These growing overlaps have also produced intense price wars. The result has been shrinking profit and growth opportunities for most Asian economies. For these economies to maintain growth momentum and become true global forces, Asian companies need to break from commodity competition driven by cost.

They should move from being low-cost producers to being "value pioneers". Value pioneering is not about pursuing technology leadership through big research and development investments. This becomes evident when we reflect on some Asian corporate success stories.

Consider the Sony Walkman that took over the world in the 1980s. It contained little of the cutting-edge technology of the time. It was simply a combination of Sony's existing stereo cassette tape machines and portable tape recorders - with the recording function stripped out. Sony created an unprecedented buyer experience by offering high fidelity and portability for the first time. People could listen to music, in stereo, while walking, jogging or cycling. Soon after its launch in 1979, the name "Walkman" became synonymous with "headphone stereo" products and a new personal portable entertainment empire was born.

In South Korea, Samsung Electronics stands out in the same way. Despite the industry downturn, its global market share for mobile phone handsets increased by nearly 5 per cent between 2001 and last year, making it the world's No 3 handset maker, up from No 6 in 2000.

What makes Samsung handsets popular? Although perceived as fancy and feature-rich, they are generally a bit light on features when compared with similar models by other producers. Rather than focusing on improving technological functions to produce more powerful games and faster text messaging, Samsung highlights the fun image of its products. The smooth and round design lines, large screens, stunning colour displays and musical ring tones that sound like real instruments have helped give the handsets emotional and style appeal - and made the mobile phone a fashion accessory and fun toy.

With the Sony Walkman and Samsung's handsets, innovations were not driven by technology, but were based on insights into what brings customers exceptional value. Such innovations allow companies to be different without increasing costs. China's Haier Group is already heading down this path. In 17 years, it has gone from being a nearly bankrupt refrigerator factory to the world's second-largest refrigerator maker and the fifth-largest appliance maker.

As the top domestic white-goods player, Haier has also been expanding fast into foreign markets, including North America, Europe and Japan. In the United States, it has captured nearly half the market in compact refrigerators, and has set its sights on 10 per cent of the US major appliance market by 2005. Can Haier achieve this?? One positive sign is its approach to innovation. The dualcompartment freezers offered in the US, with a bottom drawer that children can reach into to grab an ice cream, and the electric wine cellars that allow those who lack drafty chateaux to store their bottles in an elegant and stylish way, are but two examples. Evidently Haier strives to go beyond its cost advantage. For Haier to succeed, it needs to continue with this line of thinking.

For those who have a dream like Haier's, they should also take note: the rise of East Asian economies will increasingly be based on value-driven innovations. Asian business leaders should be aware of this if they seek to set apart their businesses solely on cost, or bet on technology innovations with huge research and development funding. Instead, they need to ask themselves: How can we differentiate our products without compromising the existing cost advantage? How can we offer a huge leap in value to buyers to make their lives dramatically simpler, safer, more convenient, more fun and more productive?