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Pursuing Growth through Innovation
Mohsen A. Khalil
Bogotá, Colombia
July 24, 2012
Global Challenges
Growing Young Population
Depletion of Natural Resources
Global Financial Crisis
Climate Change
…Doing More with Much Less
2
Increased resource scarcity necessitates a departure
from the business-as-usual growth model
Interlinked resources
(climate capacity for GHG,
energy, water and land) in
combination with…
…drive increasing
real prices and
volatility…
…rising resource demand
due to increasing
populations and wealth…
…primarily impacting the
world’s poorest people…
…requiring much greater resource productivity increases
3
Innovation will be required to reach necessary
resource productivity levels for economic growth
Percent
Historical
growth rate
1995-2008
Energy
GDP/BTU
Materials
GDP/Tonnes
Water1
GDP/m3
Required
growth rate
2008-2030
1.7
0.8
3.2
1.3
2.5
Food/feed
Yield/hectare
1.4
Carbon2
GDP/tCO2e
1.3
Technical
potential
3.2
▪
While technically
possible, current
solutions will be
prohibitively
expensive for adoption
in much of the
developing word
3.3
▪
Investment in
innovation will be
required in order to
bring these price
points down
1.5
3.7
1.5
4.0
5.3
6.4
1 Additional infrastructural investment for supply above BAU level is necessary to fully close the gap
2 All greenhouse gases
SOURCE: GDP: Global Insight; Water: McK global supply-demand model; GHGs: IPCC; Oil: IEA WEO 2008 reference scenario; Power: IEA WEO 2008
(historic) and McKinsey Global Abatement Cost Curve v2.0(2030); Food/feed: FAO 2008; IIASA
4
Breakthrough innovations will disrupt billion dollar
markets, creating new opportunities to capture value
Disruption area
Renewable
1 power
generation
2
Energy
efficiency
Innovation in
3
fossil fuel
Overhauling
4 power infrastructure
5
New
mobility
Disruption scenarios
▪
▪
▪
▪
▪
▪
▪
▪
▪
6 Materials
▪
▪
7 Water
20% of power from
renewables by 2020
30% reduction in energy
use
Ban of incandescent
bulbs
30 240
15% of new car sales to
be xEV in 2015
Biofuels 5% of liquid
fuels by 2020
>10x energy efficient
building material
8% of chemicals biobased by 2012
90% of world population
with water shortage
1,100
29 90
118
120
2,460
3,100
Declining business
▪
Wind, geothermal, biomass to
heat and power, solar power
equipment and services
Grid energy storage
▪
Coal, oil burning power plant
building, and operation
Heat reflective windows/films
LEDs and lighting controls
Energy service companies
Advanced HVAC
CHP/micro CHP
LNG growth
Biomass fuel
Advanced CCS
SmartMeters
High voltage DC technology
In home energy management
Grid IT
Battery and electric motors
Power electronics
Charging infrastructure/comms
Biofuels production
Carbon negative cement
Gel based insulation
Bio-based chemicals and plastics
▪
▪
Traditional light bulb
Power/energy company
▪
▪
Oil refinery
Petrochemical
▪
▪
Traditional meters
Meter reading services
▪
▪
Gasoline stand
Traditional power train
companies
▪
▪
▪
▪
▪
▪
Traditional windows
High emission cement
Fiber glass insulation
Fossil based plastics
Existing agricultural region
Manufacturing plants (textile,
chemical, semiconductors,
etc)
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
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▪
▪
147 470
5
Total addressable market
Growth business
214 470
2-10x increases in US
natural gas capacity from
88
shale discoveries
SmartMeters in all homes
by 2020
Grid energy storage
proliferates
Current CleanTech market
Market size
$ billions, 2010
Advanced pipes, pumps, valves
Desalination plants
Efficient irrigation systems
Korea - Innovation Leader
• By 2007, Korean investment
in R&D was at least five times
greater than Colombia.
• Multiple nation-wide policies
driving technology research.
• International leader in
broadband penetration rates.
Singapore - Innovation Leader
• Facilitated multiple-sector
cooperation to develop
innovation economy.
• International leader in internet
penetration rates and gov’t
prioritization of innovation.
Why Innovation Matters
Innovation
Productivity and
Competitiveness
6
Growth and
Development
Factors of Innovation
Innovation
Creativity: the mental process of generating new ideas or concepts
Entrepreneur: One who starts a business or other venture that
promises economic gain but that also entails risks
7
Types and Models of Innovation
Types of Innovation
• High Level (e.g., Research & Development)
• Process Innovation (e.g., assembly line)
• Product Innovation (e.g., mobile banking)
Innovation Models
•
•
•
•
•
Corporate R&D: Technology Transfer versus Home-Grown
Business Incubation
Technology Parks
Open Collaboration
Model driven by Resource Scarcity
8
Innovation, enabled by new information technologies that
are transformative and disruptive.
•
•
•
•
•
•
Reversing the flow of goods and services
High degree of economic interdependence
Shorter and sharper economic cycles
Greater participation by emerging economies and companies
Reversing brain drain
Emerging countries leading innovation and becoming global trendsetters
• Improved governance, transparency and empowerment
• Changing business models
• Emerging new platforms for distribution of social and business
services
9
Resource scarcity and global climate change are driving
worldwide innovation, unlike previous innovation cycles.
2030 GHG emissions
tCO2e per capita
0-5
10-15
5-10
>15
Key areas for
climate adaptation
Major innovation hub
during industrial
revolution
Major innovation hub
during IT revolution
Growing innovation
hub in cleantech
Source: McKinsey global cost curve; World Development Report 2010; Oregon State University, Resource Conservation and Food Security, Climate
Change Impact on Agricultural Yields team analysis; US and European patent offices; World Intellectual Property Organization
10
How does LAC compare globally?
Source: World Bank DataBank. July 2012.
11
Colombia at a Glance
Strategic Sectors for Innovation:
• Agribusiness (Forestry, Biofuels)
• Industry (Oil & Gas, Manufacturing,
Biotechnology, Clean Energy)
• Manufacturing (Automotive, Building
Materials, Textiles)
• Services (Software and IT, Business
Process Outsourcing, Tourism)5/13/11
mbia at a glance
o pm e nt Indic a t o rs
Share of Total Latin American
R&D Expenditure
mid-year (millio ns)
(tho usand sq. km)
ro wth (%)
atio n (% o f to tal po pulatio n)
etho d, US$ billio ns)
a (A tlas metho d, US$ )
a (P P P , internatio nal $ )
(%)
ita gro wth (%)
Co lo mbia
Latin
A merica
& Carib.
Upper
middle
inco me
Age distribution, 2009
Male
Other Key Indicators
46.3
572
1,002
Unemployment
10.8%
1,142
20,422rate:48,659
1.4
1.1
0.9
75
79
75 23%
Youth unemployment rate:
Female
75-79
60-64
45-49
30-34
229.4
4,003
Urban
population:
5,050
6,993
8,600
10,315
75%7,508
of total
7,495
12,466
Population in poverty: 37.2%
15-19
0-4
6
4.3
Economic
2.9
-1.8
growth:
-2.9
-2.5
4.5%
-3.3
4
2
0
2
4
percent of total population
e nt e s t im a t e , 2 0 0 3 – 2 0 0 9 )
dco unt ratio at $ 1.25 a day (P P P , %)
dco unt ratio at $ 2.00 a day (P P P , %)
12
16
28
8
17
..
..
Under-5 mortality rate (per 1,000)
6
Colombia
Opportunities
Challenges
• Proactive public sector
• Inadequate infrastructure
• Public corporations
• Security issues
• Large domestic market
• Informality
• Natural resources
• Inequality
• Favorable business environment
• Capital markets only for big firms
• Encouraging to FDI and trade
• Inefficient judiciary progress on
Intellectual Property protection
• Connectivity rates exceed regional
averages
• Growth in Capital Markets and PE
networks
• Low value on entrepreneurs
• Poor quality education
• High level educational enrollment
with a large proportion of science and
technology graduates
13
Colombia – Some Recommendations
• Take advantage of land and biodiversity to develop
new and unique products to sell around the world.
• Train human capital to be able to bring foreign
companies to invest in Colombia, create jobs with
added value, especially in services sectors,
especially for export-oriented outsourcing services.
• Build Research/Develop/Innovation Centers to
enhance studies to create new technologies and
products to increase exports and bring the eyes of
the world to Colombia.
14
Colombia – Some Recommendations
• Establish incentives, vehicles, and institutions fostering
grassroot innovation and entrepreneurship that can
support employment creation, equality, and social
inclusion.
• Forge partnerships with global partners with:
• Corporations to support technology transfer and
adaptation in key strategic sectors; and
• Technology and innovation networks that can
support entrepreneurs to develop and
commercialize concepts as well as link to global
knowledge centers and markets.
15
What is Required?
…an Innovation and Entrepreneurship Ecosystem
16