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Sun 20 May 2007 12:00 AM

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Innovate or die

Tom Peters on why the region's companies must constantly evolve in order to beat the competition.

Tom Peters looks like he's just finished a marathon. The ‘innovation guru', as he has come to be known, has spent the last six hours pacing the hall of the Dubai International Convention Centre and as he comes limping into the interview room to take his seat, there are beads of sweat dripping from his forehead.

Yet for 64 year old Peters, it's a marathon he relishes everytime. "I'm desperately in love with what I do," he gushes, "This is my world and I couldn't live without doing it." While his words might sound overly-emotive, hosting innovation forums has become both Peters' life and livelihood. Last year alone he gave 72 speeches - an average of 1.3 speeches a week - yet he is the last person to refer to himself as an expert: "There's too much uncertainty in the world, too much equivocality, and that's why I don't really believe this guru-ing thing is truly a profession."

As Peters made clear at the start of his ‘Building an Innovation Machine' workshop, there are no ten simple steps for achieving innovation because "that's not the way the world works." Rather he believes that circumstances in life are largely generated by luck and so one can make generalisations that are useful, but to claim certainty is nonsensical. "Anyone who thinks they can make certain prescriptions is insane. It's simply arrogance speaking and it's confusing yourself for God."

What we have in the US are layers upon layers of innovation support mechanisms.

That Peters should be making such remarks seems somewhat ironic given that twenty-four years after launching a management revolution with his book ‘In Search of Excellence', the man remains an irreverent force to be reckoned with. His unconventional and revolutionary views have led him to be described as ‘business' best friend and worst nightmare'. It is his reluctance to claim certainty for anything that enables Peters to always see the grey area of any issue and leads him to make such statements as: "I 94% agree with what you're saying."

Perhaps the only exception to the rule is Peters' certainty that innovation is not an option but a prerequisite, as put in his own words: "Innovate or die." He won't be drawn on offering any ‘innovation formulas' but concedes that people power is integral: "It's people but it's some funny combination of ‘pissed off people and playfulness'. It's that old line ‘You've got to stop talking and start doing'. It's people who have an urgent desire to do something and don't mind taking risks."

Peters should know. His determination to introduce change cost him his job as an executive and partner at McKinsey & Company, which he laughs off by saying: "I was right and they were wrong." The fact that he can be so good-humoured about the incident is itself testament to how passionately he believes in the importance of innovation. In fact, he hints as much when he says: "I believe that any time you do something slightly new, the world in small or large measure is on your case. So you have to believe in what you're doing enough to be able to withstand the heat and keep on trucking."

However, while Peters believes that innovation prospers best when allowing people to have a free rein, he does entertain the idea that there can to be controls in place to ensure that the system works: "On the surface level, the answer is ‘of course'. But I personally believe there are enough controls existing today which act as a safety net. You know there are a lot of things that make me lose sleep at night but the world becoming too crazy and innovative is not one of them!" That UAE banks are not doing enough to help young entrepreneurs to innovate was made apparent by a country-wide survey published last month which showed that just 11.4% of those polled said their capital came from banks and other financial institutions. The UAE's first Global Entrepreneurship Monitor (GEM) Report revealed that about half of those polled used either their own money or received support from their families to start businesses.

The UAE survey was compiled by two Professors at Zayed University as part of the GEM Report in which a total of 2000 Emiratis and expatriates were surveyed across 42 countries, and which ranked the UAE as second lowest last year in terms of entrepreneurial activity. However, the problem is not that the UAE lacks entrepreneurial capabilities, rather there are a lack of formal financial support facilities, despite an abundance of funds. According to Peters, for innovation to be properly fostered in the region, financial facilities need to be improved.

"What we have in the US and definitely Silicon Valley are layers upon layers of innovation support mechanisms. You've got groups of what we call ‘angels' who are entrepreneurially-minded people who will give you US$300,000 at the right moment. From the angels we go to the venture capitalists, then onto the second level funders to the banks, so we've got this shockingly rich financial infrastructure. It's first trench of lending, second trench of lending, seed capital - it's incredibly variegated - and frankly speaking you really need all these forms of investment."

However, a difficulty in accessing funding is just one facet of the problem. More than 50% of those included in the UAE GEM Report confirmed that they feared failure in starting a new business, claiming they lacked the necessary knowledge and skills, which in turn highlights the poor role the education system plays in promoting private business growth.

Peters also points out that an innovation problem peculiar to the region is the failure to pursue R&D: "I saw something that was talking about patents and in terms of per capita patents, the Middle East actually ranks behind sub-Saharan Africa."

However, such a lack of entrepreneurial confidence belies the fact that the UAE ranked third after the US and Singapore in providing a supportive environment to new businesses. Indeed, the report forecasts that 60 to 180 new business ventures could be launched in the UAE in the next three years.

That the UAE government is making efforts to support regional SME's is evident by the Sheikh Mohammed Bin Rashid Establishment for Young Business Leaders which in its five-year lifespan has provided value added services to its members of in excess of US$42m. (The Establishment also sponsored the GEM Report's UAE research). Meanwhile, Young Arab Leaders (YAL) - an independent non-profit association with headquarters in Dubai and offices in different Arab countries - is also legally supervised by the Dubai Government and encouarges Arab men and women to trigger change.

While Peters commends such governmental efforts, saying: "Obviously Sheikh Mohammed is encouraging innovation through a number of initiatives," he believes that for the entrepreneurial spirit to truly prosper, there needs to be more homegrown grassroots activity. "You're not putting roots down by flying in seven Japanese, German and American Nobel laureates," he says referring to the much-acclaimed Dubai Healthcare City.

I don’t think there’s any question that the American economy is going to be eclipsed.

However, Peters doesn't believe that R&D is crucial to innovation, rather it's a contributing factor: "I think Dubai is a shockingly wonderful and potent example of innovation but the question is how do we have organic growth? For innovation to be sustainable, it needs to be organic at some stage of the game - it can't all be ‘bought' or ‘brought' in. A blessing to the US - in fact more so than for any other country in the world - is that we have a whole other half of the population called women. That's a very big deal you know! It might sound like a joke but we've got ten and a half million women-owned businesses in the US, women now account for over 50% of managers in the US - even if they don't account for over 50% of CEO's of big companies. Peters recalls how an astonishing number of such businesses were started by women filling in loan application forms that they'd received from credit card companies. "They were taking 30 credit cards and maxing them out at 2,000 bucks!"

Considering that it was only around five or ten years ago that women-owned businesses became legitimate, (before then it had always been difficult for women to get business loans in the US), Peters prediction that today American women are controlling most of the wealth is even more astonishing. "You know there are a lot of older-generation people in Western Europe and the US who are predicting that women are going to take over men - you hear these terms now called ‘Womanonomics' and I think it's just a matter of time. There was this wonderful story that I read last week in a British paper entitled ‘Girls are the new Boys', and it detailed how women today are trying out bizarre diets to marginally reduce the probability of having a male child! We are now at a level where we can seriously be concerned about the welfare of boys - they're totally blowing it on the education side."

Aside from any internal battle of the sexes, Peters believes that America will continue to lead the innovation race for at least several more decades. He quashes the prediction of Ricardo Semler, President of Semco South America, that the Indian rupee and the Chinese yuan will dominate the stock market in 20 years time and that the American model is becoming outdated.

"I don't have an American-centric view but we've been written off so many times," Peters says wryly, "I started doing this stuff in 1980 when people were predicting we were all going to be speaking Japanese and using the yen in a few decades. There is a lot of entrepreneurial spark in the US that tends to right the ship eventually - you only have to look at Silicon Valley which is still the envy of the universe. There was a ranking carried out by the Chinese recently that listed the 10 most powerful research universities in the world and three of them are in Silicon Valley. To have 30% of the world's great research institutes within 50 miles of each other is pretty amazing and then you add a couple more in Southern California which gives you half the world's top ten institutions."

However, Peters does concede that "India is different to anything that's happened in the past," before continuing, "I believe the biggest threat from India is not so much cost-related issues but their hunger for success. There's a long history of small numbers of Indians and Chinese moving into a place and economically taking it over - look at the Malaysian or the Singaporean phenomenon - so I think there's incredible entrepreneurial energy in China and India. There's this saying that the first generation are really hungry and the third generation are fat. So I don't think there's any question that the American economy is going to be eclipsed eventually but I'm not sure about the 2020 estimate. Most of the charts and graphs - which of course could be turned on their head a million ways - say the Americans will probably be the biggest economy until 2050."

Another problem with both China and India that Peters says most people overlook are the ‘forgotten' billion people. "This is not an American positive bias but a billion people are being left behind and it's getting worse by the day. It's similar to German polls taken in which 40% of the East Germans say they'd rather go back to Communism. And the same applies to the Chinese case - today you have the Chinese city millionaires driving around in Mercedes while three quarters of the rural population remain in poverty. Somebody wrote this lovely book and I think the title was ‘The other 800 million' which was more-or-less banned in China but got re-printed in English and it was about the Chinese predicament. The situation is not as virulent in India as it is in China in that regard but it's still there. It may all happen and I for one have been going around scaring the hell out of people about India and China for three or four years now, so I think it's very irresponsible to be so complacent, but then you look at the other side of the coin."

Peters is right - such questions can really only be answered by time. Yet how about himself? How much longer does he envisage himself treading the conference stages for? "I spend 200 nights on the road and I love every second of it. I'm in a world with the Jack Welches and the Colin Powells and the Rudy Giuliani's and we chase each other round the circuit and I'm sure I don't deserve it but then again they probably don't deserve to be where they are either. And I would be less than honest if I told you that I didn't keep track of what the relative speaking fees are!" he laughs, before adding more soberly: "That's not to say that I'm motivated by money - for me money as a score-keeping device is different to money as the result of a taste for acquiring money. The simple truth is I've got an ego just like everybody else."

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