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As Davos moves from plenary meetings to relative small group discussions, audience interaction provides a stimulating environment. Yesterday’s discussion on startup creation demonstrated the growing links between innovative scientists working in places where costs were lower (the periphery) and headquarters in the industrialized world (the center). How do innovation transfers both to and from the periphery work? How do you enable and iterate frugal innovation, and how does one return the product to the industrialized world?

Lee Kai-Fu, founder and CEO of Chinese company Innovation Works identified three critical elements: understanding current trends; identifying smart, creative engineers; and the capacity to solve discrete problems. Lee has made his fortune doing so with Alibaba, Alipay, and Tencent ­all developed in China.

Ray Lane, executive chairman of the Hewlett Packard Board of Directors focused on hiring the smartest people and developing small centers of excellence. These centers, when successful, become leaders in their fields. Lane, with responsibilities at Carnegie Mellon University, searched for “disruptive products and processes” throughout the world, such as Trendeal in Turkey. He had created a $300,000 fund to invest in 10 engineers for one year. If successful, the engineer would create a “sweet spot” where specific products met a particular need. With proven utility, Lane found investors to iterate the product and transfer it to the center in the U.S.

Victor Dzau, president and CEO of Duke University Medical Center spoke of reverse migration in innovation. New ideas in health are now being developed in India where the regulatory restraints are minimal and frugality is essential. A startup in India has developed the technique to remove cataracts at only 20 percent of the cost of doing so in the U.S. Now, he seeks to bring the process to the U.S., but faces the trial of accreditation, regulation and professional challenges. Dzau believes that lower costs and great talent exists in the periphery. However, the participating Chinese engineers were not educated in China, but in the U.S. and Europe where critical thinking and innovation are rewarded.

John Rice, vice chairman of General Electric Hong Kong Special Administrative Region discussed “indigenous innovation” among GE’s personnel who are hired to think creatively and develop a product or process outside the established GE line of business. Each of these innovators collaborates with other GE engineers around the world to develop new products using their particular ideas, skills and collaborative exchanges. An example was the development of a hand-held, portable ultra sound machine at a cost of $15,000. From small rural communities, technicians could identify medical problems, send the results to doctors and hasten the treatment. Today, the challenge is not the machine, but its proper use. Before it can be transferred to the U.S., GE must obtain regulatory approval.

Education is critical to developing innovation, and U.S. universities were establishing campuses throughout the world to attract talented and frugal innovators. Such campuses could be successful with the condition that the same levels of quality learning are established both at the center and at the periphery. The potential for frugal innovators and cross-fertilization of ideas between the two appears limitless.

The above piece is one of two that Diana Negroponte, an attendee at the 2012 World Economic Forum in Davos, Switzerland, has written about topics discussed at the conference. The other piece includes a discussion on German Chancellor Angela Merkel's opening speech.

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On January 25 – the day after President Obama delivered his State of the Union address before a polarized Congress – Brookings hosted a discussion exploring how the president’s speech could impact critical policy challenges facing the nation during this contentious presidential election year. The first panel, moderated by Senior Fellow Thomas Mann, examined a range of domestic and global issues; participants included Karen Dynan, Martin Indyk, Eswar Prasad and Robert Puentes.

The panelists agreed the president's speech focused on domestic economic policy, and specifically on proposals to spur sustainable economic growth. Karen Dynan said the speech offered a laundry list of policy options, but that it lacked a clear narrative on how to "address our labor market problems in the short term and our budget deficit in the long term."

Thomas Mann noted the political challenges of deficit reduction. "Leading with his chin on a broad plan for deficit reduction in the face of Republican tax proposals that would dramatically cut taxes would set him up politically to lose the election," Mann said.

To achieve the president’s goals on exports, manufacturing, infrastructure and energy, Robert Puentes cited the need to harness energy at the state and metropolitan levels. "We need to go to the heart of the American economy—the states and metros—to capture their innovation and momentum," said Puentes.

Addressing global economic and trade issues, Eswar Prasad said the president’s speech made very clear the U.S. will not tolerate unfair competition from other countries, with China being the primary competitor. "It’s going to be important to be very tough on China," said Prasad.

Martin Indyk said President Obama was tough and clear on Iran, but that the United States is in a very tense and dangerous period. "In an extreme scenario, the president could well order a military strike," Indyk said. "In order to try to prevent that from happening, the president is focused on trying to get the international community behind these very strong, crippling sanctions."

During the second panel, William Galston, Elisabeth Jacobs and Pietro Nivola put the speech into the context of the 2012 election and examined how growing mistrust of government may shape the presidential campaign.

"The President eloquently invoked the ideology of fairness, solidarity, collective action and common purpose," said William Galston. "But given the pervasive mistrust of government today, it’s unclear what will happen when these themes run up against the individualist and libertarian values espoused by many independent voters."

This event was live tweeted using the hashtag #BISOTU.

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• Panel 2 (.mp3)

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Participants

10:30 AM -- Panel One: Domestic and Global Challenges11:30 AM -- Panel Two: Congress and the Presidential Campaign