Is it possible to innovate in a disruptive way in Chile?

In order to talk about disruptive innovation, the first thing we need to understand is what we mean by this. I imagine that everyone is familiar with the case of Netflix: a streaming platform that radically changed the way we consume audiovisual content and with its irruption left previous big companies like Blockbuster in oblivion. Disruptive innovation is precisely that which produces drastic changes in an industry or market, and ultimately changes consumer preference.

We have local examples: NotCo, the company founded in 2015 by Matias Muchnick, Pablo Zamora and Karim Pichara, which uses machine learning – a branch of artificial intelligence – to replicate different animal products from plant-based recipes. The startup managed to raise capital of more than $1 billion, making it one of our first national unicorns, along with Cornershop. But NotCo has not been without controversy. Today it is embroiled in a legal battle brought by the association of milk producers, who allege unfair competition (given its NotMilk product).

Innovation in the first instance generates resistance. When a traditional business model is shaken up and a new, disruptive, agile competitor appears, it is normal that it generates enemies along the way. This is one of the main problems with disruptive innovation: large companies, logically, cling to the business models that work best for them and generate the highest profitability, leaving little room for innovation.

Then comes a start-up company that begins to raise capital, and in the blink of an eye, there is a new competitor in the market that does things differently in spaces previously taken by a few big players.

An investment problem

Many ask, what should be the role of the state in this? Unfortunately, it doesn’t look promising on that front. Chile stands out negatively as one of the countries with the lowest investment in research and development as a percentage of GDP (0.34%, one of the lowest in the OECD), according to World Bank data.^[i] A few years ago, and with much fanfare, the PACYT project was launched. The idea was to create a Chilean Silicon Valley in the Biobío region, to take advantage of the leap towards technological transformation and, in passing, to set a precedent in the decentralisation of Santiago to the regions. Last year the project was buried and will now be transformed into a hospital, with several billion pesos in losses.

So, coming back to the question at hand, is it possible to innovate in a disruptive way in Chile? It is possible, but it is difficult. We still have a huge lack of public policies that generate the conditions for the development of an innovative ecosystem; we need to change the mentality of large companies, break the inertia, and take greater risks, as well as encourage research in universities and study centres.

Innovation, the key to progress

In complex and uncertain times like the ones we live in today, innovation is a huge opportunity to boost business in Chile. Moreover, it can help a lot with the distribution of wealth and equal opportunities. Especially those startups focused not only on profits, but also on social and community contribution.

Determining the return on investing in innovation can be challenging, because it is not always immediate and value can come in different forms, such as improvements in efficiency or brand reputation. For example, Amazon invested $775 million in 2012 to buy Kiva Systems (now Amazon Robotics). They have now managed to reduce their operational costs in their warehouses by up to 20% thanks to these robots.

Innovation also generates returns at the country level. Take the case of South Korea, one of the most innovative countries in the world. The Miracle of the Han River, as it is known, is the meteoric rise they achieved in just one generation. They went from being one of the poorest countries after the war in the 1950s to a world leader. Innovation pays off, but we must be able to look beyond immediate profitability and simple conversion to economic results. We must give space and time to research, development, testing and market adaptation. And, especially, we need to allow for the possibility of getting it wrong and keep trying. It is this long-term approach that will generate sustainable competitive advantages over time.

We need a push where the state, the private sector and academia are committed. This is the perfect time to do it: coming out of a pandemic that forced many businesses to reinvent themselves and in the face of a severe global economic crisis. In this way we can begin to see the world from a different perspective and make our economy take the leap into the future that it so desperately needs.

Table of content 

1. An introduction to Flair Chile 2023: A historic year?
2. Global view of Chile
3. Gen Z: A snowflake generation?
4. Feminism in Chile: A movement that is progressing, albeit slowly
5. The chilean route to sustainable development
6. Is it possible to innovate in a disruptive way in Chile?