Resilience and vitality through innovation

Innovation is more than invention

By John Ross

Innovation is often associated with new products: the next smartphone, a breakthrough technology or something that has never existed before. But innovation can take another form: making an existing product significantly cheaper through technological progress.

Economists call this cost innovation. A product that delivers most of the quality at a fraction of the price can reach a much larger market. The goal is not simply to cut costs or rely on cheap labor, but to use technology to improve production and make useful products more affordable.

China's industrial experience exemplifies this approach. Companies initially build competitiveness by producing quality goods at lower costs, then move toward product innovation. This stage is more demanding because research and development requires investment, and not every experiment succeeds.

BYD's journey illustrates how these stages can work together. Two decades ago, it was primarily a battery producer that had just ventured into automobile manufacturing. Its progress shows why cost competitiveness should not be seen as the opposite of technological advancement.

The value of AI does not depend only on how powerful a model is, but also on whether businesses, researchers and ordinary users can afford to put it to work. If the cost of using advanced technology is too high, its benefits may be limited to a few organizations. Lower costs can enable more people to experiment, develop applications and improve productivity.

Open-source technology can help widen these opportunities by allowing developers to access, use and adapt models.

This is particularly important for developing economies. Not every country can afford to build advanced technology from scratch.

More affordable tools can help businesses improve services, raise productivity and develop their own capabilities. The challenge is to move beyond merely using technology to adapting, improving and eventually producing it.

Cost innovation alone does not guarantee success. It must be accompanied by continued research, better products and the ability to learn from failure. Yet it offers a useful way to understand how technological progress can spread.

Innovation is not just about creating something new. It is also about making technology more accessible, improving what already exists and creating the conditions for the next breakthrough.

The author is a former director of economic and business policy for the Mayor of London. The views don't necessarily reflect those of China Daily.