Engineering the Future:

Disruptive Innovation for Sensible Growth

SAAD AMANULLAH KHAN

Economic Growth traditionally has been a function of :

1. Population growth, 2. Productivity,3. Capital accumulation, 4. Resources and knowledge availability

Let’s look atEvolution of Global Economic

Growth over the last ….

… years

1800’s were all about: Who could build the biggest and most efficient

farming methods ?

1900’s were about: Race to build the most efficient factories

And now the 2000’s will be all about ideas and innovation.

Perspective !

-

2.0

4.0

6.0

8.0

10.0

12.0 19

6119

6319

6519

6719

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

11

Pakistan (% GDP Growth)

5.5% 3.9%

3.0%

Pakistan (% GDP Growth)

7.1%

Human Development Index (HDI) Country’s Development Level

Standard means of measuring Human Development

HDI LEVELS Rank 1960’s 2011Very High Human

Development 1 - 47Korea (15) Singapore

(26)High Human

Development48 - 94 Malaysia (61)

Medium Human Development

95 - 141 Sri Lanka (94)

Low Human Development

142 - 187

Korea, Singapore, Malaysia,Sri Lanka Pakistan

Pakistan (145)

PAKISTAN is missing the bus !

GDP GROWTH NEEDED IS > 7%

TO ERADICATE POVERTY

GDP GROWTH NEEDED IS > 10%

TO CATCH UP WITH OTHER DEVELOPING COUNTRIES

HOW do we BRIDGE this gap ?

+3%

+10%

GDP Growth (%)

60 - 70 70 -80 80 -90 90 - 00 00 -10 08 -10

China 3.0 7.4 9.8 10.0 10.3 9.7

India 6.7 2.9 5.7 5.6 7.4 7.9

Pakistan 6.8 4.8 6.9 4.0 4.6 3.2

LEGEND Above 7%5% to 7%Below 5%

+6.5%+4.7%

4

1

13123

GDP GROWTH ROLLING AVERAGE50, 40, 30, 20, 10 Years

60 - 70 70 -80 80 -90 90 - 00 00 -10 08 -10

China 3.0 7.4 9.8 10.0 10.3 9.7

India 6.7 2.9 5.7 5.6 7.4 7.9

Pakistan 6.8 4.8 6.9 4.0 4.6 3.2

LEGEND5% to 7%Below 5%

DISRUPT

IVE

INNVOAT

ION

DISRUPTIVE INNOVATIONAn innovation that helps

create a new market and value network and which eventually disrupts an existing market

and value network, displacing an earlier technology.

Revolution in IT and Back Office Support

1998

2009

Exports US$ Employment

4 Billion

60 Billion

0.2 million

1.6 million

+30%CAGR +20%

GDP Growth Rate

4%9%

today India has about 50% of the global

market for offshore IT and business services.

25% of GDP

INTERNET

SMART PHONES

3DPRINTER

ONE THAT SHOOK

ACORPORATE

GIANT

EXCEPTIONAL HISTORY OF DRIVING

CHANGE IN THE INFORMATION TECHNOLOGY

WHY ?

1993: IBM post loss of US$ 8 BillionBiggest lost in US history at that time

To hit the market fast, IBM’s made an unprecedented decision to contract out PC components (both software and hardware) to 3rd parties:

This allowed competition and innovation in the computer industry to

develop along segmented lines versus the past

vertically integrated lines

Computers

Microprocessors

Hard Drives

Network

Operating Systems

Until Mid-80’s

Current reality

at a Country Level

But their GDP > Pakistan(remember they got Independence 18

years after us)

Equal in Population

=

WE MUST DRIVE

BUT FIRST, WE MUST FIX THE FUNDAMENTALS

KNOWLEDGE ASSESSMENT METHODOLOGY

The 4 Pillars of the Knowledge

Economy

The KNOWLEDGE ECONOMY and current economic performance are highly correlated

Pakistan

1

2

3

4

5

6

7

8

9

10 0

2

4

6

8

10

75

RADAR GRAPH

Economic Incentive and Institutional Regime

InnovationEducation

ICT

Economic Incentive and Institutional Regime

Education

ICT

KNOWLEDGE ECONOMY INDEX

KNOWLEDGE ECONOMY INDEX

Innovation

Economic Incentive and Institutional Regime

Education

ICT

KNOWLEDGE ECONOMY INDEX

Innovation

Economic Incentive and Institutional Regime

Education

ICT

KNOWLEDGE ECONOMY INDEX

Innovation

Economic Incentive and Institutional Regime

Education

ICT

KNOWLEDGE ECONOMY INDEX

Innovation

Economic Incentive and Institutional Regime

Education

ICT

KNOWLEDGE ECONOMY INDEX

Innovation

Economic Incentive and Institutional Regime

Education

ICT

Based onCurrent GDPGrowth rates

TO DRIVEDISRUPTIVE INNOVATION

WE MUST FIX OUR 4 PILLARS OF

KNOWLEDGE ECONOMY

Economic Incentive and Institutional Regime

Regulatory Quality – Stronger Institutions SECP, FBR, Competition Commission, IPO, etc. Protection in Intellectual Property Rights (IPR) Quality people – competitive Salary & Benefits

Increased Trade & Investments Open Trade Barriers Lower Cost of Trade – Port, Airport charges Improved Logistic within country

Rule of Law Improved Security Situation Stronger and effective judiciary and law enforcement Elimination of nepotism, discrimination & preferential treatment

KNOWLEDGE ECONOMY INDEX

Innovation

Research and Journal Articles Create R&D Centers, Incubators and Libraries. Research facilities in public and private sector

Issuance of Patents

Eco system for Innovators and Entrepreneurs Graduate and Doctorate programs Technology transfer and partnership at research level Enhance scholarship program for top students

Royalty Payments & Receipts Streamline Royalty approval and payment process

KNOWLEDGE ECONOMY INDEX

Education

Average Years of Schooling Double or Triple % of GDP spending on Education Allow partnership with nations with high literacy rates Make Government deliver mandatory Primary education mandatory Strong accountability if education funds misappropriated

Gross Tertiary Enrollment Rates Put in place 12 universities & technical institutes in next 5 years

Gross Secondary Enrollment Rates Invest in repairing all existing schools and enhance teacher salaries

KNOWLEDGE ECONOMY INDEX

Computer per 1000 people Indigenous computer manufacturing Partnerships with global technology companies Strong incentive to drive high tech innovation Remove regulatory hurdles in ICT

Internet Users per 1000 people

Enhance internet pipelines to Pakistan Total Telephone/Mobile per 1000 people

KNOWLEDGE ECONOMY INDEX

Information and Communication Technology

PAKISTAN needs to focus on bringing

DISRUPTIVE INNOVATION by disproportionally

focusing on fixingThe Knowledge Economy

Unfortunately, time is running out!

WE MUST ACT NOW …