro-economic and societal stability (including but not limited to climate change, ecological degradation and governance failures) coupled to rising protectionism in the West, risk undoing the continent’s technological progress. To deal with these vulnerabilities, and escape from the ‘middle-income trap’, Asia is facing a series of deep transitions akin to those that Western societies faced in the first industrial revolution.
Institutions and improvisation: a messy frontier
Given the context of rich opportunity and extreme risk, the next innovation frontier goes beyond industrial and logistics revolutions, to societal and human-machine relations at large. The next innovation frontier is therefore institutional.
Development theories on institutions have seen vibrant discussion recently. On the one hand, there is the classic view that institutions are conditions for sustainable prosperity. For Daron Acemoglu and James Robinson, the absence of institutions is ‘why nations fail.’ And the economic historian and LSE professor Carlota Perez, in her book Technological Revolutions and Financial Capital, sees institutional responses as the key differentiator in driving the positive impact of accelerated technological innovation, which are frequently followed by speculative bubbles and crisis. Only, she argues, if the right choices are made to shape markets towards sustainable profitability, ideally by government and business working in tandem, societies will be able to deploy innovations broadly, resulting in a period of stable economic growth and growing prosperity — which she terms a ‘golden age.’
On the other hand, in her recent book “How China Escaped the Poverty Trap” Yuen Yuen Ang paints a different perspective on the interplay between institutions and development. She shows that, at different times during China’s development, it benefited from weak institutions. At these early stages of development, ‘grey’ and ambiguous policies enabled decentralised, context-specific innovation. Terming this ‘directed improvisation’, she outlines how this liberated bottom-up initiative within China’s vast bureaucracy, so that regions across China “collectively improvised a large variety of development models that were tailored to local conditions and needs.”
Against the prevailing view that without pre-established strong institutions any innovation is set to fail — a view strongly espoused by Western theorists based on the particularities of Western history — this perspective of co-evolving markets and institutional capacity is useful to help us appreciate how ‘messier’ processes can have considerable success, (and that qualifying them as messy in the first place is probably a misnomer).
This is particularly relevant because, if the scale of change we face is akin to that of the first, second or third industrial revolutions, what seems to be different in the Fourth Industrial Revolution is the sheer pace of change. With this urgency, we need to face up to the massive ramifications our institutional approach will have on our ability to live on this finite planet and our ability to live together with machines in ways that enhance human flourishing. The fundamental shifts in the human-machine synthesis means we need to re-think human development institutions, labour laws, regulatory frameworks and welfare systems — all of this whilst markets co-evolve with our institutional (re-)inventions. Where previous industrial revolutions (and their subsequent institutional foundation-building) took many decades; we won’t have such luxury this time around — something Asian countries are well attuned to.
“Asia’s Industrial Revolution 4:0 must go further. It must, on top of iterating and upgrading new machines, reconfigure the human-machine relationship.”
Institutional experimentation in an interdependent world
Hence this is a time for bold thinking — and bold practice. A next generation of institutions cannot be built slowly, be arbitrarily derived from Western imported ‘best practice’ or designed in-vitro; nor can we rely on Asia’s state power or private sector prowess acting alone. Given the systemocracy that is the 21st century — a world of massive interdependencies — our theories of change must go beyond the usual tropes of disruptive start-ups and new Silicon Valleys, science and technology policy recipes or public-private partnership. What we need most of all is radical and deeply collaborative experiments involving the innovative potential of citizens and civic organisations alongside government, technologists and markets at large.
So the questions arises: ‘how to build institutions that can sustain such experimentation at scale?’ Two principles stand out: Building by doing, and Multi-scalar tactics.
- Building by doing: Given the insights of Yuen Yuen Ang and others, we cannot expect to neatly ‘organise’ institutional capacity. The capacity (to structure projects, to reflect on results, to mainstream findings, to re-skill people accordingly) will be built in the doing (the opening up of regulatory sandboxes, the responding to new market behaviours), in what is inevitably a relatively messy process which involves clear ‘red lines’ and ‘grey zones.’
- Multi-scalar tactics: This will need to take place at both the country and city (or city-region) level. In cities, the tangibility of current governance failures but also their concentration of human capital, devolved legitimacy of governance, and ability to create deeply contextual responses through multi-actor collaborations, creates a particularly fertile terrain. But at the same time, we need deep country-level shifts in welfare and human development.
At both scales, we must evolve the technical and organisational capacity to frame, drive and fund the relevant types of deliberate experimentation — whilst simultaneously making sense of emerginglessons learnt and finding ways of turning such sandboxes into full-scale new approaches to regulation, investment and massive collaboration. As for the type of institutional infrastructures that could succeed within this fast-moving field, the dictum that ‘large organisations sometimes need to behave like startups’ seems to apply here (though they need to be networked, system-focussed startups as opposed to aiming for singular products or services).
We suggest a few fields of experiment below.
1. Building the lead markets through government procurement
We should focus on the role of government procurement as commissioners of ‘missions’ not just procurers of services. These missions, whether in restorative agriculture, transition to plant-based low-carbon diets or empathetic care innovation, can be driven by proactive framing of what the public sector aims to purchase. Following the influential work of Mariana Mazzucato and UCL Institute for Innovation and Public Purpose, the public sector can accelerate preferred possibilities such as end-to-end supply chain digitisation (crucial for driving sustainability) and social accounting systems (to underpin preventative health and care systems). This is foundational to creating the future we want — but this alone will not be enough.
2. Building the deep markets through human development
We need to revolutionise human development. The next-generation industrial society, where no human can take their role vis-a-vis machines for granted, requires an approach to developing every human’s unique ability to care like a craftsman; to imagine and invent preferred futures; to dream and drive their own potentials; to criss-cross disciplines; and to foster people’s character and personal resilience in face of sped-up change. In a recent speech, Bank of England chief economist Andy Haldane emphasises fostering creative, social and empathy skills as well as technological acuity: ‘heart’ as well as hands and head. We need to upgrade our human development ecosystem both by creating networked institutions (e.g. nurseries, schools, universities, life-long learning organisations) and through a supportive, increasingly urban, wider environment. This means we must accelerate existing universities’ transition, as is already happening at NTU Singapore amongst others, but also imagine and develop challenger institutions to disrupt existing schools and universities: Haldane calls them ‘multiversities.’
Building these future markets in turn requires:
3. Building the systemic infrastructures
We need to re-invent the often invisible infrastructure which underpins our system. This means: We need to consider remaking transnational trade agreements that go beyond ‘trade flow’ outcomes to include accounting for holistic social and ecological impacts. We need to rethink property rights to enable fractional ownership and new types of use licensing, as part of the ‘radical markets’ that unlock possibility and curtail the growing monopoly power of property incumbents. We need to establish ‘civic data trusts’ to create inclusive, trusted frameworks that enable user-generated data to benefit urban management without trampling on human rights. And if we are to unlock huge advances in distributed manufacturing and circular economies, we need new regulatory frameworks around consumer rights and supply chain verification for open source, hackable goods. And these are just some examples.
4. Building the transition pathways
We must also build our collective awareness of what the near-now possibilities are that could fundamentally shift our deep institutional assumptions, by curating new language and approaches to disrupt our system. In order to ensure technological diffusion empowers people, we need to re-think the fundamental tenets of our policy approaches in fields as diverse as social welfare or law-making. Regarding the former, we need to take extremely seriously the nascent experiments in the field of introducing Universal Basic Income (or Universal Basic Share, a less well-known but not to be ignored departure from UBI) to provide security in the face of economic disruption. And on the latter, now is the time to progress the foundations for truly digitised government with ‘law-as-code’ changing the way in which lawmakers formulate rules in the first place, to create policy-making and adaptive regulations fit for the 21st century. Early steps in such diverse but equally fundamental issues show that the road towards such wholesale shifts is riddled with incomprehension, political backlash or bureaucratic obstinacy — hence we need to shape transition pathways that can enables us to imagine the unimaginable and plot our way there.
5. Building the institutional capacity.
Finally, the very imagining of disruptive change requires new institutional capacity within policymakers and their partners in the private sector and civic space. In an age of declining trust, reliance on evidence based policymaking cannot be the only answer. We require a new age of experimentation to make transitions happen, where we purposefully grow the technical capacity to undertake and learn from experiment and to conceive of bold change beyond the single perfect answer. In a world of uncertainty, where probability and precedents are collapsing as decision-making tools, ultimately what matters are qualitative, not (just) quantitative, probability-based arguments. Therefore, we need to build the political capacity and legitimacy to experiment and explore ideas in the margins of current viability and in the ‘grey zones’ of our regulatory systems — which is, as Yuen Yuen Ang magnificently showed, a subtle art. This is not a single shot strategy but involves continuously (re)directing improvisational frameworks that can work with the designed ambiguity to support divergent, context-specific testing, followed by regulatory sorting and the purposeful creating of the next generation of experiments and improvisations.
If this feels daunting, that is because it is. But we have no choice: to create sustained human progress, ideas and institutions need each other. And if the latter struggle to keep up with the former, this is because we need to adjust our ideas on what ‘keeping up’ really means. We need to furnish our institutions with continuous renewal capacity and the ability to dynamically manage a portfolio of strategic options, not simply implement and ‘scale’ one-off, silver bullet solutions.
Where the past decades have shown that inconceivable levels of change are indeed possible, a next level of ‘directed improvisation’ in Asia could make a decisive impact on how humans, machines and the natural world live together in harmony. This is the challenging learning journey that the Regional Innovation Center, recently established by UN Development Programme and the Royal Thai government in Bangkok, is keen to embark on together with partners in the region.