Ever since the Industrial Revolution, investments in science and technology have proved to be reliable engines of economic growth – Neil Degrasse Tyson
Innovation is an important, yet often misunderstood concept which is key to economic growth. At its most fundamental, wealth is driven by productivity so the challenge for most countries is how to increase productivity. Other than increasing the number of people actively producing in the economy—through increasing the number of women in the workforce, for instance, the only way to achieve this is to apply better technology, allowing a greater amount of output for a given set of inputs. That is innovation.
But there is a common misunderstanding about innovation. When most people hear the word “innovation” they think only of the sort captured in the quote by Degrasse Tyson above: cutting edge, scientific progress as seen with innovations like blockchain or CRISPR. And indeed these, and other, exciting new technologies do offer us the prospect of extending the boundaries of human capability extensively.
At the other end of the spectrum, many pundits believe, as outlined by the OECD that developing countries, like most African nations, should rely mainly on incremental innovation, taking ideas and concepts from other parts of the world and adapting them to the specificities of their own situations. Here are some other ways to think about innovation:
Innovation in strategy
Back when I was in business school, the received (Western) wisdom was that companies should adopt focused strategies. Conglomerates were distinctly unfashionable. It was thus a conundrum for Western observers that conglomerates, from South Korean Chaebols like Samsung to venerable Indian multi-sector companies like Tata, thrived in the developing world.
Studies showed however that conglomerates were often the best structures to deal with the industrial context: risks and deficiencies, of those emerging markets. Innovation in strategy is the subject of the book “Blue Ocean Strategy” by W. Can Kim, whom I was lucky enough to have as a strategy professor in business school.
Innovating businesses processes
In the late 1990s and early 2000s some of the largest pools of wealth created in Africa were generated by the mobile telecommunications industry, and largely by African entrepreneurs: Mo Ibrahim at Celtel, Strive Masaiwya at Econet and the South African team at MTN.
Business model innovation is perhaps the most important but unsung type of innovation available to Africans.
These entrepreneurs didn’t invent cellular technology. Rather they combined their understanding of the market and the African consumer, with Western cellular technology and improvements in computing processing power and software to develop and adopt the “prepaid telecom business model” turning mobile technology from the preserve of the rich who could afford to be billed for their usage after the fact into a mass market product accessible by anyone with some amount of buying power. Massive wealth generation in non-rent extractive industries generally indicates that massive positive economic value is being created, and this was, and is, the case with the mobile telecoms industry in Africa. Business model innovation is perhaps the most important but unsung type of innovation available to Africans. It allows us to borrow innovation that might have cost hundreds of millions of dollars over long time spans to develop, and combine and adapt them to solve uniquely African problems in a way that achieves what Silicon Valley investors call product market fit. This is corporate nirvana if you can achieve it.
It is in business process innovation that we see some of the innovations that could be game-changing for Africa. These include innovation in payments by the likes of Mpesa and Pagatech, home solar systems being developed by Lumos, new ways of accessing markets pioneered by the likes of Cars45.com, through to ensuring the safety of pharmaceutical products, pioneered by M-Pedigree in Ghana.
Given a relative lack of resources, it is difficult for African innovators or entrepreneurs to compete with counterparts from better-endowed economies when it comes to basic R&D. It is often a better strategy to borrow those technologies. One area where it does makes sense to develop our own technology is in solving uniquely African problems. For example the International Institute of Tropical Agriculture has put a lot of work into developing strains of cassava better suited for the African environment, with increased disease and pest resistance, lower cyanide and quicker maturities than indigenous varieties. Using technology to tackle uniquely African diseases or to solve other problems like mass education are also important areas of focus.
Incremental innovation is an important, if the least sexy, form of innovation.. This involves taking equipment, systems and processes that already work and adapting then to become better or to better fit your environment. In the African context, this will often involve initially getting technology from abroad and working to adapt it better for African environments and business processes.
The Japanese have a concept of kaizen or continuous improvement. This approach led to the massive increases in productivity that allowed Japanese companies, like Toyota, to become some of the most efficient in the world. Kaizen is implemented at all levels of a corporation from the CEO down to the janitor and it has the benefit of turning the company into a learning organization that learns and adapts to its environment. This is perhaps the most important part of it. Kaizen often doesn’t produce the sexy “big bang” innovations that grab headlines but in a low productivity environment like we have across Africa improving firm productivity to make them more globally competitive is crucial to the long term success of the continent.
Overall, improved productivity, which can only come from innovation of one form or another, is vital for the improved welfare of Africans. It is for this reason that I welcome anyone, like Quartz, who celebrates African innovation of whatever stripe and, through this, encourages others to innovate.
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