How resilient is the world?

The role of technology and innovation

Table of conTenTs
Preface 4

1 2 3 4 5

Futuregrowthengine

WhatistheinnovationcapacityoftheNetherlands?

11

China:frommanufacturertoinnovator? Interview Weiming Jiang, president DSM China

16 20

Howcantechnologicaladvanceshelptheglobalfoodsupplyin2050? Interview drs. Ben Tax RA and dr. Kees Reinink, directors of Rijk Zwaan

24 28

Socialmedia:closertothemarket,oranewbubble? Interview Frank Volmer, director Telegraaf Media Nederland

32 36

Concludingremarks Colophon Disclaimer

40 42 43

How resilient is the world? Outlook 2012

PReface

To raise new questions, new possibilities, to regard old problems from a new angle, requires creative imagination and marks real advance in science.

as simple as it is challenging, albert einsteins view of scientific innovation applies equally to innovation and technological advances in the business world. Innovation and technological progress are essential to the survival of almost any business. Particularly in todays challenging economic climate, it is crucial to be able to deliver the highest-quality products and services at the lowest possible price. at the same time, the flexibility of business owners is continuously put to the test, and innovation and technological progress are urgently needed to overcome the myriad challenges humanity has faced over the centuries. some of these challenges are only set to increase, such as the dwindling global food supply, long-term food security, climate change coupled with the global energy issue, and the limited availability of clean air and drinkable water. Under the right circumstances - which can be created mainly by implementing the correct policies - capacity for innovation can contribute in more ways than one: successful businesses create smart products and innovative processes in order to find solutions to the major problems of our time.

While we are aware that a comprehensive picture of the role of innovation and technological progress is beyond the scope of this concise study, we have highlighted some of the main aspects involved. The study notes, for example, that the rise in productivity through innovation is increasingly becoming the driving force behind economic growth in our ageing society. This growth is indispensable for building financial strength in the wake of rising government debt levels following the recent economic crises. In order to strengthen the netherlands innovative power, it is therefore essential to increase investment in research and development (R&D) and improve the quality of our higher education system. another key priority is the dissemination of knowledge and expertise through public-private partnerships. The sharing of knowledge can also help boost growth further in china and India. These countries are attempting to make the transition from an industrial to a sustainable, innovative economy. In terms of the global food supply and food security, the speed of innovation is being slowed down by factors such as inadequate access to global databases containing genetic data about plant species. another factor is that some developments in biotechnology have met with ethical objections from certain organisations.

Outlook 2012 How resilient is the world?

Preface

besides the many improvements that can be made by making existing technologies more broadly applicable, we can also expect further advances in the most recent breakthrough technology, namely the IT revolution. for one, we note the potentially considerable added value of the application of social media, which are already being used to better adapt products and services to consumers demands through more efficient and effective marketing strategies. although social media have increased the importance of branding, their downside is the potential damage they may inflict on corporate image. overall, we see a world that provides opportunities for creative, innovative solutions, and that fact alone should give you, as an entrepreneur, a sense of optimism. Rabobank has made innovation a key strategic priority. We have been the market leader with our payment services for many years, including the latest trend of contactless payments. We have provided the business market with a growing number of opportunities to link market information to products through an innovative platform RaboTransact - and to instantaneously convert this into the transactions required. naturally, we also have

an interest in facilitating innovation for our clients. one example is the Innovation loan introduced by Rabobank Rotterdam. Money should never be a barrier to innovation, thats what we stand for. supported by facilitating and stimulating policies, creativity and innovation can provide the resilience we need so urgently. along with our macroeconomic outlook 2012, this thematic publication provides an integrated view of the financialeconomic world perceived by the Rabobank. our vision is supplemented by interviews with practical experts from various enterprises, whose accounts are included in this publication. We would like to thank these professionals for so generously sharing their time and expertise with us. I hope you enjoy reading this publication, and would like to wish you a successful, healthy and happy 2012.

SipkoSchat Executive Board Rabobank Group

5

Preface

How resilient is the world? Outlook 2012

fUTURe gRoWTH engIne

For many centuries, innovation and technological advances have been instrumental in increasing prosperity. While economic growth is a major factor in this change, its impact is significantly wider. Key problems in the sustainable use of scarce raw materials were addressed and can continue to be addressed in the future by using innovative solutions and increasingly sophisticated technologies. This also applies to challenges related to the food supply for the growing world population and challenges related to adapting the supply of goods and services to consumer preferences. From an economic perspective, considering the current government debt worries and the poor demographic prospects, we believe that innovation and technological advances will become an increasingly important source of growth in the future.
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Outlook 2012 How resilient is the world?

future growth engine

promoting productivity growth through targeted investments. chapter 2 considers Dutch innovative power from this angle. an international comparison of the various factors that make up the innovative capacity of a country clearly shows in what areas the netherlands can book the biggest gains. However, the potential impact of technological progress and innovation extends well beyond economic factors alone: there are also key challenges related to the food supply and food security, climate change in conjunction with the global food issue, and the limited availability of potable water. companies developing products and services are also focusing increasingly on the specific needs of consumers, a process facilitated in part by advances in internet and communication technology (IcT). In that respect, innovation and technological progress serve not only to increase productivity but also to make economic activity more sustainable and better match production with demand. These areas are all the focus of research and development (R&D), in order to resolve problems or significantly reduce them. a number of these areas are highlighted in this publication. chapter 3 discusses the challenging transition faced by china in transforming its economy from the worlds largest manufacturing centre into a sustainable and innovative economy. against this background, DsM explains how it has adapted its business model to the chinese developments. chapter 4 is devoted to the global food issue, concluding that innovative solutions are the key
7

Productivity,technologicaladvances andinnovation economic growth is based on three pillars: growth of the working population, increase in the stock of capital goods, and technological advances, as reflected in the growth in productivity. The significance of this productivity growth as a source of economic growth is set to increase because it will become increasingly more difficult to raise the supply of labour in our ageing societies over the next decades. This will be explained in more detail in the paragraphs below. besides the challenge of increasing the employment rate, there is also a clear challenge in

future growth engine

How resilient is the world? Outlook 2012

Figure1:TrendandfluctuationsinGDPgrowth
billion

700 600 500 400 300 200 100 0

Dutch GDP in constant prices (2010), level and trend

to feeding the global population, which will increase to over 9 billion in 2050. Directors of plant seed company Rijk Zwaan explain how this goal can be achieved by allowing more scope for innovation in the industry. finally, chapter 5 describes the usefulness of social media, one of the consequences of the internet revolution of the 1990s. Telegraaf Media group sheds light on how social media can help companies market products and services to consumers as effectively as possible.
%

15 10 5 0 -5 -10 GDP level Trend GDP growth Trend

48 52 56 60 64 68 72 76 80 84 88 92 96 00 04 08

Source: Statistics Netherlands, Rabobank

Figure2:Contributionstoeconomicgrowth
% %-point

6 4 2 0 -2 -4 -6 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Capital (r) Labour (r) Productivity (r) Added value (l)

Growth of added value of commercial sector and its contributions of production factors and productivity

6 4 2 0 -2 -4 -6

Source: Statistics Netherlands

based on these factors (see Figure 2), although these developments are not determined so much by what is possible, but rather by what is actually occurring in view of the demand for goods and services. for example, in times of slow economic growth and recession, employment decreases, causing production to drop as a result. This was the case in the netherlands from 2002 to 2004 as well as in 2009. In this case, this is not because there are fewer workers available, but because the available labour is used less. slower investment growth has also Technologicalprogressandproductioncapacity resulted in a more limited increase in the stock of from a macroeconomic perspective, innovation and capital goods. In 2009, this supply even shrank, technological advances result in increased labour because gross investments were lower than writeproductivity: it is possible to add more value while downs. Here, too, the stock of capital goods could using the same number of employees. This may take grow faster, but this was prevented due to the slower on the form of automated production processes; that growth in the demand for goods and services. finally, is, more machines per employee. However, it can also production can decline so much that it is reduced be achieved through a smarter use of people and while the number of capital goods and workers 1 machines, e.g. in the form of process innovation. at remains the same. as before, this is not because the same time, it is important to realise that increased productivity is actually down, but because productivity is mainly a growth pillar for the long production potential is temporarily underutilised. term; it is not a panacea that would allow us to The fluctuations in short-term productivity growth quickly weather the current economic downturn. are therefore primarily related to the underutilisation or overutilisation of production potential. over the In the immediate future, changes in gross Domestic long term, productivity growth acts as a driver of Product (gDP) will be determined primarily by shifts economic growth. between 1996 and 2008, annual in the demand for goods and services. This means added value growth in the private sector averaged that gDP hovers around a long-term trend (see Figure 3.1%, almost half of which was generated through 1), determined by the supply side of the economy, i.e. productivity growth. Figure 2 shows that the role of production potential. This potential depends on the productivity growth between 2003 and 2008 was available number of workers, the stock of capital much larger than during the period from 1996 to goods, and the level of productivity. In the short 2002. The importance of productivity growth has term, too, production growth can be described therefore increased over the past 15 years.

Outlook 2012 How resilient is the world?

future growth engine

Figure3:Demographicsandeconomicgrowth
2.5 2 1.5 1 0.5 0 -0.5 62 67 72 77 82 87 92 97 02 07 Growth potential labour force (l) Growth total population (l) Effect of population composition on potential growth of GDP per capita (r)
% %-point

2.5 2 1.5 1 0.5 0 -0.5

Source: Eurostat, Rabobank

Figure4:Ageingpopulations: achallengeacrossEurope
%-point

1.0

Effect of population composition on yearly growth of GDP per capita

0.5

0.0

Theageingpopulationand governmentdebtissues Innovation and technological advances will become even more important over the next few decades. Problems related to government debt, which are a focus throughout our outlook,2 require an increase in economic growth. This would eventually create enough income for the respective governments to service their debt burden in the future. as a result of the demographic trend, this extra activity will need to be achieved with fewer people. In addition, population ageing will lead to an increase in healthcare services, where both production levels and production growth are lower than the average for the rest of the economy. for the economic growth potential, it is particularly important to realise that the potential working population (i.e. those of working age) is decreasing. as such, potential growth will slow down over the next few decades. furthermore, the negative effect of the ageing population on per capita production in the netherlands is already noticeable before the actual decline in the potential working population. This is because the growth of the population as a whole diverges from that of the working population (see Figure 3).

does not necessarily mean that we will, by definition, become less prosperous in terms of per capita expenditure, since a portion of the pension savings are used. This ensures that spending on goods and services remain at the same level, although these will increasingly need to be imported from abroad. However, collective provisions will need to be financed by a smaller tax base, which means that some tough choices will need to be made. over the coming years, the large segment of the population born during the post-war baby boom will be retiring, causing the working population to decline over the next several years. as a result, their share in the population as a whole will decline even faster. over the next decades, the effect of the demographic slowdown on per capita production growth will therefore be even stronger than it has been in the past decade. The netherlands is not unique in this respect - the situation will be the same in many other Western european countries (see Figure 4).

-0.5 -1.0

Belg
'80

ium

Germ

any

Spain
'00

Italy
'10

Neth

erlan

ds
'20

UK

'90

Source: Eurostat, Rabobank

Bettingontwohorses: productivityandparticipation The demographic outlook reflects the limited opportunities for boosting the labour supply. Within the parameters of what we consider a productive age The positive effect of changes in population structure for an individual, the outlook indicates how much room there is for growth in this supply. of course, on per capita production growth averaged 0.6 actual changes in the labour supply are also percentage points from 1967 to 1994. since 1994, however, the population as a whole has grown faster determined by the employment rate resulting from the potential working age population, i.e. the rate of than the working population, and up to 2011 this participation. This latter rate, which reflects the actual trend slowed down potential economic growth by working population versus the potential working age an average of 0.15 percentage points per year. This
9

future growth engine

How resilient is the world? Outlook 2012

Figure5: articipationdrivesuplaboursupply P
% 70 68 66 64 62 60 58 56
growth, 5-year average % Actual labour force as a percentage of potential labour force, 5-year average

2 1 0

population, has increased sharply in the netherlands since the late 1980s (see Figure 5). In the 1990s and the first decade of this century, the decline in the growth of the potential working population was more than offset by the higher employment rate. Despite the decline in the working age population, it may be possible to further utilise labour as a production factor in the future by means of a higher rate of participation. However, the higher this rate, the more difficult it is to achieve a further increase. note that in the netherlands, it will be possible to further utilise the labour potential even if the rate of participation remains the same, although the country
1

will need to abandon the current trend of working part-time to some degree and/or extend the retirement age. It should be noted, however, that gDP only reflects wealth in a narrow sense, not factoring in components such as leisure time.3 even with the adjustments above, it will be a challenge to regain the impressive growth in labour utilisation witnessed in the 1990s, as the effect of the ageing population will slow down this growth significantly. as a result - and as noted above - the importance of productivity growth as a source of economic growth will increase over the coming decades.

55

60

65

70

75

80

85

90

95

00

05

10

Gross participation rate

Potential labour force

Actual labour force

Source: Statistics Netherlands

The oslo Manual (2005) uses a much broader definition of innovation, i.e. the implementation of a new or significantly improved product (good or service), process, a new marketing method or a new organisational method in business practices, external relations or a different type of organisation. 2 see Rabobanks outlook 2012: How resilient is the economy? 3 see Rabobank special 11/08 for more information on measuring wealth and prosperity.

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Outlook 2012 How resilient is the world?

future growth engine

WHaT Is THe InnovaTIon caPacITy of THe neTHeRlanDs?

Chapter 1 describes the importance of innovation for sustainable economic growth. Governments in advanced countries see innovation as a way of keeping up the growth figures they experienced in the last decades, while emerging countries see it as a way of catching up with the industrialised countries. Sadly, not all countries are equally successful in spurring innovation. This chapter compares the innovation performance of the Netherlands with some major economies according to our recently constructed Rabo Innovation Index (RII). Besides this international perspective, this chapter elaborates on appropriate policy measures for the Netherlands to bolster innovation going forward.
11

The innovation capacity of the netherlands

How resilient is the world? Outlook 2012

Measuringinnovation Measuring innovation in a form that is useful for policy purposes has proved particularly challenging. The central problem is that no two innovations are alike. some innovations (e.g., the invention of the telephone or the personal computer) create whole new market sectors whereas others are useful but do not push the frontier further out (e.g. the upgrade of iPad1 to iPad2). capturing innovation confronts statistical challenges as well. for one, direct official measures that would quantify innovation outputs are frequently not available across many countries. This is particularly true if one considers a broad notion of innovation, as suggested by the oslo Manual referred to in a footnote in chapter 1. Whats more, there is no clear understanding of which factors interact in specific country settings. Many factors may not operate in an identical manner across different countries. all these challenges notwithstanding, we believe it is still useful to measure innovation in order to be able to compare and contrast economies. To this end, we have constructed a composite indicator, which we have christened RII -the Rabo Innovation Index (RII)- to establish an objective framework for measuring innovation. More specifically, we wish to rank the major economies4 from most to least innovative based on a selection of indicators. before discussing the methodology and the results, it would be important to stress that this exercise is by no means flawless. combining various metrics into a simple measure of innovation for an economy is fraught with many complexities, especially when considering economies that are often vastly different
12

in size, population, and stage of economic development. Moreover, by selecting a set of indicators and excluding others, some information may be lost. finally, the absence of a strong theoretical base regarding the weights of each indicator forces us to give equal weighting to each indicator. This may not fully reflect reality where some variables are perhaps more important in some settings when it comes to assessing a countrys innovative capacity. Introducingourindex after looking at a host of variables, we settled on ten indicators taken from a variety of sources that we believe can roughly measure a countrys innovation capacity.5 a trade-off between precision and country coverage was often made in selecting the indicators to be included in the RII. The RII relies on two sub-indices, the innovation input sub-index and the innovation output sub-index (see figure 6). as regards the former, two pillars capture elements of the national economy that enable innovative activities: (1) human capital and research and (2) institutions and environment. The first pillar is the level and standard of education and research activity in a country, which are the prime determinants of the innovation capacity of a nation. as for the second pillar, nurturing an institutional framework that attracts business by providing good governance and the correct levels of protection and incentives is essential to innovation. The business and political environment are also of utmost importance to attract innovative firms and a high skilled workforce. The innovation output sub-index captures actual

Outlook 2012 How resilient is the world?

The innovation capacity of the netherlands

evidence of innovation outputs. It includes three indicators that are the result of inventive and innovation activities. once the variables are selected, given all their known constraints, we summarise them into an index score in order to be able to interpret the countries relative positions (table 1). To benchmark our RII rankings, we have compared it with the rankings provided by the InseaD business school, the boston consulting group (bcg) and the economist Intelligence Unit (eIU).6
Figure6:RaboInnovationIndex-indicators

RII Innovation input Human capital & research Institutions & environment Innovation output

R&D expenditure (%-GDP) Tertiary education (% gross) PISA score: math, science & reading

Venture capital deals (%-GDP) University/industry collaboration Rule of Law Intensity of competition (survey)

Scientific publications (%-GDP per capita) Patent application (%-GDP) High tech exports net of re-exports

RII:Ourmainfindings When glancing through the table, a number of interesting observations catch the eye. The most noteworthy observation is that the nordic countries (excluding norway) dominate the top 5 positions in the RII. also of note are the relatively high ranks for the Us and switzerland in the RII as well as in the benchmark indices. on the other side of the spectrum, the southern european countries (spain, Portugal, Italy and greece), which are currently grappling with a debt crisis, are the least innovative advanced countries in our sample pool. This is again very much in agreement with the rankings provided by the benchmark indices. Ireland is the only crisis-hit periphery country that has a relatively strong innovation capability (we have extensively discussed this in the past - see our economic Quarterly Update 09/2010, Ireland: a strong economy falters). from the bRIcs, only china manages to outperform some of the advanced economies in our sample by scoring higher than the southern european countries. Unsurprisingly, brazil and Russia are in the bottom of the table. RII:Dutchinnovationperformance as for the netherlands, the country comes in 9th in the overall RII ranking. This is a touch below the rankings given by the benchmark indices. Figure 7 shows the Dutch performance on all individual indicators. although the country does not top any individual indicator, it places within the top 5 in three indicators (PIsa scores at 4th, rule of law and patent applications at 5th). Where the country performs rather poorly is the relatively low R&D intensity (12th),
13

Source: Rabobank

The innovation capacity of the netherlands

How resilient is the world? Outlook 2012

Table1:RaboInnovationIndex

Country
sweden finland switzerland United states Denmark United Kingdom germany Japan netherlands Ireland belgium norway france austria china spain Portugal Italy greece India Russia brazil

RII
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Ranking based on: INSEAD BCG* EIU**

2 3 1 5 4 7 8 12 6 9 14 10 13 11 15 16 17 18 22 21 20 19 6 3 1 4 7 9 12 5 8 2 15 11 13 10 16 14 17 18 19 20 21 22 5 3 2 4 8 13 6 1 7 14 11 12 10 9 21 16 18 15 17 22 19 20

* Boston Consulting Group ** Economist Intelligence Unit Source: Rabobank

which has dropped substantially since the early 1990s. Private expenditure on R&D fell from 1.1% of gDP in 1990 to 0.9% gDP in 2009. according to our RII the other main weakness of the Dutch innovative capacity is the low tertiary school enrolment (11th). Despite this low ranking, the proportion of people having attained tertiary education has increased by roughly 10%-points to around 33% during the last two decades. finally, the netherlands scores quite poorly on university/industry collaboration (9th), although figure 7 displays that the netherlands slightly outperforms the oecD-countries. In fact, in 2008, only 36% of innovative Dutch industrial companies were involved in public and/or private collaboration, which is quite low if you want to increase the commercialisation of scientific research.7

InnovationpolicyintheNetherlands If the netherlands aims to be one of the top five knowledge economies in 2020, as is aspired by the Innovatieplatform,8 then the increase of the basic quality of tertiary education and the proportion of the population with tertiary education should get priority. This will not only require a more efficient deployment of the existing funds, but also extra investment in education and research going forward. funding of higher education should focus on performance and quality of programmes and greater priority should also be given to availability and quality of the teaching staff. More freedom in setting tuition fees and a more competitive environment for public funds should enhance the quality of courses offered

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Outlook 2012 How resilient is the world?

The innovation capacity of the netherlands

Figure7:Dutchinnovationperformancein internationalperspective closer to the centre suggests lower in performance

R&D-expenditure High tech exports Tertiary education

and provide universities with an incentive to develop more tailor-made programmes, from which both students and the labour market would benefit. a second overriding objective of Dutch innovation policy is to improve the cooperation between companies and public research organisations, especially universities. one way to foster privatepublic collaboration is by making university funding partly dependent on performance in diffusion of knowledge to firms. To put if briefly, throwing massive sums of public money to raise the Dutch innovative capacity is neither enough nor desirable. for innovation policy to be successful, the improvement of framework conditions is more beneficial in the long run.

Patent application

PISA-score

Scientific articles

Venture capital University / industry collaboration Rule of law Netherlands

Intensity of competition

Conclusions according to our Rabo Innovation Index, the netherlands is not particularly innovative compared to the major economies. In spite of the government policy, private investments in knowledge, research and innovation in the netherlands have not kept up with gDP growth in recent years and have been lagging behind investments in some advanced economies. The good news is that a number of appropriate policy measures can bolster innovation going forward. If the netherlands aims to be one of the top five knowledge economies, our main finding is that the basic quality of higher and academic education needs to be improved and private-public collaboration should be further encouraged.

OECD average in RII

Source: Rabobank

We included the major european industrialised countries plus the Us, Japan and the bRIc-countries (brazil, Russia, India and china). 5 The sources contain: Unesco, oecD, Thomson Reuters, World bank and World economic forum. for further details and the statistical description of the ten indicators please refer to Rabobank special 11/07. 6 InseaD (2011), The global Innovation Index. bcg (2009), The innovation imperative in manufacturing. eIU (2009), a new ranking of the worlds most innovative countries. 7 oeso (2006), oecD economic surveys: netherlands 2006. 8 Innovatieplatform (2010), Kennis en Innovatie agenda 2011-2020.
4

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The innovation capacity of the netherlands

How resilient is the world? Outlook 2012

cHIna: fRoM ManUfacTUReR To InnovaToR?

Chapter 1 explained that an important aim of innovation is not only to produce more, but also to produce in a more sustainable way. The availability of resources is not endless and the negative external effects of production can be large. The necessity to transform existing industries holds for many advanced countries but certainly applies to China.9 The growth performance of the Chinese economy has been astonishing. Within three decades the country rose out of poverty and transformed into a middle-income country. Innovation might help to sustain these growth rates in the future and to realise these goals without avoidable additional damage to the environment. However, according to our Rabo Innovation Index (Chapter 2) in which China ranks 15th, there is still a long way to go.
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Outlook 2012 How resilient is the world?

china: from manufacturer to innovator

Wheretogofromhere china already made great strides in improving the innovative capacity of its economy. between 2000 and 2009, the number of patents awarded to chinese applicants multiplied by 8, while the number of chinese publications in international science & Technology journals doubled. Moreover, expenditure on R&D as a percentage of gDP rose from an average 0.8% between 1996 and 2001, to 1.3% between 2002 and 2007. In comparison, in the Us expenditure on R&D remained stable at 2.7% of gDP. However, what the numbers above do not show is the quality of the articles published and the innovative content of the patent applications measured. for instance, chinese patents are often applied to products or techniques that only differ marginally from older versions. More general, chinas emergence as a global economic and political power has in part been the result of the governments ability to reap the fruits of decades of innovation in the rest of the world, high investments in capital goods and putting to work a reservoir of cheap labour. Up to now, copying, rather than inventing products and processes has been the main strategy towards developing the economy. However, in the long run, the technological stance of china will inevitably approach the level of leading countries. In that case, the copycat-model will necessarily be transformed into a growth model based on own research and innovation. besides that, this growth model has proved to be unsustainable as chinas rise as the worlds main manufacturer has severely damaged the environment.
17

china: from manufacturer to innovator

How resilient is the world? Outlook 2012

Theneedforpolicychange In light of the above, chinas forward looking government embarked on a road to increased welfare through innovation. We observe that the need for innovation stems from two distinct goals: the first is to upgrade traditional industries and resolve many of the bottlenecks that are currently obstructing development. In order to reach this goal, china will need to find new ways to apply existing technologies and processes. The second goal is to be able to compete with the worlds most developed countries. Doing so will require the creation of new technologies and processes. To reach these goals china should accommodate an environment in which innovation is enabled by an educated work force, the opportunity to share knowledge and a culture that rewards those that challenge the status quo. The following describes these three challenges in more detail.
Figure8: oreignDirectInvestment(FDI)China F
bn USD

especially multinationals, further illustrate the underperformance of chinese universities. graduates are said to be too young and too inexperienced to be employed. besides that, in contrast to education in the Us or europe, the chinese educational system rewards good memory and obedience over critical thinking. This while critical thinking and the ability to think outside the box are widely regarded a prerequisite for success in innovation and science. Theneedforknowledgeand technologicaltransfers Innovation is unlikely to come about in isolation. Instead, companies that are tapped into global markets are better able to reap the benefits of existing knowledge and technologies. opening the economy in order to exploit foreign expertise has been one of the most notable achievements of the chinese government. The interview with DsM china (next page) gives a nice example of how foreign expertise can help china to overcome its main obstacles. as shown in figure 8, between 2000 and 2010 fDI grew considerably, reaching roughly 3%-gDP in 2010. Theneedforaprotectiveenvironment even when companies are fully capable of innovation, they need the proper motivation to actually innovate. The most important incentive is, of course, the prospect of exploiting an invention and turning it into a profit. Patents allow innovators to do so. a well governed patent system is therefore considered a vital prerequisite for innovation. When, in 2002, china became a WTo member, it brought its

200 160 120 80 40 0

00
Inward FDI

02

04
Outward FDI

06

08

10

Source: EIU

Theneedforhighskilledlabour only a high quality education system will allow for the accumulation of the human capital needed to foster innovation. Unfortunately, the chinese education system is lacking in more than one aspect. The problem is not in the numbers of graduates, but rather in the quality of education provided to the scores of students graduating each year. While chinese universities churn out more science & Technology graduates than their counterparts in the Us, only six chinese universities rank on the Times World University Ranking (top 200). In comparison, 75 american and 12 Dutch universities are listed in this ranking. complaints about skill shortages, from

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Outlook 2012 How resilient is the world?

china: from manufacturer to innovator

patent laws in line with international standards. However, the main problem of chinas Intellectual Property (IP) system is not the laws, but rather the (lack of) enforcement of IP regulations. as a result, the infringements of IP rights remain a significant problem that deters especially foreign firms from transferring knowledge to china, out of fear that their accumulated knowledge will simply be copied.

Conclusions by increasing its capacity for innovation and by applying existing innovative products and processes to traditional industries, china could avoid the middle-income trap and overcome the various bottlenecks that will otherwise hamper future economic growth. However, it will take more time and effort for the label made in china, to be replaced by the label invented in china. The following interview shows how foreign knowledge helps china to speed up their transformation process.

for more information on innovation in china and India please refer to Rabobank special 11/06.

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china: from manufacturer to innovator

How resilient is the world? Outlook 2012

Royal DSM is a global science-based company active in health, nutrition and materials. Innovation is historically one of the key drivers to secure DSMs growth. DSM collaborates with many universities and business partners across the world. In the early 1990s the first sales offices and manufacturing facilities were opened in China. In 2005 DSM opened a new research centre in Shanghai to improve its innovation capability.

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Outlook 2012 How resilient is the world?

china: from manufacturer to innovator

Weiming Jiang
President DSM China

gRoWIng MaRKeT sHaRes aTTRacT R&D To cHIna

Why did DSM decide to setup a R&D centre in China? DSM has always been a very innovative company in its field, with several research centres in for example the Netherlands and Switzerland. Innovation is simply a precondition to survive for any company, and this certainly holds in the chemical sector. DSM has been operating in China since the 1960s, at that time still as a governmentowned company, but in the first decades our main activity in China was business trading. In the last couple of years our activities in the Chinese and Asian market have grown rapidly, sales in China nowadays account for more than 14% of DSMs total activity. Of course, we are still a new and relatively small player in the large Chinese market, but as a company with growing market shares, we must be able to answer the needs of our Chinese customers. So the decision to setup a research centre in China is mainly business driven. In the first place DSM China tries to make the transformation of existing products and production processes, from for example the European market, into products and production

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How resilient is the world? Outlook 2012

processes that serve the preferences of the Chinese market. Only in the second place we aim at inventing new products and processes. We hope DSM China can distinguish itself in the Chinese market with innovative power, and thereby we can build on the great experience of DSM as a whole. Do you foresee other companies to move their R&D-activities to China? It is undeniable that China is growing rapidly as a consumer market. In the last couple of decades the United States has played this role, but China is running up quickly. If a multinational wants to benefit from such a growing market, it has to make sure that it is able to service the specific needs of that market. However, this is no golden rule in all sectors. For example, a strong, luxury brand like a Swiss watch can simply be exported via foreign sales channels. But in other sectors local R&D-activities are indispensible and the chemical sector is certainly one of those. If you dont adjust your products and services to a specific market, competitors will do that for you. Besides that, it is certainly attractive to use the talent pool in multiple geographical areas. Chinas technological education and know-how is rapidly increasing. Again, if you dont make use of that, you will be outsmarted by other companies in those specific markets. However, making use of such a talent pool is easier said than done. Also DSM China has

had some challenges attracting good employees, as young Chinese people are difficult to attract if you dont have a strong brand. Therefore it is essential to promote yourself in local markets as a respectable and innovative company. What is the effect of this R&D inflow on China? From a global perspective, China is currently not playing a leading role regarding the level of technological sophistication. In the coming decades this might change, especially as the governments focus is shifting more and more towards innovation. In the last 30 years China has built up an incredibly large manufacturing industry, which has been a massive achievement. However, criticizers state that this transformation has come at the cost of the environment and the restricted usage of resources by future generations. The current government is aware of these issues and in its twelfth Five-Year Guideline (2011-2015) the main theme is innovation and its possibilities to make the manufacturing industry more sustainable in the future. This is a historical turnaround in Chinese policy as it encourages clean sectors and it restricts polluting industries, unless they can show a transformation to a more green production process. The detailed Guideline includes encouragement of sustainable sectors via for example financial incentives or research grants.

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Outlook 2012 How resilient is the world?

china: from manufacturer to innovator

However, China needs to spend good energy to make its industry cleaner and the inflow of foreign R&D activities might help to find innovative solutions to address these issues. When it comes to innovation, people tend to think about the invention of for example an iPad, but also the transformation of traditional industries towards sustainable production processes requires a huge innovative effort. DSM China is contributing to this process, by making use of the know-how and good practices of for example reduced CO2-emission in Europe. Translation of DSMs know-how to the Chinese market enhances the competitive position of DSM China and shows the added value of the inflow of R&D activities for China as a country. Do you see any challenges regarding future innovation? I believe the current government policy as described in the Five-Year Guideline is already quite extensive. The government can hardly do more than encourage clean and restrict polluting industries, although this policy will take time to deliver results. In practice it turns out to be difficult to implement this policy when the closure of a large company results in massive unemployment. This shows that also innovation policy might sometimes be hampered by social considerations.

Besides the Five-Year Guideline I see room for improvement regarding the financial incentives for innovative projects. For example banks could provide more favourable loan conditions to firms which are moving to clean processes. The government might play a role in steering these financing. Furthermore, it is important to improve the protection of intellectual property rights. China is able to produce a huge amount of intellectual property but the protection of it should get more attention. However, I believe that if a country becomes more innovative, the mindset of the people in that country will naturally change to the idea that the protection of intellectual property is important. Also more in general, I believe that a change in the mindset of the people is crucial to become the most innovative power in the coming decades. The talent pool of young, promising students is overwhelming, but after 30 years of producing without too much awareness of the environmental consequences, you can imagine that it is difficult to start taking such factors into account. This change of the mindset is very challenging.

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china: from manufacturer to innovator

How resilient is the world? Outlook 2012

HoW can TecHnologIcal aDvances HelP THe global fooD sUPPly In 2050 ?

Several sectors are challenged to structurally increase their production capacity. Faced with an ongoing growth in global population and prosperity, especially in the emerging markets, the agricultural sector is certainly one of them. As Chapter 1 suggests, innovation is key to pushing a sectors production frontier. Advances in biotechnology increased the productivity and resistance of plant seeds during the last decennia, which led to larger harvests of several crops. Besides the importance of technological improvement in plant breeding, it is essential to create an enabling environment in which these technological improvements can prosper.
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Outlook 2012 How resilient is the world?

feeding the world in 2050

preferences. approximately 70 percent more food will have to be produced in order to feed the world in 2050.10, 11 but there are other important developments why we should improve our current production processes. The world is running out of vital natural resources such as fertile land, clean water, nutrients and a number of non-replaceable raw materials/metals. besides that, the world is confronted with rising greenhouse gas emissions, to which agriculture is one of the largest contributors. These developments highlight the need for increased and simultaneously more sustainable production. of course, the answer to our challenges should not only come from the production side. There should also be given far more attention to other contributing factors, like inefficient distribution and irresponsible consumption. Theadvancesinplantbreeding as part of the solution to these challenges, this chapter focuses on the developments and obstacles in the plant breeding sector (see box). successful and ongoing application of plant science to plant breeding has reaped some impressive results in terms of improved yields and land productivity. a number of new plant breeding techniques have been developed in the last decades. The enhanced understanding of the plants genetic codes has substantially increased the speed of developing new varieties. since the introduction of the first transgenic seed in 1996, the use of genetically modified crops increased 88 times until 2010 (in terms of used acres). Key crops that have benefited from biotechnology are e.g. soybean and corn, of
25

Whatarethechallenges? an important driver behind the expected increased demand for food is the growth in world population. Total population will grow by some 40 percent, to more than 9 billion people in 2050. also of great importance, these people will be far wealthier than today, which probably means more nutritious dietary

feeding the world in 2050

How resilient is the world? Outlook 2012

Plant breeding and biotechnology

In plant breeding many different techniques are used on plants in order to be able to produce seeds with desired characteristics (like taste, use of resources and resistance against diseases). Over the last century, several technological advancements have been made in this sector. From the earliest form of breeding through open pollination, we have now come to an advanced stage of carrying out breeding by using genomics as a tool to enable faster and economical breeding Biotechnology is a very broad term which captures several techniques used in e.g. medicine and the agricultural sector. In the latter, it both contains traditional breeding techniques as well as more controversial techniques like genetic modification (for a transgenic seed a gene from another organism is inserted into the DNA of the target plant). Biotechnology contributed to the understanding of the plant genome, more specifically on the mapping of all characteristics or traits of a specific breed.

which the production has increased enormously. The growth rate in the production of e.g. wheat, for which the application of these new techniques is less intense, is lacking considerably compared to aforementioned crops. The benefits of enhanced understanding of the plant genome are multiple. next to the possibility to target higher yields and for example a better taste, it can offer important traits such as stronger resistance to droughts, insects and diseases and moreover a lower required use of fertiliser. This can be used to increase the production of crops in dry parts of africa, but it might also help to reduce the emission of greenhouse gas. Whataretheobstaclestothebreedingsector? although biotechnology, in all its applications, is key to feeding the world in the future, an important obstacle is public resistance, especially against genetic modification. apart from the ethical issues regarding playing with the genomics of an organism, one can think of other arguments against this controversial technology. In the long term genetic modification can lead to a lower degree of biodiversity, which is undesirable in many biological and social respects. besides that, a consequence of the increased use of genetic modification is that technology and knowhow regarding certain breeds might come in the hands of one or just a few large companies, since the inventions of superior crops may drive out competition and monopolise the market. a different obstacle for further technological advances in the breeding sector is structural

underinvestment by the public sector. although private investments have bridged this gap, especially since the introduction of intellectual property rights in plant breeding, this development leads to a situation in which plant breeding of commercially insignificant crops, like oats, lags behind. In the interview with Rijk Zwaan, a Dutch based, globally active producer of vegetable seeds, on the next page, abovementioned and other obstacles are explained in more detail. Innovationsneedanenablingenvironment as suggested in our Rabo Innovation Index in chapter 2, an enabling environment is crucial for any sector to benefit maximally from innovation. also in the breeding sector there is a strong interplay between several factors, including government policies, scientific breakthroughs, farming practices and business strategy of the private sector. While scientific research resulted in several major breakthroughs in the past, the added value of this factor diminished in recent years due to public underinvestment. That said, the need for proper government policy is still essential, not in the least owing to the fact that supply and safety of food are matters of public importance. furthermore, government policy plays a crucial role in striking a balance between protecting the fruits of innovation via intellectual property rights, while simultaneously policy should not hamper innovative behavior by restricting the use of recent innovation by others.

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Outlook 2012 How resilient is the world?

feeding the world in 2050

Conclusions several sectors are challenged to structurally increase their production capacity. faced with an ongoing growth in global population and prosperity, especially in the emerging markets, the agricultural sector is one of them. given the hard restrictions regarding the availability of resources, also the plant breeding sector endures a serious challenge. although technological advances expanded the

production of several crops in the past years, it should be noted that not only the level of technological sophistication is crucial for our future food supply. an active role for policy makers is important to create an environment in which obstacles to both production and innovation can be cleared. The following interview elaborates on these obstacles.

10 11

oeso-fao (2010), agricultural outlook 2010-2019, Paris. for more information on the global food challenge please refer to sustainability and security of the global food supply chain, Rabobank, october 2010.

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feeding the world in 2050

How resilient is the world? Outlook 2012

Rijk Zwaan is a multinational vegetable breeding company engaged in developing high-quality vegetable varieties. As one of the worlds top 5 vegetable breeding companies, Rijk Zwaan markets its products in more than 100 countries. One of Rijk Zwaans main priorities is research and development, resulting in new techniques that enable vegetable breeding companies to develop new species faster and more efficiently. In its research activities, Rijk Zwaan works closely with other research institutions and universities.

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Outlook 2012 How resilient is the world?

feeding the world in 2050

Drs. ben Tax Ra and dr. Kees Reinink

Directors of Rijk Zwaan

boosT InnovaTIon foR fooD secURITy

Is vegetable breeding a conservative or an innovative industry? We operate in a highly innovative sector. Rijk Zwaans research activities focus largely on developing new and improved vegetable species, for example by increasing their resistance to disease or by improving yields. Those are major advantages in a world where food will possibly become increasingly scarce. However, developing new crop varieties is a very time-consuming process - it can take six to twelve years. There is also a long testing stage involved to make sure that commercial gardeners can use our vegetable seeds in different climate zones without any problem. Is vegetable breeding a science or a trade? It used to be mainly a trade - youd get well-trained people selecting crop varieties and using only the best ones. However, it was a lengthy and uncertain process of trial and error. Although experience and a certain amount of luck will always play a role, vegetable breeding is gradually turning into a science. We are learning more and more

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How resilient is the world? Outlook 2012

about the different genes found in vegetable crops, and the properties determined by those genes. Its a bit like a puzzle, where youre trying to identify the numerous properties of a specific crop variety. By crossbreeding species, you can combine several positive properties and eliminate the unwanted ones to create new hybrids. Thanks to new technologies, were able to breed new varieties much faster and more efficiently than in the past, and the outcome has also become more predictable. Its important to make a distinction between breeding and gene technology. In breeding, you use the genetic variety of the species youre breeding, and you also use the variety that can be found in related, crossable species. Genetic modification, on the other hand, involves adding extra genes to a specific variety, which can also originate from completely non-crossable varieties. Gene technology is a controversial practice and the subject of public debate. At Rijk Zwaan, we dont believe gene technology is necessary to improve vegetable species. Due to the great natural genetic variety in vegetables and the technological advances in breeding, we are able to solve the current issues through regular breeding. The use of biotechnology in breeding is very useful, but it should not be confused with genetic modification, which is only one part of biotechnology. For example, there are molecular

diagnostic techniques that make the breeding process more precise and more predictable, but that still create completely natural products, only faster. So does vegetable breeding provide a solution for our food security? Well, we already have the genetic material and technological expertise needed to provide the growing world population with a sufficient supply of vegetables without the use of gene technology. However, our industry faces two major factors that undermine this process. First, although there is a sufficient amount of genetic material available worldwide, it has become very difficult in recent years to access international gene banks. The limited access to genetic material from other countries has slowed down innovation considerably. There has also been an ongoing debate in our industry about the protection of intellectual property rights. In our sector, these have traditionally been protected by plant breeders rights, and since recently also by patent rights. Were in favour of the idea of protecting technological inventions through patent rights, as this rewards inventors for the money and time they have invested in creating their invention. Having said that, we feel actually patenting plant properties would be taking things too far, since it means you deprive other breeders of the opportunity to use the crop species to create new,

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Outlook 2012 How resilient is the world?

feeding the world in 2050

superior species. When species were protected by plant breeders rights, it was permitted to use species for further breeding, which has resulted in a highly innovative sector. The current patent rights prevent further breeding, which undermines innovation significantly, while innovation plays such an important role in securing food supply in the future. Would you say its up to politicians to change this? Yes - both these obstacles call for a solution at the political level. The industry has a common interest when it comes to gene banks, which is to gain access to genetic material and thereby allow room for innovation. However, it takes time to convince national governments that their protectionism will backfire in the long run. There has been considerable debate in the industry on the issue of patent rights. The different viewpoints are related to the use of different business models. We feel that it would be undesirable for any one player in this industry to hold too much monopoly power. What if there were only one company left in the future that develops tomatoes? Dutch politicians get a lot of respect in this area internationally. Fortunately, Henk Bleker, Minister for Agriculture and Foreign Trade, has advocated an across-the-board breeders exemption for Europe, which would make all varieties available on the market eligible for further breeding.

I would also like to stress that future food security is not merely a question of innovative solutions: although all these issues play a key role in the future capacity of food supply, how we handle the existing supply is at least as important. A significant portion of current food production gets lost due to waste, corruption and poor distribution. If we were to put an end to waste in the Netherlands, we would be able to provide 80 million Africans with sufficient food. In that sense, weve got our work cut out for us in the coming years.

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feeding the world in 2050

How resilient is the world? Outlook 2012

socIal MeDIa: closeR To THe MaRKeT, oR a neW bUbble?

Social media have grown explosively in recent years. This form of digital innovation adds great value for companies; allowing them to adapt their business operations increasingly to consumer needs. Chapter 1 cites this as one of the key roles innovation can play in matching production with demand. Given the (expected) rapid increase in the value of new media platforms, a comparison with the dot-com bubble of the early 2000s is inevitable. Are we witnessing the birth of a new bubble?

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Outlook 2012 How resilient is the world?

social media

Web1.0:Inflatedexpectations Just over a decade ago, at the height of the dot-com bubble, investors had very high expectations of the possibilities of the internet, and there was even talk of a new economy. after thousands of dot-com start-ups were launched across the United states in the late 1990s,12 the spring of 2000 marked an end to the buoyancy, with dot-com stocks continuing their free fall until mid-2001. However, the dot-com bust aside, the internet - or, on a broader level, IT - did undoubtedly generate economic growth. In fact, the use of new means of information and communication technologies (IcT), many of them internet-related, has been an important source of growth over the past 15 to 20 years, and will remain so in the foreseeable future. Web2.0:Doesitdeliveronitspromise? We are currently at a new stage in the internets evolution: Web 1.0 has transformed into an environment where users provide most of the content - this is referred to as Web 2.0 (see box). social media companies - mostly founded in the new millennium - are attracting an increasing number of visitors (Figure 9). of the number of people using the internet in the netherlands in March 2011, 96% visited a social networking site - up 18% from the previous year. facebook, Twitter and linkedIn were the fastest-growing websites. There is no country in the world where people, relatively speaking, send as many tweets and spend as much time on linkedIn as the netherlands. social media are becoming an ever more important pastime, and the lines between
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social media

How resilient is the world? Outlook 2012

users personal lives and working lives are becoming increasingly blurred. Companiesareincreasingtheirsocialmedia presence a growing number of businesses are also using social media. of the top 100 companies in the netherlands, 90% are currently active on social media platforms,13 up more than 30% from 2010. but what, precisely, is the added value of these websites? for one, social media allow companies to communicate with their customers more easily and more directly. Unlike Web 1.0, where the core activity of internet companies was to create their own content, Web 2.0 is all about interaction with users. social media are also a way for niche companies to connect with customers all over the world. They can even gather feedback from customers (free of charge) on how to develop new products, to ensure that these products - at least

Figure9:Therapidincreaseofsocialmedia
2.5 2.0 1.5 1.0 0.5 0.0 05 06 Facebook 07 Hyves 08 09 Linkedin 10 11 Twitter
Index

Used queries, underlying scale by Google Trends

theoretically - better match consumers needs. There is not only key added value to be gained from a corporate perspective, but also from a general economic point of view, as matching production more closely with demand results in increased prosperity and efficiency. The interview below with the director of Telegraaf Media netherlands shows how social media can be used as a means of communication. another key reason for companies to participate in social media is that it allows them to monitor and enhance their corporate image. Using relatively few resources, companies can use social media to conduct convincing and effective image campaigns. Socialnetworkingcompanies:Bubble2.0? In a general sense, Web 2.0 clearly adds value, but does this justify the high stock-market value of companies such as linkedIn and facebook? for all

Source: Google Trends

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Outlook 2012 How resilient is the world?

social media

What is web 2.0 / social media?

Web 2.0 is a term that is often used rather loosely. Usually it refers to the various technologies that facilitate efficient interaction between people, content and data. This interaction is not just used passively, but also to create new opportunities collectively (including applications and networks). This is known as user-generated content. The social aspect of social media refers to the fact that users provide the content of the media themselves. Examples of such media include blogs, wikis, microblogs (i.e. Twitter) and social networking sites. What all these online platforms have in common is that users provide the content with minimal or no editorial intervention. In addition, the users of these sites interact with each other.

their success, these companies merely offer a platform, with the millions of visitors providing the content. What these websites are essentially about is generating as much traffic - and, by extension, advertising revenue - as possible. The great danger for social media companies lies in this simple revenue model. although a first-mover advantage applies to some extent, due to easy accessibility (the investment required to build a platform is relatively low), competition in the market is fierce. This means there will always be others waiting to take over, supported by a strong marketing campaign or a superior platform. since a platforms image is vital, damage to a companys reputation, for example as a result of privacy issues, can drive large numbers of visitors away within a very short period. While it is too early to say whether the social media boom is yet another bubble, the sectors business model, by its very nature, results in an uncertain outlook for existing platforms.

Conclusions There is no question that social media add value for businesses, considering that the latter can effectively match their production supply with consumer demand. However, this does not mean that individual platforms can actually meet the high expectations. The interview below provides a look behind the scenes of Telegraaf Media group. as a media company, it is on top of social media trends as a way of increasing its market position in the future.

Wang, Z. (2007), Technological Innovation and Market Turbulence: The Dot-com experience, Review of economic Dynamics, 2007 vol. 1, pag. 78-105. 13 ssM (2011), Rapport social Media Monitor 4.
12

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social media

How resilient is the world? Outlook 2012

Telegraaf Media Groep (TMG) is one of the largest media groups in the Netherlands, with leading market positions in print media (newspapers and magazines), puzzle magazines, online and offline media, and radio. TMG increasingly operates in new media (many of them digital) through the internet/mobile internet and in cross-media formats. It is also actively involved in social networking through its subsidiary Hyves.

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Outlook 2012 How resilient is the world?

social media

frank volmer
Director Telegraaf Media Nederland

socIal MeDIa HelP Us caPTURe THe Days MaIn neWs sToRIes

How have changes in the media industry affected Telegraaf Media Group? The shift from print media to digital media has obviously had a huge impact on our company. Theres no telling what the future of print newspapers will look like, but Telegraaf Media Group is looking to expand in a number of different directions. This would include branching out into television (WNL) and social media (Hyves). Even though our takeover bid for SBS, fell through earlier this year, weve definitely still got our sights set on television. At the same time, despite these changes affecting the media industry our companys core competence will remain the same: a knack for reporting on the days most important news, disseminating this news, and explaining complex problems to consumers in an understandable way. The news we report must be appealing and credible in order to meet the needs of consumers. By reporting on the days most interesting events, we attract consumers and then take advantage of the time they spend. We charge consumers for the time they spend reading our

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How resilient is the world? Outlook 2012

news, in the form of paid products and services. Or we share this time with others looking to get their message across to consumers, in the form of advertising revenues. New media platforms enable us to further optimise this competence and use it in other areas as well. How have these trends affected your revenue model? Weve seen an undeniable shift in the source of our revenues. Currently, around 8% of our income is generated by non-print activities, although this share is expected to rise rapidly. Our revenue model works largely the same across new media platforms, although we are gradually seeing new opportunities on how to benefit from our consumers time and attention. The revenues of the free daily newspaper Spits and the website Dumpert, for example, are based on the same revenue model: providing free services funded by advertising revenues. Although we expect that our digital business will account for a larger share of our revenues, this does not mean this market is not under threat. The costs involved in entering this market are low, which means competition is very high. Also, there are a number of issues which are related to protecting consumer privacy, particularly at the political level. An example is the recent debate on the Cookie Act in the Lower House of the Dutch Parliament. The current bill

states that internet providers must ask consumers for their prior consent to store cookies. This limits the use of targeted advertising, as well as taking the fun out of using the internet for many consumers. Several Dutch politicians have obviously not done their homework properly. How do you stay ahead in this industry in terms of innovation? The business structure of the Telegraaf Media Group includes a separate, coordinating branch dedicated to innovation in several departments. The purpose is to facilitate and speed up the innovation of a number of specific services.

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Outlook 2012 How resilient is the world?

social media

We also dont have a clear-cut path when it comes to creating innovative solutions. We are seeing a number of trends in the media industry, to which were trying to respond by offering a wide range of products and services. The direction were taking is clear, but its currently impossible to say whether weve chosen the right concept. You kind of learn what works and what doesnt as you go along; it seems to me that the best strategies are conceived after the fact. Something you actually can do to make an impact is provide room for creative and innovative ideas from within your own organisation. A good example is GeenStijl. Its a website launched by the editors of De Telegraaf newspaper, which created the financial conditions to continue the initiative. Unfortunately, not everyone has the ambition or the talent to initiate such projects, so when you do spot it, you instantly need to recognise it for what its worth, make it happen, and help turn it into a success. How does the acquisition of Hyves play into your strategy? Social media play a very important role in our business operations, because they allow us to reach more consumers and advertisers in a more targeted way. You can use social media to effectively gather information about current events and actually encourage the debate as well.

What are people talking about? What do they enjoy? Never mind all the stories going around about Hyves and the heavy international competition from the likes of Facebook - its essentially a healthy, stable company. Besides, Hyves clearly adds value to the more traditional media divisions of our company. Following discussions on this platform makes it easier for our editors to write up-to-date and appreciated articles. But its a reciprocal thing - Hyves also benefits from our large network, which makes it possible to post videos from the Dumpert website on the platform. Hyves was already very valuable in providing corporate services, through its end-to-end services. Hyves allows companies to interact with consumers directly, without any intermediaries. One organisation that took advantage of this service is the Donorstichting (Donor Association), in its search for new donors. It shows that social media are an entirely new way to help advertisers attract consumers attention. We like to help them find the right way to do that, and Im convinced that this is only the start of a new development.

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social media

How resilient is the world? Outlook 2012

conclUDIng ReMaRKs

Due to the ageing population, innovation and technological development are becoming increasingly important drivers of economic growth. However, from an international perspective the Netherlands has some way to go in terms of innovative power. In particular, the country needs to improve the quality of its universities and other institutions of higher education, as well as boost public-private partnerships. Although the importance of innovation and technological progress is vital to economic growth, their impact extends well beyond growth alone. As well as being able to take on different guises (see the definition used in Chapter 1), they also serve different objectives, including more sustainable production.
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Outlook 2012 How resilient is the world?

concluding remarks

The three final chapters and the related interviews present a number of key findings. Despite the wide variety of industries involved, there are numerous similarities with regard to the position and problems of innovation and technological progress. first, the interviews show that there is an absolute intention to innovate, usually driven by stiff competition. The entrepreneurs interviewed regard innovation as vital to achieving a strong position in the market. The general emphasis on sustainability and the restricted use of natural resources show that there are definite limits to the worlds resilience. from this perspective, too, the intention of the business community to innovate is doubtless a positive development. However, as some of these chapters show, the willingness to innovate sometimes meets with resistance or obstacles, some of which can be industry-specific. These obstacles may be political or moral, but they are seldom technological in nature. over the past decades, technological progress and the opportunities it creates has increased significantly across many industries. The problems tend to be related not to the presence of existing or new Innovation is the key to making production processes technologies, but rather to their limited application. more sustainable - this applies to anything from The three chapters all discuss the appeal to policygreenhouse gas emissions to future biodiversity. makers to eliminate these problems. as stated in The issue of sustainable consumption merits the chapter 2, government policies are designed not so same degree of attention, particularly as it relates much to boost innovation directly as to create the to future food security. Innovative applications right conditions and reduce potential problems. It is of internet technologies, including social media, only through this type of partnership between the can be used in order to better match supply and private and public sectors that we will be able to use demand, thereby ensuring that production can the worlds resilience in a sustainable way through be used more efficiently. innovation and technological progress.

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concluding remarks

How resilient is the world? Outlook 2012

coloPHon
Editors Michiel verduijn allard bruinshoofd Wim boonstra enrico versteegh Thanksto: Chapter 1: Tim legierse, economic Research Department, Rabobank nederland; see also: Rabobank Themabericht 11/30 Chapter 2: shahin Kamalodin, Danijela Piljic and Michiel verduijn, economic Research Department, Rabobank nederland; see also: Rabobank special 11/05 Chapter 3: anouk Ruhaak, economic Research Department, Rabobank nederland; see also Rabobank special 11/06 Interview Weiming Jiang, President DSM China Chapter 4: Dirk Jan Kennes and Rakhi sehrawat, food & agri Research, Rabobank International Interview drs. Ben Tax RA en dr. Kees Reinink, directors of Rijk Zwaan Chapter 5: Hans stegeman, economic Research Department, Rabobank nederland Interview Frank Volmer, director Telegraaf Media Nederland
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Graphics Roy de Haan selma Heijnekamp Designedandcreatedby click communicatie, Utrecht Interviewphotos Irene vijfwinkel, Pentagram cherry fotografie, Utrecht Printedby Kobalt, amstelveen Paper arctic volume White fsc Address Rabobank nederland economic Research Department Telephone: + 31 30 216 26 66 e-mail: economics@rn.rabobank.nl www.rabobank.com/economics www.rabobank.com/outlook2012

Outlook 2012 How resilient is the world?

colophon

DIsclaIMeR
The text of this publication was completed on 19 october 2011. In creating the text, we used sources we consider reliable. These data were incorporated into our analyses with care. Rabobank nederland accepts no liability whatsoever in the event that any data or forecasts contained in this publication contain any inaccuracies. Use of the contents, or part of the contents, of this publication is permitted only provided that the sources are listed. The information provided by Rabobank* in the outlook documents or through its websites does not constitute an offer, investment advice, or any other type of financial service. While the information provided by Rabobank is based on sources considered reliable, the accuracy or completeness of this information cannot be guaranteed; it represents general information that is subject to change. no rights can be derived from the information provided. Past performance does not guarantee future results. Rabobank and any other parties providing information in this publication and on the websites listed therein accept no liability whatsoever for the contents thereof or of information provided on or through the websites. Rabobank accepts no liability whatsoever for the contents of this publication or of websites it does not maintain itself and to which this publication refers or that refer to Rabobank websites. The user of the information is responsible for the choice of information and any use thereof. The information may only be used by the user personally. This user is prohibited from transferring, reproducing, editing or disseminating the information. The user is required to comply with the instructions provided by Rabobank regarding the use of the information. The laws of the netherlands apply. December 2011 - *coperatieve centrale Raiffeisen-boerenleenbank b.a., The netherlands.

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Disclaimer

How resilient is the world? Outlook 2012

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