Innovation: The Key to Grow More and Distribute Better

Interview with Jorge de los Santos and José Alfredo Galván

By: Ariel Ruiz Mondragón / Photo: Ignacio Galar

Innovation: The Key to Grow More and Distribute Better
In a world that is increasingly transforming along with exponential technologies, the federal government is betting on innovation to address Mexico’s big current challenges, according to Jorge de los Santos, coordinator of the National Plan for Technology and Innovation of the current administration, and José Alfredo Galván, business research national developer of the Monterrey Institute of Technology and Higher Education. During the interview with Comercio Exterior, they also shared with us the foundation of the federal administration’s innovation strategy and announced the upcoming Innovation MX: Driving Economic Growth forum, which they believe is a milestone in the instrumentation of said strategy.

The world is going through a real technological revolution. Is the country ready to face this?
Exponential technologies are transforming all fields of human work: the way in which we produce, our consumption patterns, distribution channels, our competitive advantage, and the way in which we insert ourselves in the world trends of trade and investment. Transformation is underway and Mexico has the great opportunity to position itself as an outstanding actor in this new world order if we leverage the drive of exponential technologies; if we digitize industrial processes; if we reinforce our abilities to create our own designs and innovate; and if we are able to replace the add value paradigm with create value. The federal government’s National Plan for Technology and Innovation is a guide heading toward these goals and its ultimate purpose is to elevate the wellbeing and quality of life of citizens.

What role does innovation play in the government goal of increasing national content in exports? There is even a set goal of 33% by 2024.
Innovation is essential to access the more complex phases of the value chain. We must move on from the simple manufacturing and assembly of pieces with imported designs, and access more complex production process phases. Participate mainly in more creative activities. Move from manufacturing to mindfacturing. Fortunately, some Mexican companies are already doing so; suppliers proposing their own designs to big tractor companies that introduce new and more efficient processes, that automate and incorporate new materials. There are innovative companies, but we need to create an environment conducive to them multiplying and to spread to all production sectors and throughout the country. It’s one of the most important aspects of the national strategy for innovation.

Are the conditions there to take this leap? Is it not too late?
China, Korea, many European countries and even the United States have been investing a significant percentage of their government budget in innovation for decades, and so have companies. We still have some way to go; specific actions to increase resources we channel to innovation and not only public investments, but also company investments. In the United States, for example, most of the investment in innovation comes from companies and almost 30% is public.

JORGE DE LOS SANTOS AND ALFREDO GALVÁN
JORGE DE LOS SANTOS AND ALFREDO GALVÁN

Mexico has consolidated itself as an important center of world manufacturing and that is an extraordinary starting point. But we must break the cycle of slow economic growth that we have suffered for years. Innovation is the big bet to revitalize the country’s competitive advantages and grow more. We have —very successful— car and car part industries with an important presence in international markets. However, we cannot settle for that. We must double our efforts to increase the national supplier portfolio and align them to the main trends of the world industry: electromobility, connectivity and autonomous management, among others.

There are, of course, more examples of very dynamic activities and with good international projection, like the future mobility in the Bajio region, home to many and very good Mexican companies; aerospace in Chihuahua; advanced materials in Monterrey; the third-generation components one in Baja California; and intelligent agriculture in Sinaloa.

In the National Plan for Technology and Innovation we have identified eight innovation clusters that will be the spearhead of the innovation strategy: aerospace; future mobility; advanced materials; efficient, clean and renewable energy; biomedicine, biotechnology and genetics; intelligent agricultural industry; Industry 4.0 and AI, and new generation microelectronics.

We consider three factors for the selection of these strategic areas: one, that helps us increase the percentage of national content of products and boost the internal market; two, that focuses on areas of high international projection and broad export growth potential; and three, that has a critical mass of Mexican entrepreneurs who are already undertaking such activities.

What is the planned route to implement this plan?
Mexico’s entrepreneurs are well organized. There are chambers and industrial associations; clusters, and technology parks that are very active and committed to the progress of the country, and entrepreneurs who have already gone down the path of innovation. If we manage to get them hooked and join all efforts in a national crusade for innovation, we are convinced that the momentum of exponential technologies will give us the opportunity to create more value, conquer more markets and grow faster.

One of the main axes of the National Plan for Technology and Innovation is the collaborative design of objectives, actions and goals. Record the voice of entrepreneurs from the very beginning of the strategy to reinforce its relevance: such is the main aim of the upcoming Innovation MX: Driving Economic Growth forum.

The forum aims to bring together a large group of businessmen from the aforementioned clusters and strategic activities, to exchange views, learn about their projects and listen to their needs. Then, in a coordinated manner, lines of action, the mechanisms of collaboration and the responsibilities that both entrepreneurs and authorities must assume will be established. Of course, each innovation cluster has specific needs that must be taken into account.

The conclusions of the forum will enable us to establish—in detail—strategies, actions, a critical path and responsibilities of this great national crusade for innovation. We believe this will be a milestone in the instrumentation of the National Plan for Technology and Innovation.

Most companies are micro, medium to small-sized. How do you plan on incorporating them into this innovation dynamic?
MSMEs are essential to articulate production chains and propagate technology and innovation to all production sectors. They are also essential to incorporate greater national content to exports and extend the benefits of foreign trade. Their participation is key to grow more and do it in a more balanced way among the different regions of the country.

Large companies are tractors that move the entire production and value chain. With small and medium-sized companies we have to work in a coordinated way to provide them with other types of abilities: improve their business management, favor the adoption of digital technologies, promote the development of their own designs and their production processes to innovate.

What about higher education institutions? What will be their role?
Universities have the big responsibility of providing the human capital required to introduce exponential technologies and digitally transform companies. They are key to producing innovation in all countries. They are strategic partners for companies and governments alike to promote innovation, because without them, there would be no experts or teachers that train people who will work in companies; nor would there be patents or technologies that at some point help being truly disruptive.

We must not overlook, however, that higher education institutions are also immersed in a powerful transformation process. Academia not only has to evolve along with the technological revolution, but also lead it with the generation of innovations. For example, there is a very important world trend that promotes certifications as a way to strengthen graduate abilities and align them with the technological transformations under way. Hence, many universities in Mexico are changing their educational models to give greater importance to professional aspects, with internationally recognized certifications that expand the work horizon of graduates.

As we can see, this is coordinated work between companies, government and higher education institutions —conventionally known as the triple helix— that we want to take to the next level, also incorporating society under an ecosystem that considers the environment as a decisive element in decision making.

Is there an increased social focus in terms of technology and innovation?
Experience shows that competitiveness based on low wage costs significantly limits the ability of economies to progress in the construction of production abilities, move to more complex phases of the production process, incorporate and develop technology, and create and distribute greater wealth. Thus, the National Plan for Technology and Innovation considers a different path, where society and caring for the environment are at the heart of decisions.

From a multidimensional perspective, it seeks to go beyond just promoting the competitiveness of companies. That is, promoting innovation to develop technologies and new products, and to incorporate new processes or improve existing ones. Innovate to improve learning processes and increase the abilities and skills of the human factor, to provide workers with the necessary tools to create and to grow. Innovation to improve business management, bring them closer to international best practices. And at the end of this long path is the central objective of creating more and better opportunities for economic agents, preserving the environment and raising the quality of life of citizens.

Are there resources to finance a plan with the proportions you mention?
Allow me to go back to the topic of innovation. I mentioned that it is multidimensional. It is also multidimensional in the way of doing business. Financing mechanisms are evolving and open new options to raise funds. The use of more digital platforms opens options for funding on the Internet through crowdfunding and other variants of fintech.

Looking at another area, the company cost structure is also being transformed. Before, you had to invest large sums in machinery and equipment to set up a company; now, it is not necessarily the case. There are affordable alternatives to finance innovation.