You’ve seen Brazilian companies
struggling to innovate. Given the size
of Brazil’s economy, why is innovation
so challenging here?
A crucial reason is our education
deficit. That’s our Achilles’ heel, not only in
our public (state) schools but at all levels,
including higher education. The result is a
significant talent shortage. Consequently,
we have relatively few truly disruptive and
winning initiatives, be it in large companies
or startups—and these are key for boosting
innovation in the country.
What other factors come to mind?
Many of them are related to
the fact that Brazil still behaves like a
relatively closed economy. While it has
been opening up over the last two decades,
companies still don’t feel the burden of
having to differentiate themselves as is
evident in more mature markets around
the world. In many ways, our economic
structure still reflects that legacy. The
government adopts policies that, while
perhaps well intended, are somewhat
ill-informed and perpetuate the mindset
of a closed economy.
Can you say more about how
Brazil’s economic structure reflects that
closed-economy legacy?
On the policy side, there is not
much government support for innovation.
Initiatives are mostly peripheral—nothing
remotely close to what you see in many
advanced economies. On the corporate side,
state- and family-owned companies still play
a huge role in Brazil’s economy. Many have
only recently begun migrating from what we
could call a family-centered management
style to a more professionalized style. So,
a lot of corporate leaders are still playing
according to the rules of a game that has
become obsolete. In addition, many focus
excessively on the short term. And in some
sectors, you still see some near-monopolies
or oligopolies, where there are relatively few
players in an industry. This further undermines
innovation. In addition, historically, Brazilian
citizens never put much pressure on
companies to innovate, because they had
few options to choose from anyway. But
now they have become more sophisticated
in their desires and more informed about
their greater range of options, even though
companies haven’t yet adapted to this. Add
the huge complexity of our tax system, which
forces companies to divert time, energy and
resources away from more valuable efforts,
and you get a landscape that is not very
conducive to innovation.
Still, there are some extremely
innovative companies in Brazil.
How have they achieved this?
Even our most innovative
companies are not yet fully innovative.
Many people in Brazil tend to coin these
companies as extremely innovative and see
them as global benchmarks. I don’t want
to deny their many merits, of course, but I
think it is dangerous to look up to a company
for innovation inspiration when most of its
products and services don’t have the quality
they should or could have, its processes
are archaic, its structures hierarchic and its
overall culture less than inspiring.
Even with all those challenges,
we believe that Brazilian companies
could boost their innovativeness by
adopting a more open and collaborative
approach. But there is little collaboration
here; for example, between large and
small companies. What do you think
is behind this?
Big and small companies are so
different from each other that many don’t
even view cooperation as possible. People
working for large companies usually have a
very different academic background, career
track and even worldview from those hailing
from small companies. There is also power
asymmetry. It is very difficult to collaborate
when one side has much more to win or lose
than the other. In Brazil, many entrepreneurs
and small-business owners feel powerless
next to a large corporation.
But shouldn’t the need to protect
and grow market share motivate companies
to explore all possible alternatives to
innovate?
That happens in markets where
companies face a constant need to reinvent
themselves because of intense competition
and increasing technological disruption. In
such markets, innovation becomes a matter
of survival. We see that in our operations in
the US and Japanese markets, for example.
In Brazil, however, most companies don’t
seem to feel that kind of pressure. As a result,
few leaders seem willing to become true
game changers.
For those who do, what
capabilities does their workforce need
to become more innovative?
I think these companies’
workforces need a diverse repertoire of
skills. These include the ability to see their
companies’ businesses as part of a larger
ecosystem and to understand complex public
policies that may affect future business
growth. Staff also must understand Brazil’s
vulnerabilities, because these often hide the
greatest business opportunities. Finally, they
need to take a balanced approach to risk.
They cannot be too daring, because that
would make their company vulnerable.
But they cannot be too conservative either,
because that would cause the company
to stagnate.
How important are traditional hard
skills, such as understanding intellectual
property systems, to a company’s ability
to innovate?
Understanding how IP works is
important, but your legal department can
address that. The key problem I see in terms
of innovation-related capabilities in Brazil
is that people leave university unable to
think critically, express their ideas clearly in
writing or orally, exert leadership and work
in teams or across organizational functions.
Lack of ability in these “softer” skills makes it
much harder for companies to innovate. That
being said, you need both hard and soft skills
to innovate. If you cannot express yourself
clearly, it doesn’t matter how smart you are
about IP, technology or some other “hard”
area, because people won’t listen to you.
What does a truly innovative
company look like?
It has a clear purpose that the
entire staff embraces. It is meritocratic,
favoring true talent, regardless of age and
length of service. It adopts a multidisciplinary
approach to work, promoting crossdepartment
interaction so people can
exchange knowledge with colleagues they
wouldn’t normally engage with. It welcomes
people’s contributions from their life out of
the office, because all their experiences can
help inspire innovations. This human-centered
attitude permeates the organization.
What role, if any, do standardized
processes have in innovativeness?
You can’t get rid of all such
processes in a corporate environment, but
you should try to have as few as possible—
keeping only those essential for the job to
be done well. Innovation always comes with
risk and error, so companies should give
professionals autonomy to make mistakes.
Processes exist to minimize errors, so having
too many of them stifles innovation.
Of course, companies can’t afford to make
too many mistakes. So they must strike the
right balance between the efficiency of
their existing operations and their ability to
innovate. If you embrace innovation, you must
be prepared to take some risks, and that must
be reflected in your policies. Compensation
policies are a case in point. Most companies
have compensation policies that reward
excessively conservative attitudes. Think about
people who have been with a company for
20 years and are now at the director level.
Many have a family and big bills to pay. They
see an innovation opportunity but worry that
it may not work out. Failure could cost them
their bonus, promotion or even their job, so
they won’t take the chance. Consequently,
their company won’t innovate.
What about younger employees
in Brazilian companies? Are they equally
conservative?
Many want to change the world,
starting with the companies they work
for. These younger people have a different
worldview, and companies have to adapt
to that. In fact, we are seeing a clash
between two business paradigms. The old
paradigm is based on predatory market
practices. Companies are closed entities,
and competition is the only possible way
to navigate the market. In this mentality,
business is a zero-sum game. Someone has
to lose so someone else can win. Knowledge
is proprietary. But today, young people live in
an open-source world, which is informed by
the idea that collective intelligence benefits
all. In this new paradigm, the key assumption
is that we can not only coexist, but also boost
each other’s potential. When you look at the
market through this lens, you see competition
replaced with integrated cooperation and
the creation of shared value. To innovate,
companies have to adapt to this new mindset.
Thank you very much. This has been
an extremely interesting session.
It has been a pleasure.
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