Stimulating demand led innovation in Africa

To do business in Africa is not easy. I am not being pessimistic with this statement. I am based in Africa because I believe in our opportunities here. But lets face some truths:

  • We are far from input suppliers (a problem for many and an opportunity for others)
  • We are far from our customers (I mean those international customers or the pockets we have on the continent)
  • Things take longer to arrive here (inputs and my Amazon book parcels), and
  • We stretch our infrastructure on a daily basis (roads, rail, health, education).
  • It is not difficult to trade between countries, or to find partners, markets etc. because of various barriers (I think Europe and Asia is ahead of us in overcoming technical and cultural barriers to trade – whether perceived or real)
  • Our societies spend a huge amount of time arguing, blaming and politicising that could probably be better applied to solving problems and exploring opportunities
  • We have many government and market failures (more on this in another post) that only benefits elites (public and private)

Most people think that we have to innovate to reach markets that are far far away, line Europe or the US. Or we think that we have to out-innovate the Asians. But we have something right here under our noses. We have demands from consumers, businesses, policy makers. These demands are not yet always expressed as needs. If you think it is important to save energy in Europe to save the planet (or save money), then we have an additional and more urgent reason to save energy – our constraints to produce enough to go around. Same for water, food, technology and other areas.

So why are we not exploiting the opportunities created by local demands and unexpressed needs?

I think part of the answer is about our policy incentives, and then another part is about our low self esteem. Ok. There is also the fact that innovation is increasingly becoming difficult, because consumers are getting so smart at selected the better products that combines elements of good design with functionality (functionality alone often doesn’t make the cut). What I mean with difficult is that you have to spend a lot of time searching for the right components, process technology (and perhaps even patents).Many of you will probably come up with other reasons as well.

But here is a question worth spending our collective brain power on: what can we do to stimulate more demand led innovation here in Africa?

The OECD last year had an interesting seminar on this topic. I am relieved to find that industrial countries are also thinking about these things (it means we are not so far behind), but I am very envious because we also need to be discussing these things in Africa. Perhaps our greatest resource is not our minerals. Perhaps it is the huge number of problems that we still have to solve, and the millions of demands that are not yet articulated. But how do we turn these challenges, problems (or opportunities if you like) into profitable ventures?

Any ideas?

The Worldcup of graphs

Gapminder has realised some fantastic graphs about the FIFA Worldcup.

For instance, for a view on how uneven the participation in the Worldcup is, click here. For instance, 53 countries in Europe competes for 13 spots in the Worldcup. Africa competes for 5, with Asia competing for 3. More than half of the teams competing in the Worldcup are from rich countries. Click here to see this visualised.

On the question of whether popilous countries far better, click here. Although it seems harder for a very small country to be successful, Slovenia and Uruguay shows that it is possible.

Next is the question of whether rich countries far better than poorer countries? Here you can see the correlation between income and the ranking made by the International Football Association, FIFA.

Gapminder is making statistics a beautiful game….

To this point, the spirit in South Africa around the Worldcup is great. I hope that our teams exit will not mean an end to the euphoria that is still ruling the cities.

Connecting innovation systems with local and regional economies

Many of you have asked me how I connect my current focus on innovation systems and technological upgrading with industries with my past experiences of local and regional economic development. I thank you for repeatedly asking this question, and apologise for not providing you with an answer. The reason for my silence was that I was also not exactly sure how to connect these topics. But I think I am now starting to understand how these topics relate to each other.

Let me try to explain this.

Before I continue I need to make sure that you understand that an innovation system is far more than one or two innovative firms.  Freeman (1987:1) defined an innovation system as “the network of institutions in the public and private sectors whose activities and interactions initiate, import and diffuse new technologies.The emphasis is mainly on the dynamics, process and transformation of knowledge and learning into desired outputs within an adaptive and complex economic system.

So how does innovation systems work within regions or places? Well, it is often affected by issues such as trust, social and informal networks, formal relationships, common customers or common inputs and other factors. You will notice that it sounds very similar to the characteristics of a cluster in its early days. The main characteristic of a local or regional innovation system is that it is mainly focused on a specific geographic space and on the specific knowledge spill-overs that occur around certain firms, industries or institutions unique to that space.

You will immediately notice that innovation thus favours places with more people and more firms. You are right, a close relationship exist between density of interactions between people (provided for by towns and cities, nightlife, and frequent social exchanges) and the innovation system. It does not mean that innovations are limited to these spaces, but simply that they emerge faster or with more success in these spaces. This is largely caused by the increasing importance of knowledge exchange and interaction between firms, knowledge service providers and technological and educational infrastructure. But more about that in a seperate post.

I want to leave you with 3 questions that I have found to be useful to better understand the relationship between places and innovation systems. I use it frequently at the start of an assessment into an innovation system, or to stimulate thinking of public and private leadership.

1) Why are people innovating in this specific location (and not on another space)?

2) How does this space or place support innovation, and more specifically, how does it reduce the costs of innovation?

3) How do innovations in firms affect this space?

Bear in mind that with innovation I mean product, process as well as organisational or business model innovations.

Ask these questions and let me know what you find. I am sure that you will find that many places do not actively support innovation (unless you have some really determined or stubborn innovators there). Nor do they make it cheaper for people to innovate, exchange knowledge or stimulate joint problem solving (or opportunity exploitation). To me it also seems increasingly obvious that the role of cities and towns in Africa are not fully exploited in national economic development as spaces for innovation.

In South Africa, innovation happens mainly in 9 major and about a dozen secondary urban spaces. No amount of public policy will break this pattern until settlement patterns change, or until smaller places start to attract skilled people that can afford to innovate from cities.

So how can we support innovation systems in each and every town? How can we built regional and local institutions that reduce the cost and risk of innovation. Again, I dont mean only product development as an innovation. I mean process and business model innovation as well.

Until we can build our own local technological and educational institutions using local priorities and local resources from the bottom up the trend of urbanisation and migration to the major centres will continue. This is great in terms of reducing the costs of innovation, but it makes us very dependent on national policy, and only a few good local administrations. I would prefer a situation where we can build our local institutions around local issues, this giving firms in for example a mining region a head start in innovating around problems or opportunities related to mining.  For instance, in the Mpumalanga  province (South Africa) we have a lot of coal mining with its associated problems. Why is it so difficult to create a small but focused research institute or technological institute in a town that will focus on applied research and knowledge generation around environmental technology related to coal mining? Could this not be an impulse with environmental solutions as well as innovation as outcomes? I could imagine that such an institute could create positive externalities in a space that would lead to innovation that our both cutting edge and relevant to our society.

Now if you think about it, then Africa is rich with millions of ideas (also known as opportunities, challenges and obstacles) that could serve as impulses to create, stimulate or grow local innovation systems around relevant issues. Dont get me wrong, I dont mean that the public sector must do the research, and then the private sector must commercialise the research (although a little of this certainly helps). I mean that public funds or public private partnerships could be used to establish local institutions that create positive advantages for firms to innovate within regions through reducing the costs of finding relevant information (about a problem, opportunity or technology) and by highligthing opportunities for application of new ideas (by better articulating demand or applications). But there must be sufficient scale of infrastructure to allow the people with the right knowledge, experience and perhaps financial resources to settle in the region to exploit (or address) the opportunities through innovation.

Let me know what you find when you ask these questions.

PS. I know I will receive hundreds of angry e-mails that I am implying that rural areas are doomed.  Re-read my post before hitting ‘send’.

Sharing links: Scidev.net and the new manifesto

I frequently receive requests for more links, papers and ideas around how science can be related to development. Add Scidev.net to your favourites.  (Thank you, Lucho for bringing the website to my attention.)

At the same time you might want to look at “a new manifesto” that deals with new ways of linking science and innovation for development.  This is an update of the 70’s publication of a radical and controversial document that helped shape modern thinking on science and technology for development. It was called The Sussex Manifesto: Science and Technology to Developing Countries during the Second Development Decade.

Let me know what you think!

UNU-MERIT: How firms innovate: R&D, non-R&D, and technology adoption

You may be interested in the following paper from UNU-MERIT by C. Huang, A. Arundel & H. Hollanders

The official abstract is below.

Non-R&D innovation is a common economic phenomenon, though R&D has been the central focus of policy making and scholarly research in the field of innovation. An analysis of the third European Community Innovation
Survey (CIS-3) results for 15 countries finds that almost half of innovative European firms did not perform R&D in-house. Firms with weak in-house innovative capabilities and which source information from suppliers and competitors tend to innovate through non-R&D activities.
In contrast, firms that engage in product innovation, find clients, universities and research institutions an important information source for innovation, or apply for patents or use other appropriation methods are more likely to perform R&D. However, non-R&D performers do not form a consistent block, with several notable differences between firms that use three different methods of innovating without performing R&D. Many of these determinants also influence the share of total innovation expenditures that are spent on non-R&D innovation activities. Furthermore, an analysis of the determinants of the share of each firm’s total innovation expenditures for non-R&D activities shows that the
factors that influence how innovation expenditures are distributed is generally consistent across sectors and European countries.

What I find interesting is that these empirical findings are very similar to what I have found in my interviews with South African firms. Many firms do a lot of innovation without spending any money on R & D. A large number of firms use specialised product developers (or freelance experts) to do research on their behalf. Or they depend on universities or technology stations for research. Amazingly, the majority of the firms doing product development (as their area of specialisation) are small firms.

I wish we had this kind of data in Africa…..


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