China Update

Via good friend Mr. Tony Tsai, CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co.:

"Zeng Peiyan urges establishment of free trade zone between China, Japan and South Korea to be accelerated
April 25, Zeng Peiyan, former vice premier of China, urged the establishment of a free trade zone between China, Japan and South Korea to be accelerated. He said that the three countries should enhance their cooperative partnership to deal with international risks and challenges. He made the remarks during the Northeast Asia Trilateral Forum in Hangzhou."

"China is the world's largest consumer of geothermal power
Guan Fengjun, head of the geological environment department at the Ministry of Land and Resources, said that China will further develop geothermal energy over the next five years as it steps up efforts to cut carbon emissions. China will increase the proportion of geothermal power in its energy mix to 1.7%, which is more than 10 times the current amount, by 2015. China is already the world's largest consumer of geothermal power. Consumption of geothermal energy in 2010 was equal to the consumption of 5m tons of coal."

"Development Research Center of the State Council: China's GDP will grow by 9% in 2011
The Development Research Center of the State Council published a report on Monday. It predicted that China's GDP will grow by 9% year-on-year in 2011. China's trade surplus may be further reduced to $140b, or 2% of China's GDP, in 2011."

China Update

Via good friend Mr. Tony Tsai, CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co.:

"China reduces holdings of US Treasury bonds two months in a row; Japan may become the "biggest creditor" of the US: The US Department of the Treasury said on Feb. 15 that China reduced its holdings of US Treasury bonds two months in a row in Nov. and Dec. last year to less than $900b. Even though China is still the biggest holder of US Treasury bonds, the gap with Japan has narrowed to less than $8b."

"State Council publishes policies encouraging development of software and integrated circuit industries: The State Council publishes a series of policies encouraging the development of software and integrated circuit industries. The State Council reiterates that the software industry and integrated circuit industry are the state's strategic emerging industries and they are an important basis for the national economy and social informationization."

West's Decline & Mr. Gordon Brown's Insights on Recovery

It is always helpful to know what the leaders of nations are thinking during crisis, which may be driven by economics, climate, etc. What is even more interesting is to see the realization of the "what" into the "how", which usually is a bit farther away from the desired.

In his article "How the west can reverse a decade of decline" in the Financial Times here, Mr. Gordon Brown highlights an obvious fact - "Within a decade a richer Asia will be home to a middle-class revolution equivalent to the consumer power of two Americas, becoming the main driver of world growth... This shift can be the most effective exit strategy from the crisis, and help to rebalance the world economy – but only if Europe and America re-equip, and are able to export their superior innovations and global brand name goods to Asia’s new billion-strong middle class. Yet delivering these value-added, technology-driven, custom-built products and services will only be possible with high levels of investment."

Here is a fallacy - Western innovation is not superior, and if it is, for example, internal combustion engine, it is being leapfrogged as China is focusing on electrical vehicles and in a decades time frame will be delivering commoditized electric vehicles and/or their components to the world.

Mr. Brown though highlights a key consideration and this is where his "what" is right on, though the "how" to manage it is already looking like as he predicts - "The descent into trade and currency wars, bans on cross border takeovers, and excessive restrictions on skilled workers are also counterproductive, risking access to the world’s biggest new markets just at the time they could benefit us most. History will judge these newly fashionable orthodoxies as wrong as the false certainties of the 1930s."

Here is an example of how reacting to fear due to lack of knowledge, just like GM not adopting the electric vehicle option, gets popularized, and Mr. Brown's statement above may come to be:

As a senior South Asian diplomat friend of mine says, "But what to do??!!" :)

Lateral Innovation - Network Problem Solution from Nature

I analyze "adjacencies" and "lateralities" in innovation to discover solutions from industries a sector specific or vertical expert perhaps may not choose to.  Here is an excellent example of engineering solutions for network problems validated in natural organisms through the research of Atsushi Tero at PRESTO, Japan Science and Technology Agency in his recently published paper in the Science, "Rules for Biologically Inspired Adaptive Network Design".  The abstract:

"Transport networks are ubiquitous in both social and biological systems. Robust network performance involves a complex trade-off involving cost, transport efficiency, and fault tolerance. Biological networks have been honed by many cycles of evolutionary selection pressure and are likely to yield reasonable solutions to such combinatorial optimization problems. Furthermore, they develop without centralized control and may represent a readily scalable solution for growing networks in general. We show that the slime mold Physarum polycephalum forms networks with comparable efficiency, fault tolerance, and cost to those of real-world infrastructure networks—in this case, the Tokyo rail system. The core mechanisms needed for adaptive network formation can be captured in a biologically inspired mathematical model that may be useful to guide network construction in other domains."

The researchers grew the slime mold using 36 oat flake template representing cities around Tokyo, while they placed the mold itself on Tokyo.  The paper states:

"Overall, we conclude that the Physarum networks showed characteristics similar to those of the rail network in terms of cost, transport efficiency, and fault tolerance.  However, the Physarum networks self-organized without centralized control or explicit global information by a process of selective reinforcement of preferred routes and simultaneous removal of redundant connections."

Open publication - Free publishing - More network

Innovation in Emerging Market: Dilemma Managent vs. Problem Solving

In Economist's recent report on innovation in emerging markets here, the article "Easier said than done" talks about differentiated and unique approaches to putting economically profitable business ideas into practice. An exceptional example is from Kenya:

"East African Breweries, a division of Diageo, launched a cut-price beer, Senator Keg, to help reduce demand for illicit alcohol, which is cheap but is frequently contaminated with methanol, fertilisers and battery acid. The company reduced the cost of the beer by negotiating a tax waiver with the government and by distributing it in kegs rather than bottles. The company made use of the shadow economy to get the beer delivered to the outlets. It also trained bar staff to understand the importance of rotating kegs to make sure the beer was fresh, and of washing glasses. Senator Keg is now ubiquitous in Kenya, sold in every makeshift roadside bar, and is affectionately known as “Obama”."

This is 21st Century Dilemma management vs. 20th Century Problem Solving. Thinking beyond maximizing the shareholder value on a quarterly basis yields the above innovative solution.