NOKIA

EXECUTIVE SUMMARY

Beijing is working hard to establish itself as a world city. As the capital of the world’s most populous nation, it is exerting increasing economic, political, and cultural influence around the world. 

A recent government report, however, points out that there are currently no more than three world cities: New York, London, and Tokyo. In order to join this elite group, Beijing is eager to learn from these cities. Yet at the same time, Beijing’s top government authorities hope to differentiate the city by addressing its unique features.

Nokia, whose China headquarters are located in the city, has a strong commitment to and confidence in Beijing and its long-term development. Nokia is honored to have been given the opportunity to provide insight into Beijing’s sustainable development and its path to becoming a world city.

Becoming a world city is a major undertaking. And Beijing has a long way to go in the next couple of decades to achieve this goal. Based on experience accumulated during 150 years in most of the world’s markets, Nokia sees innovation as the most powerful engine of a city’s growth. We believe that continuous innovation must be based on a comprehensive system; we call this system an innovation “ecosystem”. This report will focus on suggestions on how Beijing can establish itself as a world city by fostering such an ecosystem.

This report will discuss the relationships between a world city, sustainability, and innovation. It will also discuss Beijing’s advantages and resources, as well as the challenges faced by the city. Government plays an extremely important role in a city’s development, and so this report will investigate the experience of governments in the US, the UK, and Japan in an effort to understand how they have produced the three world cities of today. The report will also briefly discuss the European Union’s vision for a “Digital Society”, using this as another reference for Beijing in its bid to take a place among the world’s most important cities.

Nokia will also provide detailed suggestions to the Beijing government on how to face its challenges and how to maintain sustainable growth through innovation. In sum, we believe that Beijing should:

1.Foster an innovation-friendly ecosystem based on an “open” environment;
2.Embrace innovation when it comes to new ideas and new technology; and
3.Build a business-friendly support structure for SMEs, while supporting large companies.

INNOVATION ECOSYSTEM, SUSTAINABLE DEVELOPMENT AND WORLD CITY

After the Olympic Games pushed Beijing to the center stage of the world, the city is now determined to move to the next level and play an even more critical role globally. With its economic, political, and cultural impacts being felt across the world, Beijing is emphasizing economic and environmental sustainability as part of its aim to establish itself as a world city.
As pointed out in a recent government report, there are three world cities today: New York, London, and Tokyo. According to Mr. Liu Qi, Beijing’s Communist Party Secretary, while Beijing is eager to learn from these cities, it will differentiate itself by addressing its own unique features.

The Beijing government has five objectives which make up its overall goal. Beijing aims to become:

1. A center for global financial activities;
2. A center for decision making and management;
3. A center for international events and gatherings;
4. A center for information; and
5. A center for talent.

The Beijing government has also indentified six elements that will characterize it as a world city:

1.A fairly large economy;
2.A service-oriented economy with many leading global company headquarters;
3.Co-operation with neighborhood cities;
4.Efficient transportation facilities;
5.Advanced technology and education; and
6.A good living environment.

In addition, the European Union has initiated a program that focuses on a “digital society” to bring enormous economic and social benefit to European countries, cities, and people. Nokia believes that in addition to objectives and elements mentioned above, Beijing as a world city will have to become a “digital society” in the near future. As part of this, Beijing must become a center for digital research and businesses, as well as ensuring that the city is digitally equipped and enabled. Just as mobile technologies changed the world and people’s lives at an unparalleled speed in the past ten to twenty years, these technologies will be one of the keys to creating a digital society in the future as well.

This is a major undertaking, and requires effort from all areas of society. The world is changing rapidly, bringing uncertainties to every country, every city, and every business. This requires a city to be not only fast in moving forward, but also flexible in responding to changes. As a result, the Beijing government has to find a solution to a complicated situation and a myriad of uncertainties; it should have a simple but well-rounded focus so that the government can manage it effectively. But what should this focus be?

Nokia’s previous experience may be useful to the Beijing government in identifying this focus. In the past several decades, Nokia has continued to change to stay ahead of the competition and be prepared for industry trends and changes. About twenty years ago, when Nokia realized the huge potential of mobile communications, we decided to step into this area, leaving our established business in pulp, paper and rubber production. In 2008, already the leader in mobile communications, Nokia restructured the corporate organization and decided to move to the internet and solution officially. In every one of these successful transformations, the secret weapon was innovation; it is these solutions that have guaranteed Nokia’s competitive strength and sustainable development.

I. World City, Sustainability and Innovations

Beijing has developed at a tremendous pace in the past thirty years. The city is now home to 17.5 million people and in 2009, GDP per capita in Beijing had reached US$ 10,000. Beijing has also seen huge foreign direct investment: in 2009, Beijing received more than US$ 6.1 billion in foreign direct investment, most of which was invested in projects worth more than US$ 10 million.

While Beijing is one of the most dynamic cities in China, to become a world city it must maintain this momentum, probably for the next few of decades. Ensuring such rapid growth will be a challenge; ensuring environmentally-friendly growth adds to this challenge.  Beijing is becoming more and more environmentally friendly, with 16% more days officially recognized as being “clear” in 2009 compared to that in 2007. The Beijing government has committed a huge amount of resources in this area, moving many manufacturing facilities out of the city center and applying more strict environmental requirements to areas such as automobiles. The next task for the Beijing government has to be supporting businesses that can create more value while producing less pollution.

Sustainable development should see balanced growth in investment and consumption, a well-established social security system, improved efficiency in the economy, environmentally-friendly businesses, and a number of other important factors. Beijing needs to continuously provide momentum for the city’s sustainable development.

So, what should the Beijing government do to ensure that growth is sustainable? How can authorities in the city create more added-value with less consumption of natural resources? Nokia believes that innovation is an engine that can help Beijing grow into a world city. If we have a close look at the other world cities, we will see that all three are global innovation centers.

•Innovation is critical for a city to face the challenges from globalization and technological revolution. Rapid globalization brings Beijing ever closer to New York, London, and Tokyo. Although global energy prices saw huge fluctuations in previous years, logistics costs from New York to Beijing are still less than 5 percent of what they were 150 years ago. High value-added products can arrive in almost every corner in the world within 48 hours. Advanced information systems in the warehouse can request for more inventory as soon as products are sold in the stores. The only approach to deal with the fierce competition is to continuously innovate in these ways, and only like this can Beijing keep up with New York, London and Tokyo.

•The Chinese government already realizes that the economy must be “restructured” and moved toward high value-added industries. Of course, this also requires innovation. The profit-margin of a high-tech company can be ten times more than that of a company manufacturing resource-intensive products; a high-tech company will also pollute far less.

•Innovation in information technology can substantially improve social welfare. As illustrated by the EU’s Digital Society, by equipping society with more IT and by connecting everyone in the EU to the internet, millions of Europeans will be able to lead better lives and the trading bloc will receive financial benefits estimated to be worth in excess of EUR 85 billion in the next five years.

•Beijing wants to encourage more MNCs to locate their regional headquarters in Beijing. Technology-intensive businesses are particularly encouraged, since they pollute less and provide more wealth. To many of these companies, an innovation ecosystem is critical when making decisions on where to relocate.

•Among all innovations, those in information technology are particularly important today. Information technology facilitates knowledge and information sharing, and improves efficiency in all areas. Convergence of mobile technology and the internet will make information technology even more important and influential in today’s economic and social development.

•Sustainable development should be based on a “green” economy. Many innovations can improve efficiency in production and can reduce consumption of energy and other resources. Innovation-driven growth will be more “green” compared to growth that simply involves expanding manufacturing.

The government should ensure that most people benefit from innovation, particularly considering the groups that may not be able to afford to buy the technologies or be in a position to learn to use them. Nokia believes that technologies should serve the majority. For example, Nokia offers Nokia Ovi Life Tools to provide useful information that can make the lives of people in smaller cities and rural areas easier. To Nokia, this is not only a practical business operation, but also part of our social responsibility as a technology company.

Among modern technologies, the mobile internet and telecommunications industries play a critical role in sustainable development. Today, the entire telecom industry accounts for about 2% of the world’s total energy consumption. At the same time, by reducing the necessity of physical transportation, improving work efficiency, and better utilizing natural resources, it has helped other industries to reduce resource consumption, thus lowering energy consumption by 15%. It will save a total of Euro 600 billion in energy consumption by 2020. In terms of economic contributions, a study by London Business School revealed that an increase of 10% in mobile coverage will increase the country’s GDP by 0.6%. In addition, World Bank research has found that for every 10% increase in high speed Internet connections, there is a related 1.3% increase in economic growth.

So, in order to grow sustainably and achieve status as a world city, the Beijing government must plan and encourage innovation in a systematic and sustained way.

II. Innovation Ecosystem and the Potential of Beijing

A single piece of innovation can be based on a moment of inspiration, yet continuous innovation must be based on a comprehensive system. We call this an innovation “ecosystem”.

An innovation ecosystem is a combination of elements that will lead to systematic innovation. An innovation ecosystem should include at least six elements: a talent base; dynamic local technology companies and innovation-driven MNCs; a group of investors working on all stages of the innovation process; a public service system that includes legal and financial services; an information infrastructure to facilitate innovations; and a market to use the innovation. Those elements are knitted together; they affect each other and work together both to create innovative ideas and to turn the ideas into reality.

Many people talk about Silicon Valley as one of the world’s leading places for innovation. When we have a closer look at Silicon Valley, we see an environment that can attract global talent and huge investment; it serves as a hub of global innovation information and has an effective legal infrastructure to protect IPR and encourage innovation. In short, this place has a solid ecosystem, rather than just a few of universities and companies.

Silicon Valley is not the only innovation center in the US. New York, Boston, and North Carolina produce a great deal of innovation. If we look at New York, which is also a big city like Beijing, we see that it is fully utilizing its resources for internet-based innovations; it is a media center, so it can generate content unlike any other; it also has creative businesses, a thriving fashion industry, and the world’s leading financial institutions. These are all critically important to the development of internet-based innovation. Given there are so many star companies in financial services in New York, people used to be less focused on high-tech companies in New York. But that is changing quickly. Venture capital companies are showing more interest in New York high-tech initiatives, which brought US$ 1.4 billion into 247 New York ventures in 2009. This was the third highest in the US, behind Silicon Valley and Boston.

An ecosystem is extremely important to innovation, and not just to an ambitious city. It is extremely important to a company such as Nokia, who would like to retain its leadership in mobile businesses. Nokia has created an innovation ecosystem to ensure that we stay at the forefront of development. It is based on the following three focuses:

First, Nokia focuses on talent. By leveraging Forum Nokia, Nokia has gathered more than 4 million developers worldwide, including about 350,000 in China, to work together to provide better mobile applications and experiences. The Nokia Research Center also set up many research institutes globally, including in China, so that we will always be able to plan for the technologies of the next ten years. We research jointly with Cambridge University on nano technologies so that we can leverage cross-over technologies.

Second, Nokia focuses on setting technology standards. By initiating the Symbian Foundation and making the Symbian system open and free, Nokia is saving industry thousands of man-hours and millions of dollars. Nokia has also partnered with Intel to develop the MeeGo platform, so that mobile and internet can be more smoothly integrated.

Third, Nokia focuses investment in the innovation ecosystem. Nokia has sponsored funds to invest in technologies and ideas that may have huge impacts in the mobile internet industry. The funds focus on different stages of projects, from the very beginning to mature businesses. Nokia Growth Partners – a global investment fund – has been introduced into China to focus on projects in the solid growth stage.

With an effective innovation system, Nokia sees huge potential in Beijing in almost all areas. Among these areas we would like to focus on the following

•Beijing has a talent pool that is irresistible to all kinds of companies. For example, Beijing is home to more universities, including some among the best universities, than any other provinces in China. Beijing also has most of China’s advanced research institutes. As long as Beijing can utilize this talent pool, it will continue to produce and be home to even more talents; it will also attract more and more overseas talent.

•Beijing is home to many MNCs and leading domestic companies. By 2009, Beijing was home to regional headquarters of 174 MNCs; this included many technology companies. These companies may bring to Beijing technologies and know-how that will upgrade Beijing’s economic structure, with a focus on greater innovation and better value-added services.

•Beijing has relatively advanced legal systems and legal services. Though not perfect, these will better protect IPR and other investment in innovation. Innovation investment is always associated with high risk, huge investment, and lengthy research processes. There will be no real innovation if the fruits of this innovation cannot be protected.

•Beijing has more headquarters of telecom operators and mobile devices companies than other cities in China. Mobile phone penetration in Beijing has exceeded 100 percent, with some people owning more than one mobile phone. An advanced information infrastructure will benefit technology innovation, economic development, and social welfare; it is considered an indispensable part of today’s innovation ecosystem.

III. Challenges facing Beijing’s Innovation Ecosystem

While Beijing has excellent innovation resources, it faces considerable challenges. Nokia, by investigating the innovation ecosystem in Beijing and by observing the best practices from other cities in the world, would like to propose the following areas that could be improved to create a better innovation ecosystem.

•There should be more partnerships between research institutes and business entities; this will not only increase investment in technology, but also better utilize innovation. In 2007, 44 percent of patents originating in Beijing came from universities and research institutes, higher than the amount originating from business entities. At the same time, the government invested more than RMB 40 billion in universities and research institutes. Nokia suggests that Beijing creates a mechanism for business entities to partner more with universities and research institutes, enabling them to better share information, invest in research projects, and benefit from the achievements. At the same time, the universities and research institutes should become more open to business entities, especially to local companies who need greater software and hardware resources to enhance their R&D capabilities.

•Beijing’s economy should become more based on innovation and technologies. High-tech manufacturing accounted for 30.3 percent of the total added-value of the industrial sector in 2005; this decreased to 23.8% in 2008. The Beijing government should increase the weight of high-tech manufacturing, especially in the post-crisis period. Evaluations on return on investment in technology investments should not only be based on innovation quantity, but also on the quality of innovation. Compared to a handful of minor improvements, a leading technology innovation will result in substantial benefits for the entire ecosystem. The Beijing government should identify those business entities which have the potential to deliver such innovations.

•Innovation and technologies can be largely applied to improve the efficiency of Beijing’s public services, enhancing the welfare of businesses and people in Beijing. Innovation is not limited to applying technologies in industry alone, it can also be to provide better services to increase the efficiency and value of the service sector. Mobile devices can play many roles in such efforts. For example, mobile devices can be used by students to study, by farmers to predict the weather, and by transportation administrations to track traffic.

•Beijing’s innovation ecosystem should be more focused on soft infrastructure, such as creating a solid legal system to protect innovation and investing in education and talent development. In many countries and cities, governments tend to invest more in hard infrastructure and provide direct financial support. However, we believe government should balance “hard” and “soft” investments, upon which an innovation ecosystem can be built.

•Beijing should be able to leverage the development of neighboring areas to create an innovation ecosystem that covers more people, more geographic areas, and a bigger market. With all talent, MNCs, local leading companies, and professional services, Beijing will be able to better innovate. However, the market, manufacturing, and service base in Beijing may not be big enough to best utilize this innovation. It is important to remember that other cities around Beijing have their advantages as well, such as Dalian, which is focused on IT outsourcing. Once Beijing and the surrounding cities can create a sharing platform to best utilize the resources and innovation achievements, all cities will benefit from the resulting synergy. There are many such city clusters worldwide which leverage the competencies of several cities instead of one; notable examples include New York, London, and Tokyo.

IV. Government’s Role in Building an Innovation Ecosystem

Innovation can be created by universities and research institutes, MNCs, large local companies, small and medium businesses, and all kinds of individuals. However, governments play a critical role in establishing the ecosystem necessary to foster innovation. Nokia does not suggest that the Beijing government take over the direct responsibilities of innovations; instead, the Beijing government can help build an innovation ecosystem in the following ways:

•Formulating policy: The government can direct industry development by creating appropriate policies that direct the flow of investment and talent. Government policies should be clear and transparent to prevent people from misunderstanding the government’s direction. Government can also share best practices in innovation, particularly those that are based on an ecosystem.

•Providing services: The government should improve the effectiveness and efficiency of public services, especially those used by innovators such as legal, finance, marketing, branding, and manufacturing services. In many of these areas, the government can offer affordable services to innovators.

•Coordination: The government should coordinate cooperation across different industries, cities, and even nations to form an open environment for innovation. The Beijing government can work with neighborhood cities’ governments and even governments from global cities to share best practices, resources for innovation, infrastructure to utilize and deploy technologies, and a bigger market. This can help innovations reach market as quickly as possible, a task that cannot be completed by any single company.

•Investment: The government should continue to invest in education and basic sciences, from which all businesses can benefit. A better education system can deliver a stronger pool of talent, attracting more research projects to Beijing, which will, in return, benefit the education and research on basic sciences.

The government in the following countries applied different policies, yet all of them focus on innovation ecosystems. The Beijing government should use these as references to create its own policies that make the most of the city’s advantages.


The US

The US has about 6 percent of the world’s population yet it has 30 percent of the world’s scientists, researchers, and engineers. In the US, California is considered the center of innovation. The Silicon Valley, a small part of California, accommodates almost one third of the top 100 technology companies in the US and more than 10 percent of the top 500 fastest growing companies in the US. What happened to make California and the US so successful? We have identified two major factors.

1. IPR protection

The US government applied strict IPR protection which encouraged business entities to invest in innovation. In 2001, though the profit of US companies decreased substantially from 2000, patent applications increased by 9.8 percent. The media commented that the US entered an era of “patent or perish”. The Wall Street Journal surveyed 28 large US companies in late 2008. Despite the fact that the financial crisis had caused the revenues of 28 companies to decrease by 7.7 percent in the fourth quarter of 2008, their R&D investment only decreased by 0.7 percent. This would be impossible without strict IPR protection.

2. Encouraging business entities and universities to invest in innovation

President Bush announced the American Competitiveness Initiative on January 2, 2006, requesting the government to subsidize technology innovations projects with a total of US$ 137 billion. The US government also applied tax incentives to companies investing in R&D projects, amounting to US$ 4.6 billion in 2007 alone, and outlined plans to invest US$ 86 billion in tax incentives over the next ten years. At the same time, the Bayh-Dole Act encouraged universities and business entities to cooperate in the areas of patents. The act was named by the Economist as a landmark law in last 50 years of US history. These plans attracted many companies to cooperate with universities in R&D.


The UK

The UK has managed to reposition itself as a center of art and innovation, casting away its traditional image as a conservative and slow-moving country. In addition to various campaigns to create this new image, the UK government applied policy to foster an ecosystem for innovations.

1. Encouraging joint programs among universities, businesses, and research institutes

The UK Foresight program is a government-driven program that identifies critical technology areas that are important to the long-term development of the country, i.e., the next ten to twenty years. Since the development of technologies happens at such a rapid pace, these focuses will be revised as needed. The government will be involved in programs by offering preferential tax arrangements, providing information to the parties, supporting small and medium businesses, providing loans for the programs, and even directly subsidizing the programs.

2. Planning and supporting high-tech company clusters  

The UK government understands that group of high-tech companies clustered together will create much more opportunities for all companies. A cluster of high-tech companies will compete, cooperate, and attract more investment. The UK government invested not only in hardware such as high-tech development zones, but also in soft infrastructure such as semi-formal innovation clubs to bring together scientists, entrepreneurs, and investors.


Japan

The Japanese government sees innovation its base, with innovation treated as one of the fundamental elements of Japan’s economy. As part of this, the Japanese government has successfully leveraged private funds to invest in innovation.

1. Policies for small and medium enterprises (SME)

The Japanese government helps SMEs apply more technology, thus promoting competition and creating economic vitality. The government has managed to expedite the transference of technologies from large companies to SMEs, such as sharing information, providing training programs, and offering advisory services. The government set up an office to support the SMEs in this way. The government also supports the SMEs’ application of technologies by offering preferential tax policies.

2. Financial support

Japanese government funding for innovations come from both central and local governments.
By investing a small amount of money into areas of strategic importance, the government leveraged huge amount of private funds to invest for these areas. In July 2009, while the financial turmoil was threatening the Japanese companies’ global standing, the Japanese government raised US$ 9.4 billion to support Japanese universities and other research institutions to find appropriate partners among industries and provide businesses with advanced studies. The Japanese government will directly invest US$ 874 million, while the balance will be invested by financial institutes and other private sectors. The government pledged to compensate part of the losses of such investments. The government also set up special funds for SMEs. One such fund raised JPY 515 million for investment in SME innovation.

V. Beijing, a Digital Society

A “digital society” is connected by digital information infrastructures such as the Internet and mobile networks. In 2007, the EU realized that one third of Europeans are still excluded from the full benefits of the digital age. This led to a campaign to establish a “digital society”. The EU estimated that EUR 35-85 billion could be generated within five years if Europe could be made more inclusive, broadband Internet could be made available to all Europeans, and more people could make use of the Internet to acquire knowledge, improve work efficiency, and gain access to public services.

Nokia believes that a similar digital society will help Beijing become a world city. A digitally-connected society will bring economic benefits and social welfare to people, and empower a dynamic and sustainable development. Beijing, with so many research institutes and technology companies, is in an excellent position to become a truly digital society. In turn, Beijing could even offer solutions to other areas in China, helping them become digital societies.

The level of connectedness of a society depends on two things: the affordability and accessibility of digital technologies. To many people who are not yet connected, it is possible that they either cannot afford the technologies or cannot access the technologies due to reasons such as lack of education. The government should ensure equal opportunities to its people, and businesses should take this task as both a business opportunity and a social responsibility. Taking Nokia as an example, we not only offer entry-level devices but also solutions that target the people that are often ignored. Nokia Ovi Life Tools offer a range of affordable agricultural and educational services designed for people in small towns and rural areas in emerging economies, bridging the digital divide by empowering them with access to information.

Among all the technologies, mobile technology has emerged as a key vehicle on the road to becoming a digital society. A number of mobile solutions have appeared to meet social and individual needs. For example, as mobile navigations are applied on a larger scale, it will help business people improve efficiency, young people enhance their entertainment experiences, and government manage transportation more effectively.

NOKIA’S SUGGESTIONS

Beijing is now determined to become a world city like that of New York, London, and Tokyo. We have proposed that Beijing’s sustainable development should be based on an innovation ecosystem; we have also analyzed the challenges facing Beijing in building an innovation ecosystem, as well as the roles that the Beijing government can play in the process. Based on the analysis above, we believe that Beijing should:

1.Foster an innovation-friendly ecosystem based on an “open” environment;
2.Embrace innovation when it comes to new ideas and new technology; and
3.Build a business-friendly support structure for SMEs, while supporting large companies.

I．Open Environment

An open regulatory framework is one in which government provides the support mechanisms necessary for businesses to develop and prosper.  It also refers to a business climate with clear, predictable, and transparent regulation.  To create a sound environment for international business operations, the Beijing government should help market players overcome existing regulatory and market hurdles and establish a more open environment for open access and open innovation.  This will make the economy more value-added and more based on solutions and technology rather than manufacturing.

The conventional regulatory framework in China is geared towards a “vertical” structure, where government regulations impact key industries but fail to consider the interaction between industries.  Existing policies tend to encourage the development of local technologies and standards, but ignore the synergizing effect of adopting different technologies and standards across the world.  As a result, companies may find it hard to best utilize their knowledge and skills.

As the world leader in mobile devices, Nokia supports the convergence of mobility and the internet. Apart from being the top device producer, Nokia is committed to providing enriched services to complement the device experience and to offer compelling solutions for consumers and businesses.  As a result, our strategy is to be more like a solution company, by operating the devices and services business sectors in an integrated manner. We refer to this trend as “convergence” and it represents a fundamental change of industry structure, value chain, and ecosystem, from a vertical to a horizontal one.

In China we recommend that the Beijing government supports a new regulatory framework that will help the market move to a “horizontal” market structure.  Although this is generally a central government policy position, a local government can support this effort as a way to ensure a sound environment and allow additional market access.

Government leaders should support the following practical measures as a first step toward encouraging a more open system:

•Fostering a level playing field for all players

In order to encourage all players to compete in the market, the Beijing government should support policies that favor all players in China, as a way to ensure fair competition between established and emerging entities, as well as between international and local companies.  For example, the government could establish a mechanism to help emerging players market their products and services to customers directly. At the same time, however, measures should be taken to ensure equal opportunities to all market players.

•Engaging foreign companies as partners in innovation

Globalization has led to new technologies moving to multiple countries and regions within a very short period of time.  An open mechanism that allows foreign companies, especially multinationals, to participate in indigenous innovation is a good way to introduce Chinese-developed technologies and standards to the global market. China currently has a relatively closed technical innovation system and foreign companies have a tough time participating in local technology development.  This makes it difficult for foreign companies to develop long-term business strategies in China.  Beijing can support key multinationals that are making significant technical and economic contributions to the country’s innovation system.

•Encouraging widespread adoption of cutting-edge technologies

Incentive measures should be introduced to encourage businesses to use technologies in the marketplace, whether they are developed locally or introduced from overseas.  While the central government tends to favor locally-developed technologies, the Beijing government should strive for “special treatment” for companies that engage in innovation based on varied technologies and standards.  Even on a trial basis, this approach would help local players access more cutting-edge technologies from around the world and expand their options for developing new products and applications.

•Supporting an open platform for technology and expertise sharing

Open platforms welcome new business alliances that involve small and big, as well as foreign and domestic, entities; small companies bring new ideas into play while larger companies bring industry experience, standards, technology, and an established network. While the transportation infrastructure in China is developing rapidly, Beijing can also be better linked with surrounding cities to create an even more open and dynamic economic entity. Beijing should create a mechanism to encourage information sharing and resource planning between surrounding cities, so that all cities can benefit.

A good example of a successful open platform is Forum Nokia. Forum Nokia began as a website for our developers, but transformed into a global business model that has helped hundreds of companies.  In China, more than 350,000 firms and individual developers participate in this forum, and every day, we hear from more than a million developers in Asia and collect their ideas and insights about how consumers use the internet and their mobile phones. In China Forum Nokia has led to new ideas applicable to music, gaming, and security.  We held a contest in Singapore not long ago, where winners came up with valuable ideas, such as a mobile phone application that lets patients retrieve medical records.  In India, a contestant created a mobile phone which helps farmers remotely start water pumps.

At Nokia we have worked with key partners, including travel book publishers, major media outlets, magazines, and transportation systems, on ways to expand mobile phone applications that can enrich people’s lives.  We created these alliances to come up with new ideas on how to meet consumer needs and provide information that is important to their daily lives.

We suggest that the Beijing government help businesses create an open platform for business development. Large and small companies want to create business partnerships but do not know where to start. Government leaders can serve as a third-party by identifying successful small businesses and connecting them with larger companies. In cooperative relationships between large and small companies, the Beijing government should play a bigger role in order to prevent abuses in business relationships; it should help small companies that have IPR issues, since they do not have the resources to investigate infractions.

In such a business model, mutual respect, especially in intellectual property, is crucial for the success of the cooperation. Through Nokia Forum, we allow multiple players to share their expertise and tools because we are confident that our IP is well protected and will not be inappropriately utilized. Nokia’s partners are willing to develop their products and services by using the expertise and tools offered by Nokia because they believe their creations will not be used inappropriately.

This is the power of the platform: smaller businesses bring fresh ideas, more cutting-edge innovation; and the larger companies can bring best practices or other resources, such as advanced technologies and standards. Cooperation helps expand the industry and create more strategic alliances. In the end, the platform helps to transform the industry and keeps the competition fresh.

In addition, we suggest the following measures to encourage an open environment:

•Supporting a transparent policy environment;
•Discouraging artificial barriers, such as economic nationalism, green/environmental standards, trade tariffs and restrictions on market access; and
•Supporting the adoption of international standards that support overall operations, not just specific technologies.

II．Embrace Innovation

Innovation refers to a new way of doing something or a new way of thinking, both of which can lead to new ideas, and, eventually, new products.  In China, the emphasis now is on indigenous innovation, which involves creating commercially viable technologies in an effort to translate them into products and services.  Beijing should continuously work with all companies, including MNCs, on indigenous innovation – this joint effort will help Chinese companies expand their reach globally and will help their foreign partners become “local” companies.

There are multiple ways to achieve indigenous innovation. Companies can buy other companies and the ownership of technologies and products; they can create new inventions that bring about value and benefits; and they can collaborate with partners to create new ideas. Indigenous innovation is a term that is often misunderstood – it can mean co-innovation between several partners and is not necessarily a new idea created by a single entity. In short, indigenous innovation does not equal self innovation.

Protection of intellectual property rights is an essential step in achieving indigenous innovation. No company will conduct innovative research or exploration without strong IPR protection.  Government should protect IPR as part of its efforts to encourage innovation. Eventually this will lead to stronger enforcement. IP theft in the US costs the economy US$ 200 billion a year and 750,000 jobs. Costs in China are difficult to assess but significant. Any effort to protect IP enforcement will help the local economy.

Incentive measures should be introduced to encourage businesses to try varied technologies in the marketplace, whether they are developed locally or introduced from overseas.  Globalization has led to innovation being a truly cross-border matter.  At Nokia our R&D experience reveals that products or applications are usually developed by a collective effort from many countries, and not just by a specific country.

Chinese firms have made great efforts in innovation, but it is still not enough and they should broaden relationships with other companies. Beijing should support an environment where market players can engage in innovation activities based on varied technologies and standards. Even on a trial basis, this approach will help local players access more cutting-edge technology and enrich their choices for developing more innovative products that create greater synergy.  This could even lead to domestic firms purchasing overseas companies, making additional investment into R&D and increasing involvement in standard making relevant to intellectual property protection.

In particular, the Beijing government should make a plan to drive the growth of IPR. Beijing has rich resources in technology development and has the potential to stand at the forefront of IPR creation. We have outlined some specific suggestions for the Beijing government:

•Talent: The government should help domestic companies train employees in multiple skills so they can be flexible when the market changes.  Also, recognizing employees with new creative ideas will help encourage more ideas and will begin to change the strict hierarchical structure within Chinese companies.

•R&D: The government should support investment in R&D that looks for new systems, not just new products. The government should focus more on investing in infrastructure that promotes innovation, such as information-sharing infrastructure that can connect demand to the supply of technologies.

•Innovation of everyone: The government should encourage everyone in Beijing to participate in innovation, by helping to communicate the demands, ideas, and suggestions of citizens to business entities the can respond to the voices. The bodies that help communicate this demand should be rewarded either by the government or by any third party that benefits. In Japan, government-sponsored organizations and local NGOs are very helpful in this area.

•Technology in public services: Since technology is an important part of our lives and our economies, we suggest coming up with ways to help the government serve businesses and residents more efficiently, say, through their cell phones. This can also be used to provide public information services. Nokia Ovi Life Tools is such an application; it provides affordable real-time and useful information to people in need of it, especially those who do not have other access.

III．Build a Business-friendly Support Structure for SMEs, while Taking Care of Large Enterprises

Although Beijing is home to the headquarters of many large companies, the Beijing government should still pay special attention to SMEs. SMEs underpin national economic and social development, playing a crucial role in the economy, people's welfare, and social stability, and improving efficiency by promoting competition. SMEs are usually very sensitive to market demands and are more likely to respond to market changes, which are extremely important for an economy to maintain vitality. The local government should strengthen efforts to improve services and create a good business environment for them.

At Nokia, we depend on our cooperation with SMEs as a barometer on what local consumers need or are interested in. Their smaller business models allow the companies the flexibility necessary to adjust to market needs in a timely manner. This is also their strength when it comes to breeding new innovation.

Through our Nokia Forum platform, we work closely together with developers, offering training and assistance, through software developer Kits or marketing guidance. By ensuring a safe and well-regulated environment, the platform also opens doors to connecting and building business relationships. Such cooperation helps expand the industry and create more strategic alliances. Nokia devices are also a means of promotion, and often serve as the direct channel of public outreach.

We suggest that the Beijing government assist these SMEs with a multi-pronged approach. With the wealth of information and resources the government possesses, providing training and guidance would be invaluable to these companies. From a range of professional services in legal matters, financial management to taxes; education on labor law; offering subsidized office space for expansion to promoting entrepreneurship in high-tech spaces through faster regulations of new businesses to one-stop shop approval. These factors would all help assist the growth of SMEs.
The government can also help these companies in a more direct way through financial support.  Special money for self-employed high-tech entrepreneurs along with tax holidays will help small companies.

In addition, we recommend the following:

•Reinforcing the IT sector:  The Beijing government should try to establish closer partnerships with foreign IT companies. In addition, the Beijing government should reinforce support for IT start-ups, such as promoting entrepreneurship in the high-tech sector with faster approval times for new business licenses, “one-stop shop” approval for documentation required for hiring and expansion, and special financial support. Start-ups tend to begin with a disadvantage in terms of capital and scale. The Beijing government should continue to offer incentive programs to these companies. This will encourage creativity and risk-taking entrepreneurship.

•Venture capital (VC) investment:  Government leaders should support additional venture capital investment geared towards the high-tech industry. Venture capital companies tend to invest in small technology companies and turn them into profitable and long-term enterprises. However, without a method to evaluate the credit and history of a company, they are often left to take risks on companies who have no verifiable credentials. The Beijing government should consider creating a system to formalize relationships between entrepreneurs and potential VCs. To do this, we suggest creating a program to register entrepreneurs with the proper credit and credentials, so they can access elite industry associations. We believe this program would regulate the legality of deals between by entrepreneurs and VCs; often VCs can help to stimulate entrepreneurs like no other force.

CONCLUSION

The Beijing government is determined to develop Beijing into a world city. This is an impressive goal. We have seen that to develop sustainably and to achieve this objective, Beijing must be based on an ecosystem that can continuously generate innovation. We have also outlined ways in which the Beijing government can play a critical role in the establishment of this ecosystem.
According to recent surveys released by the World Bank and Business Software Alliance, countries that have sound business environments share similar traits.  These include:

•An open, flexible, and competitive market with government regulation that enhances business activity;
•A strong technology infrastructure; and
•A strong legal framework that protects IPR.

Based on our analysis of Beijing, we believe that to achieve this there should be more partnerships between research institutes and business entities; economic and social services should be more based on innovation and technology; and Beijing should leverage the development of neighboring areas.

Facing the current economic challenges and the ambitious objective of becoming a world city, the Beijing government should focus on the following policies to create a better innovation ecosystem:

•Direct industry development through policy measures;
•Working with other city governments to create an even bigger innovation ecosystem; and
•Continuing to invest in education and basic sciences.

Nokia proposes the following suggestions to the Beijing government for appropriate policies:

1.Foster an innovation-friendly ecosystem based on an “open” environment;
2.Embrace innovation when it comes to new ideas and new technology; and
3.Build a business-friendly support structure for SMEs, while supporting large companies.

Another issue that the Beijing government should be aware of is the national government’s gradual shift toward favoring domestic enterprises over multinational corporations. Since the recent financial crisis took its toll in China, there have been signs that China may look inward, at all costs, to protect itself from this crisis and future crises. The broader movement of this “self-reliant, economic nationalism” may continue and the Beijing government should be aware of this trend and the potential implications to multinational companies and their future investment in the region.

Nokia is determined to be a local company in China and in Beijing. We would like to continue our effort to become even more rooted in the city and to help build a healthy and efficient innovation ecosystem. We are more than happy to become more involved in helping Beijing become one of the next world cities.