Instigating Innovation: Tech push fallacy is still alive

Let me continue with the Instigating Innovation series. I will slowly shift my attention to the technology intermediaries, research centres and technology transfer organisations that exist in many countries to overcome persistent market failures in the private sector. Yes, I know it is a shock for some, but these centres do not really exist to promote the technical careers or the of these people in these centres, nor to promote a specific technology in itself. From a systemic perspective, these kinds of technological institutions exist because they are supposed to overcome pervasive causes of under investment in technology (and skills development) and patterns of poor performance of enterprises. Economists describe the last two phenomena as the result of market failures, mainly caused by information asymmetries, a lack of public goods, high coordination costs, economies of scale and a myriad of other challenges faced by enterprises (hierarchies), markets and networks.

The challenge is that very often the technology these intermediaries promote become an objective in itself. The technology, embodied in equipment, processes and codified knowledge, becomes the main focus. So now we see technology centres being created to promote Industry 4.0, or 3D printing, or environmentally friendly technology. While I am the first to admit that I am helping many of my clients come to grips with industry 4.0, additive manufacturing or environmentally friendly technology, we must not confuse means with ends.

About 20 years ago, my late business partner Jorg Meyer-Stamer and his colleagues at the German Development Institute developed the Systemic Competitiveness framework. Many of my posts on technological capability and innovation systems are based on this Systemic Competitiveness, but I wont go into this right now (perhaps I can do that in a later post), but will only state this this model has greatly influenced my thinking of how technological capability can be developed in order to upgrade, improve or stimulate the competitiveness and innovative behavior of enterprises and state institutions. In one of my current research contracts I had to retrace the evolutionary economics origins of this framework and I found the following paragraph in one of the early publications:

“A further fallacy also played a role in the past: the establishment of technology institutions was based on the technology-push model, according to which breakthroughs in basic research provide impulses to
applied research, which these in turn pass on to product development. In fact, however, research and development is for the most part an interactive process; and it is frequently not scientific breakthroughs
that impel technological progress, but, on the contrary, technological breakthroughs that induce scientific research, which then seeks to interpret the essence and foundations of a technology already in use.”

What struck me was the past tense in the first sentence. So many of the technology institutions I am working with are still established on these same grounds. A technology push model. Actually, much of economic development has the same mindset, a solution-push model. It implies that clever solutions are developed in a clinical and carefully managed environment, and then is made relevant to business people (as Jorg often said “stupid business people”) through iterations of “simplification” and “adaptation”. Don’t get me wrong. I am the first to promote scientific discovery. But this has its place. Modernisation of industry must start from the demand side:

  • where is the system now?
  • What is preventing companies from competing regionally and internationally?
  • What kind of failures, both in business models but also in markets are repeating over and over again?
  • What kind of positive externality can we create?
  • How can we reduce the costs for many enterprises to innovate and become more competitive?

Only then do you start asking what kind of technological solutions, combinations, coordination effort or demonstration is needed. Perhaps no new equipment or applied research is needed, maybe something else must first happen. Some non technical things that I have seen work are:

  • mobilising a group of enterprises into a discovery process of common constraints and issues
  • arranging exchange between researchers, academics and business people at management and operational levels
  • hosting interesting events that provides technical or strategic inspiration to the private sector
  • helping companies overcome coordination costs
  • making existing technology that is not widely used available to industry so that they can try it
  • placing interns at enterprises that have different skills than the enterprise use at the moment
  • arranging visits to successful enterprises; and many more.

The truth of the matter is that the innovative culture of the technology institution, and its openness to learn from the industries it is working with are much better predictors of whether the industries around them will be innovative. If the technology institutions are bureaucratic, stale or rigid, nobody in industry will be inspired by them to try new ideas, new technologies, explore applying technology into new markets, etc. Just like we can sense when we arrive (or contact) a succesful enterprise, so we can all sense when we have arrived at an innovative technology institution. It looks different, there is a vibe. It is information rich, everywhere you look you can see ideas being played with, things being tried, carcasses of past experiments can be seen in the corner.

I can already hear some of my customers leading technology centres reminding me that I must consider their “funding mandate from government” and their “institutional context in universities” as creating limitations in how creative they can be, and just how much demand orientation they can risk taking. Yes. I know this. In the end, leaders must also create some space between the expectations of their funders (masters?), their teams and their target industries. In fact, how leaders balance these demands and what is needed by their clients, students and staff can probably be described as business model innovation. If you cannot get funding from government for what you believe is required, just how creative are you to raise this funding through other (legal) means?

We have seen over and over again that it is not the shiny new piece of equipment in the technology centre that inspires industry; but the culture of the technology centre, the vibe, the willingness to try crazy ideas to make even old stuff work better or combining old and new. Ok, I agree, the shiny equipment excites geeks like me, but this is not all that matters.

My main point is this. Technology Institutions should focus on understanding the patterns of performance or under-performance in the industries and technology domains they are working in, and should then devise innovative products, services and business models to respond to these. This means working back from the constraint to what is possible, often through technology. To be effective in helping entrepreneurs overcome the issues they are facing would require that these technology institutions are innovative to the core. Not just using innovative technology, or offering some innovative services, but also in how these institutions are managed, how they discover what is needed and in how the collaborate with other institutions and the private sector.

To instigate innovation in the private sector, publicly funded technology institutions need to be innovative themselves.

 

Source:

ESSER, K., HILLEBRAND, W., MESSNER, D. & MEYER-STAMER, J. 1995.  Systemic competitiveness. New patterns for industrial development. London: Frank Cas. Page 69

 

 

Preparing for a different manufacturing future

In Africa, we face the challenge of a manufacturing sector that often manufactures products in low volumes. In a country like South Africa, we manufacture a wide range of products but often at low scale. Even our manufacturers that manufacture in larger volumes are still small compared to European or Asian competitors. In some parts of Africa we are further challenged by not having very sophisticated domestic demand in many sectors. When demanding customers are far away it becomes much more difficult to be innovative and well informed of what is possible and what can be done to exceed or at least meet the demands of customers.

But I can sense an important change taking place. I am frequently visiting manufacturers that are becoming much more knowledge intensive. They are smaller and more flexible than their more established competitors, and they combine different skills sets, technology platforms and knowledge bases.

In a forthcoming paper [1] that I co-authored with Garth Williams of the Department of Science and Technology and Prof. Deon de Beer (Vaal University of Technology), we offered the following definition of Advanced Manufacturing.

Advanced manufacturing is an approach that

  • Depends on the use and integration of information, knowledge, state of the art equipment, precision tooling, automation, computation, software, modelling and simulation, sensing and networking;
  • Makes use of cutting edge materials, new industrial platform technologies [2], emerging physical or biological scientific capabilities [3] and green manufacturing philosophies; and/or
  • Uses a high degree of design and highly skilled people (including scientific skills) from different disciplines and in a multidisciplinary manner.

We also argue that Advanced Manufacturing includes a combination of the following.

  • Product innovation: Making new products emerging out of new advanced technologies (including processing technologies).
  • Process innovation: New methods of making existing products (goods or services).
  • Organizational innovation or business model innovation: Combining new or old knowledge and technologies with traditional factors of production [4] in non-traditional fields or disciplines in unique configurations.

I am very proud that our definition of advanced manufacturing was also taken up by the Department of Trade and Industry in their next Industrial Policy Action Plan (IPAP) 2014/15-2016/2017.

The implication is that our technology development, technology transfer and education programmes need to change in order to be better able to equip and support manufacturers. Manufacturers increasingly need to be able to manage multidisciplinary teams using different technologies. These manufacturers must not only be able to learn fast from the market around them, they must be harness and pro-actively develop new combinations of knowledge within their enterprise. Existing or potential manufacturers must also think differently about manufacturing. Smaller factories, using more modern equipment in a flexible way is now a competitive advantage. The entry costs for starting a small manufacturing enterprise has never been so low. For instance, the cost of an automated electronics surface mount production line has come down by more than 70% in less than 10 years. Additive manufacturing allows tooling and products to be developed in parallel, but also makes it possible to develop new products very fast.

Where do South Africa enterprises learn to become more knowledge intensive at the moment? The answer is: At European Trade Shows. If you are a manufacturer or a potential entrepreneur, start saving up. There are many excellent trade shows throughout the year.

Which Meso-organisations offers the best examples, technology demonstration and training on this? Again, European Universities, Technology Transfer centres and universities. (The US and Canada also provide brilliant services, but it is much harder to access for us). If you cannot find a local expert or academics to help you, reach up to Europe.

What do we have to do? Think of ways to get as many of our entrepreneurs curious or interested in the newer technologies available, and learn from our (larger) competitors. Also, we have to get our universities to be more involved in technology adaptation and participating in new research areas. The academia should focus less on publishing in journals and get involved in real research collaboration that gives our industries (exporting) opportunities and that at the same time address unique needs in our domestic markets.

Oh, and by the way. Start reading up on the “internet of things”. Maybe my next post should focus on that.

 

Notes:

[1]  Our paper will be presented at the International Conference on Manufacturing-Led Growth for Employment and Equality in Johannesburg on the 20th and 21st of May. The paper is titled “Advanced Manufacturing and Jobs in South Africa: An Examination of Perceptions and Trends”.

[2] Such platforms have multiple commercial applications, e.g. composite materials, and exhibit high spill-over effects.

[3] E.g. nanotechnology, biotechnology, chemistry and biology.

[4] Labour, materials, capital goods, energy, etc.

 

Assisting firms to improve their Research and Development activities

In my daily work I deal with two kinds of manufacturers: those who have formal or informal research and development activities, and those who don’t. While there are certain tendencies for some industries to be more R & D intensive than others, I found some very innovative firms even in traditional sectors.

The first step to assist firms to improve firms to depend their R & D activities is to disconnect R & D from product development that responds to complaints, suggestions or requests from customers. While in some firms product development is the result of R & D, in most, product development is not purposeful, pro-active or inventive. I am always surprised to realize how dependent many firms are on their customers for specifications, product or ideas, especially in more traditional industries.

So if you disconnect R & D from responding to customers product demands then what do you connect it to?
From my experience, I found that establishing a cross functional team within the organization that has a mandate to question anything, any process, any routine, or that can investigate any problem is a good start. Thus I try to connect R & D firstly with reducing internal costs, solving internal products, mastering existing technology and knowledge domains. The key is to get very different people together, not based on their rank, but based on their curiosity and different expertise.

Next step is to then start thinking about the science behind current products, processes and core assumptions in the firm. Are therw substitute materials, solutions or processes for what is used now in the firm? Can we create some experiments, or can we explore alternative ways to achieve the same results? The purpose here is not to successfully develop new products, but rather to broaden the knowledge used within the firm not only about is core processes, but also about alternative markets, applications and production approaches. If you are lucky enough to have a great team together, then you can even play with questions such as “what else can we make with what we have?” or “if we partnered with a firm nearby, what crazy stuff could we make together?” But, I am sad to acknowledge, this does not happen often.

Only when we have a core team in the manufacturer curious about different ways of doing things, different ways solutions are used, alternative ways of creating solutions – only then do we look at new ways of pleasing current and existing customers with innovative new products. At this point the firm is inquisitive enough to value conducting research into new ways of doing things. We are ready to consider how a more formal Research and Development approach might look.

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