Talent is out there, we just need to be smart as to how we harness it
By Sidney Taurel 2008-4-2

CHINA'S economic transformation has been the result of producing goods and services more efficiently and cost-effectively than almost anywhere else in the world.

However, the goods and services themselves for the most part have been invented elsewhere.

In recent years, China has been innovative in how things are produced, but not so much in what things are produced.

Looking to the future, the next economic frontier for China will be to develop and find markets for wholly new discoveries and inventions.

Innovation of the sort we are talking about tends to flourish in a particular location when three conditions exist at the same time:

First, ideas must flow freely and in abundance, and there must be a supply of talented people with the ability to test, refine, and implement these ideas.

Second, there must be the possibility of reward if the ideas are to be developed into viable products.

And thirdly, innovation can be sustained only if an industry enjoys the confidence of consumers and has a clear and direct connection to them.

In the pharmaceutical industry, for example, the existence of bright and talented scientists in a particular country will not turn that country into a major source of innovation if rewards are in doubt, or if the connection to potential customers is disrupted by a poorly functioning health care delivery and payment system.

Bearing the need for integrated strategies in mind, let us go through the three conditions individually and consider China's situation in each case.

With regard to ideas and talent, China's situation is strong indeed. Between 1995 and 2004, the number of researchers in China increased by 77 percent - which now places China in the second position worldwide in terms of the size of the research and development workforce - behind only the United States.

I should note that the size and quality of China's talent pool in chemistry and biology have been impressive - leading to our company's collaborations with ChemEmplorer, BioExplorer, and Hutchison MediPharma here in Shanghai.

Still, even in China, the supply of ideas and talent has not been secured to its fullest extent.

Imagine how the size and quality of China's human capital could grow if access to technical education were to increase significantly among the rural population and if the overall health and life expectancy of China's people were to improve more dramatically.

Ultimately, no investments are more broadly beneficial in a society than wise expenditures on education and public health.

As for rewards, one needs to know that investments will chase even the possibility of reward so long as the size of the possible reward increases in proportion to the risks involved.

Public policy in China has not yet created this condition. It is a serious challenge.

Besides talent and reward, confidence of consumers is important. If consumers have doubts in their minds about whether the product they are purchasing is authentic, and therefore of high quality, they will fulfill their needs elsewhere.

China should act quickly and decisively to improve its product quality and safety standards.

(The author is Chairman and Chief Executive Officer of Eli Lilly and Company. The article is adapted from his speech at the Conference on "Marketing, Innovation, and Business Growth" at China Europe International Business School in Shanghai on March 26.)