Some of the challenge prospective clients that reach out to me are grappling with

Due to my research, public speaking and writing my favourite topics I regularly receive requests to help somebody that is grappling with an issue either around meso-organisational change or about technological capability, innovation or disruption.

Usually after a few emails we schedule a phone call to discuss their context, their intent and my service offering. Thanks to my journal and reflection processes I can track the original requests and the ensuing correspondence or projects. Over the last six months, I have noticed some patterns that are now repeating. Here are some of the most frequently discussed points. While I can help with some of these, with some I cannot help for various reasons.

Because I have always focused on training other consultants and my own clients, I thought it would be a good idea to share these early observations with you.  (Larry, Goran, Bojan, Nik, Albina, Garth, these are for you). To save you all from many emails, I have written 8 blog posts in one!

So here are the emerging patterns of 2019:

  1. I am frequently contacted by organisations or projects that believe that technological change, or preparing for the 4th industrial revolution (4IR) is a project. That there is something that we can do quickly (one of the most popular search terms on this blogsite is “formula for 4IR” and “4IR method”. Preparing for technological change, responding to disruptions, or even preparing to disrupt others is a capability that is distributed over companies, public and civil organisations, regions and individuals and over time. It is not a project that ends, it is a capability that must be continuously nurtured. After addressing one threat or challenge and the next two will be on the horizon. While I love training, what these organisations really need are new technology, innovation, change and knowledge management capabilities.
  2. I am asked by development organisations to prepare their target groups or beneficiaries for the 4th industrial revolution by focusing on one threat. For instance by mastering computer-aided design, design thinking, or helping entrepreneur to cope with advances in digitalisation, 3D printing, or master some automation or sensor technologies. However, the reason why so many people lump so many technological advances together under the banner of the 4th industrial revolution is that these technologies are converging, and if they are not yet converging, they are rapidly learning from each other. That means the capabilities are converging or starting to follow similar evolutionary patterns.  That also means that very few economic activities are left untouched by changes in other sectors, technologies and markets. Again, this is not about training. It is about competence, leadership, sense-making and innovation. Perhaps it is mostly about learning, relearning and knowing what you have to master next. People also commonly confuse “digitalisation” with writing software, whilst telecommunication costs, insufficient regulatory frameworks for e-commerce, closed government (as opposed to open government) or very fast connectivity and data security are ignored.
    People that can quickly master a new domain, like machine learning, big data or concurrent design, will have a distinct advantage in the future. People that are specialised in one skill, especially a vocational skill, may be more vulnerable. But my main point here is that splitting up the technologies is not helpful. Again, the broad technical capability must be fostered. However, in addition to point 1, I want to add that the ability to track, master, integrate and leverage multiple specialised domains continuously over time is very important, even if they do not yet appear to have a relation to your industry, business or organisation.
  3. I am asked to help only the private sector in a country, region or sector. Many organisations believe that the private sector is most vulnerable to disruptions. I believe that many competent firms would be OK, but not all. Uncompetitive companies, un-innovative companies and undermanaged companies are going to be more vulnerable unless the state can afford to protect them and in so doing possibly raising the costs to the society. But what we must not lose focus of is that when one public sector organisation, programme or function fails, the effects could be far-reaching. Take for instance what happens when a local municipality in a developing country is undermanaged. It will affect the whole community. The challenge is that in developing countries the “revolution” or the “disruption” will be about social institutions (local government, universities, technical vocation colleges, schools, or whole governments etc.) that will be caught in a weak position – and unable to catch up or get ahead. So supporting the private sector in a place where many public institutions are failing is just naive. You do not address a market failure by focusing mainly on the private sector, just as you do not address government failure by only working with the government. 
  4. This point is an extension of the previous point. Many organisations that approach me want me to help them get the private sector more innovative. But here is the problem. It is not possible to develop a prosperous and successful private sector without the same happening in the public sector and in civil society. Actually, any form of innovation starts with a good basic and often some good higher qualifications. The changes that people can work together in a sophisticated way, without these arrangements being replicated in other sectors are naive. Complex forms of cooperation within an organisation, company, NGO, school or church depends on the ability to work together to solve problems that span over the ability of individuals. This needs trust, and it comes from the broader society and its formal and informal institutions. You cannot develop the private sector in a vacuum. Management teams of companies are not suddenly going to behave in novel arrangements that don’t exist in schools, sports teams, civil organisations, universities or political parties. Maybe it is possible to develop only the private sector in the short term, but for long term economic development, healthy public sector organisations are a pre-condition. The social technologies that enable the private sector to innovate, to combine old and new ideas, to figure out new ways of arranging teams around objectives, problems and opportunities are in most countries developed with the direct or indirect help of the public sector. Often these ideas are first developed around social, political or local problems. The quickest way to instigate innovation is to focus on creativity, better decision-making and increased performance in publicly funded programmes and civil organisations. Do you want to quickly get new forms of dialogue or new technology to spread in a location? Start with the schools, the local theatre, church or community organisation – and watch how fast the private (and hopefully public) sectors will catch on. Often the most adaptive private sector leaders are serving on the boards of the schools, local NGOs, and they take up new ideas very quickly.
  5. I am often asked to assist struggling industries in developing countries to become innovative, competitive or successful. Maybe the companies were successful once, hopefully not too long ago. The challenge with sectoral upgrading is that the prominent companies must either be very competent in market development, or they must have mastery in a technological domain that has a long cycle time still ahead. With one of these two domains mastered product and process innovation is possible, but perhaps not easy. The real challenge is often that in developing countries the business model innovations are the hardest and the cost of failure are also very high. Thus the incentives to try new business arrangements are low. If the companies are not able or willing to rethink or change their business models, then there is very little one can do. The entrepreneurs that will be successful in five years from now have already made decisions to master emerging markets and technologies today, and they have found a way to foster their competence in these domains within their current companies. They have innovated in the business arrangements, enabling them to innovate in products and processes. If there are no companies that are able to do this it is most likely the best idea to rather invest public funds into investment promotion, education, tech transfer and incubation to try and offset the job-losses when the current companies fail.
  6. I am often approached by internationally funded development projects to do something to create employment in a sector or a region in a developing country. The challenge is the sectors, supporting institutions and even the approach (the ideology) is already decided and cannot be changed. Often even a quick analysis and a few phone calls reveal that the development project has read the situation wrong, or they ignored strong messages of resistance because they believe in their ideology. Yet they persist, and now they are not getting the response from the stakeholders. I notice many of TVET and green economy projects that fall in this category. Even if there is great value in what these organisations have to offer, if they are not responding the binding constraints or challenges (the decision points) faced by the entrepreneurs and government officials, their offer will not be taken up. Or it may be taken up but it won’t stick. My approach for the last few years has been to wait for the projects to realise that they will never reach their targets and then to propose that we try some alternatives to see if we can get some impact. Or I simply turn down the request. Development programmes in the education sector are often
  7. I am often asked to help manufacturers or development organisations in developing countries to prepare for technological disruption at the technological frontier. That means technologies that are newly emerging. The problem is, most companies in developing countries will not be disrupted by cutting edge technology. They will be disrupted when older technologies reach new levels of efficiency and scale, perhaps in combination with newer technology. That means that an older technology evolves to become available as a utility service or on a pay-per-use basis. That is how the fundamental disruptions occur that completely displaces existing markets and sociotechnical arrangements. An example if PV electricity to homes. In many developing countries a homeowner can now buy panels, inverters, brackets and batteries from hardware retailers (or online). It may be illegal in many countries, but homeowners can take their homes off the grid. If enough homeowners do that, national power utilities may collapse. Perhaps another example is that as developing countries switch to fibre internet connectivity, all the IT companies that used to provide small servers, desktop maintenance, server maintenance, cabling installations, etc are disappearing. They are disappearing because they have not long ago mastered an older technology (shared server-based computing, remote network maintenance) that has recently become a utility-based service.
  8. I am asked by an international development organisation to help with a project aiming to support 25, or 50 women, girls, lecturers, youth or a handful of companies. 25 out of a population of thousands or millions is really depressing. This is not systemic, nor is it sustainable. I cannot get involved in these projects, my conscience will not allow me. If any beneficiary group is so marginalised or excluded that 10, 20, or 50 seems like a good indicator of impact, then we should really be going back to the drawing board about the complexity of the system and our sensitivity to the decision points, the attractors and the boundaries in the system. Most likely we should be targeting changes in mandates, roles and functions of institutions and not be focused on individual beneficiaries. The system must be very dysfunctional (meaning somebody must be benefitting enough to keep it in this state), and focusing on getting a handful of people through the system despite all the resistance or challenges is not systemic. In fact, everybody that is inspired by this handful might suffer severe challenges to follow in their footsteps. In a complex system, fixing a little part and then scaling it up does not change the fundamental working of the system. But let me stop venting now, I am asked frequently enough to talk about the potential of complexity thinking applied to developed. Maybe this deserves a blog post of its own.

These are just some thoughts about the challenges that some organisations are grappling with when they reach out to me. These are some of the common objections that many clients are challenged by based on my writing, teaching or speaking. Perhaps these are also the reasons why some clients decide to appoint somebody else or to never reach out to me in the first place. But these are also the points that keep me awake at night, the recurring themes that come up even when I am trying to walk the dog.

Let me know if any you’ve also had these conversations, or whether your organisation, funder or clients are stuck on the same issues. If there is sufficient interest in any of these points then we can perhaps think of how to explore these deeper, or perhaps we can even get together to brainstorm these.

The evolution of technologies, industries and regions

In the earlier research on technological evolution in the 1970-1995 period, attention was mainly paid to either a whole economy or a single sector or technological paradigm. It is broadly understood from this research that different industries and technologies evolve at different rates. This means that over time, some industries may be more important than others, or at least, some may be accelerating while others may be stagnant or declining. In recent research by Saviotti and Pyka (2013), the emergence of new technologies and industries (and the goods and services that they provide) is seen as offsetting the diminishing returns that are innate in the development of existing technologies. Nelson (2015) argues that this is a reason why absorption and further development of these technologies are necessary to maintain economic development.

In enabling technological evolution in countries, a whole range of actors play a part. Individuals and informal networks, to large and small firms all play a role. However, for the last century, most technological advancements have been supported by scientists, the academia and professional societies and a range of supporting meso organisations. In Europe, professional associations often play an important role in the deepening and dissemination of technological knowledge.

I want to come back to the meso organisations mentioned in the earlier paragraph. Meso organisations or functions are created in response to structural issues like market failures, sometimes government failures or persistent patterns of underperformance in the economy. These meso functions are critical in supporting economic actors to discover what is possible in a given economic context, to assist stakeholders to overcome coordination failures, and to provide critical public goods (such as scarce or expensive technological infrastructure, demonstration facilities, testing facilities, public research, and so on).

The meso functions enable a society, industry or even the public sector to discover and absorb new ideas, they enable learning by doing, they encourage the adaptation and dissemination of new knowledge or technologies, and they connect different stakeholders to overcome coordination and search failures. These meso functions are a critical ingredient in the local innovation system as they extend the technological capability of a given sector, industry, market or region in a country.

You would have noticed that I have not yet mentioned universities and public research efforts. This is simply because I have written about them so often as they form a critical part of the local innovation system. I sometimes even think that the higher education sector receives too much attention. Yet, education from basic schooling to higher education plays a critical role. For me, a university is an important meso organisation, and research centres, technology extension centres and laboratories that provides testing facilities are all important meso functions or maybe even meso organisations hosted by a larger organisation.

The importance of the higher education sector in the technological infrastructure varies for different parts of the economy. Nelson contends that scientific and technological research and teaching, especially the more applied fields, provide a base of knowledge that is accessible to all technically sophisticated individuals and firms working to advance technology in a field (Nelson, 2015). However, different fields also depend, to different extents, on scientific and formal research and technology support. Therefore, measuring journal articles and research outputs as a contribution to the national innovation system or as a proxy for technological capability will always paint only a partial picture. It really also depends on the pace of change and scientific advancement that is taking place in a region, a technological domain or an industry.

Furthermore, different industries depend, to different extents, on government support and incentives. In some fields public support is crucial, and in other cases, provides little incentive or value. In many cases innovations preceded science, and continued development is only possible due to the iteration between researchers and enterprises. Nelson continues that the kinds of firms that do most of the innovating differ – in some fields this tends to be large, established firms while in others it is smaller firms or new start-ups (Nelson, 2015).

Nelson draws an important conclusion that has really shaped my own thinking. Nelson states that there is no single set of policies that are applicable to all technologies and industries. What will be effective in some fields will not be in others. For instance, small business promotion in some sectors in one country could work, but it could be ineffective in another country.

In South Africa, with its very high coordination costs and high compliance costs, smaller enterprises in the manufacturing sector are at a huge disadvantage. The distance to sophisticated buyers and the challenges with exports compounds the difficulty for smaller enterprises to compete globally from the local base.

Nelson is also known for his writing on the importance of a wide range of social institutions, both formal (for example a cluster development organisation) and informal (the trust networks between members of the clusters). He refers to these social institutions as social technologies, and he argues that they co-evolve with physical technologies to enable economic development. These social institutions range from central banks to a diverse range of firms, but importantly include other forms of organisations such as scientific and technological societies, universities, government agencies and even capital markets. These institutions are the focus of the discipline of innovation systems.

Nelson emphasises that “that when a potentially new technology emerges, new institutions often are needed to develop it, and invest in and operate effectively the economic practices based on it”.

Nelson acknowledges it is not an easy task, as it is hard to predict which emerging fields of promising new technologies are going to be important in driving economic progress in the future, and which will have a modest impact. The policies to create or reform institutions need to be adaptive and flexible. Arthur (2009:186) confirms the view of Nelson and argues that “We cannot tell in advance which phenomena will be discovered and converted into the basis of new technologies. Nor can we predict which combinations will be created.”

That brings me back to my intent with this post. When we look at technological disruption and change, it is very easy to get caught up in the potential or risks of any given technology. But we must not take our eye of the informal and formal institutions, market systems, regulations and technological domain specific organisations that are needed to make a new technology viable. At the same time, we also have to figure out how to gracefully exit older technologies and how to either shut down or transform public organisations that once had a critical role in supporting those industries and technologies.

Again, I repeat, the so-called fourth industrial revolution is going to be more disruptive at the level of institutions and social arrangements than it will be disruptive for the enterprises that are competing at the technological frontier.

In South Africa, we have a triple-challenge.

1 – Our institutions change very slowly, and we have huge social tensions about how to allocate resources and wealth in the economy. Our local municipalities and local economic development activities are ineffective (with some exceptions in some of the larger metros). Yet, local authorities have hardly any influence over the quality and effectiveness of national meso programmes that are supposed to enable economic change.

2 – This is compounded by a largely uncompetitive economy with lots of market concentration.  The regulatory burden in the economy keeps a lot of potential entrepreneurs employed in the corporate and the public sectors.

3 – Our discussions in South Africa about technological change, technological capability and the promotion of the innovation system is dominated by a linear logic of science leading to technology leading to innovation (the so-called STI approach). There is not enough attention being paid to the eco-system of organisations, technology extension agencies that can help enterprises master new technological domains, reduce coordination costs, the so-called Do, Use, Integrate (DUI) kind of innovation. On that point, we also have very few (if any) technological organisations tasked with transforming or upgrading whole sectors or regions in the country from a technological perspective. Everything is aimed at one enterprise at a time.

My research agenda:

This is what my research is about at the moment. I am working with a team from TIPS and the dti (South African Department of Trade and Industry) to strengthen the visibility of this technological meso network, while also strengthening the public sectors ability to spot technological disruptions and to be more pro-active.

Please sign up below if you want to stay informed of our progress as I will not be able to share all of our learning in the public space all the time.



Sources:

Arthur, W.B. 2009.  The nature of technology : what it is and how it evolves. New York: Free Press.

Nelson, R.R. 2015.  Understanding long-run economic development as an evolutionary process. Economia Politica,Vol. 32(1) pp. 11-29.

Saviotti, P.P. and Pyka, A. 2013.  The co-evolution of innovation, demand and growth. Economics of Innovation & New Technology, Vol. 225 pp. 461-482.

Technological architectures

An important distinction can be made between architectural innovation and component-level innovation. The architecture defines the way different components or subsystems are organised and how they interact with other components. Often architectures themselves form part of even larger webs of architectures.

Innovations at the component level, which is a physically distinct portion of the technology that embodies a separate design concept, mostly reduce costs of production, and often take place at high frequency with a wide range of choices available. While the organisations that innovate at the component level are more dependent on past experience as well as economies of scale, the organisations that determine the architecture are able to depend far more on their value addition, as well as the sunken investments of many other agents into the system.

To change the architecture of a system requires many simultaneous changes to different sub-architecture and component levels, which may be beneficial to some agents in the system, but not to others (thus vested interests often create a path dependency). A change to the architecture could even disrupt industry structure, and it changes the way the markets judge whether a specific architecture is suitable for the function or tasks it fulfils. A combination of path dependency and architectural change can be used to describe why many industries (or architectures) have disappeared.

However, architectures such as the vehicle example in the figure above change slowly over time and can certainly be influenced by improvements at the component level. For instance, better electronic management of the engine may result in less frequent services, but the architecture hardly changes. Interestingly, the architecture of the vehicle also forms part of a wider architecture of road networks and urban designs, again reinforcing another higher level of path dependency. This nested nature of technologies at the level of architectures is what slows down massive technological change. To continue with the example of a car, passenger vehicles depend on the architecture of a road network. It is also dependent on fuel and maintenance systems, parking arrangements, insurance and all kinds of traffic and safety laws.

I find it interesting that two decades ago, electric vehicles were described as being massively disruptive resulting in the demise of the fossil-fuel vehicle. Now, many established car manufacturers have jumped onto the bandwagon and are investing heavily in their own electric vehicle technologies, and in doing so reducing the disruptive effect of alternative fuels. In doing so, they are making massive strides in fuel efficiency, reducing the weight of their cars and substituting harmful and heavy materials with materials that have less impact on the environment. The component and sub-system level innovations offered by electric vehicles are being incorporated into the designs of the older fossil fuel architecture, while the architecture itself is only changing slowly. In South Africa, the network of charging stations and points are slowly expanding, but the use of electric vehicles is still minute compared to the fossil-car usage.

Some examples of architectures and components are computers (architecture) and an internal graphics card (component) or a jet airliner (architecture) and in-air entertainment systems (components).

The reason why I thought it a is a good idea to go back to such a basic distinction as the difference between architectural innovation and component level innovation is that in much of the popular discussion about technological disruption (the fourth industrial revolution-talk) this distinction is not made. What I appreciate about the World Economic Forum is that they are raising awareness of what will happen to social arrangements when one architecture displaces another. But what is not receiving enough attention are the many challenges that we will face in developing countries at the level of sub-systems and components. This is where competitiveness, resilience and innovation are critical because this where the disruptions and discontinuities of industries will occur. This is also the area where developing countries usually follow (as outsourced manufacturers) and where we are the most vulnerable to the design capabilities and dense networks that existing in clusters in the developed world.

I will explore how these changes occur in the next few posts.

Becoming better at tracking how technologies change over time

The subject of how technologies evolve over time have been receiving a lot of attention over the last 40 years. Actually, much of the research work done in the late 80s and 90s are still relevant today. With all the talk of the fourth industrial revolution, the attention has shifted towards innovations coming from elsewhere away from what do we have to do in our own organisation to improve our performance, offer our clients amazing value, and to create the future we want to be part of.

I am working with several think tanks, research organisations and policy advisors to help governments and key meso-organisations to become better at tracking technological change and potential disruptions. This work draws on my experience of supporting industry and innovation systems diagnostic processes as well as my experience in supporting organisation development and change.

To be better able to predict technological disruptions meso organisations and policymakers must become much better at anticipating future demands. That means they have to shift from being demand responsive (in other words waiting for the private sector to clearly articulate what they need) to anticipating what is needed. This requires a deep understanding of how user needs are changing (market knowledge), but also of how key technological capabilities in the industries they serve are changing (technological knowledge).

The challenge here in South Africa is that most of the organisations that are supporting innovation and technological change are focused on fixing the past. Due to our countries past, they are trying to get marginalised people (women, the youth, black entrepreneurs) into the mainstream economy. These disadvantaged groups need a lot of support because they are expected to compete against incumbents who have access to capital, suppliers and markets.

This research agenda has three pillars:

  1. Figure out how well South Africa is doing in terms of technological change. Which sectors are changing faster, where is productivity and manufacturing value add improving, and where are we falling behind? This area of research is also about mobilising sector organisations, like industry associations or a whole range of meso organisations supporting the private sector to become better at tracking technological change.
  2. Make the landscape of technological support organisations more visible. These organisations can assist both the private and the public sector to embrace, experiment with or adapt to technological change. A next step would be to make sure that these organisations are incentivised to disseminate technological knowledge and that they are not only measured on how they assist individual enterprises or technology transfer projects.
  3. The third pillar is to improve the dynamism in how public sector organisations work together and collaborate with the private sector to promote industrialisation, upgrading and innovation. This is an essential ingredient to strengthen the countries technological capability, to reduce coordination costs and to foster healthy and pro-active public goods that encourage entrepreneurs to search and discover new economic opportunities.

The current research agenda is not yet comprehensive but for me the synergies between these three pillars are great. It is about technological change, about making sense, about promoting innovation within and between organisations and also about strengthening meso organisations.

Is the Fourth Industrial Revolution a paradigm shift?

I am excited that the Helvetas Eastern European team asked me to write a blog post for their Mosaic newsletter about the Fourth Industrial Revolution. The blog article and many others can be found here.

Regular readers will know that I am not so convinced of one big revolution; rather that there are many smaller disruptions. In this article, I argue that it is hard to imagine what a paradigm shift would look like. I make six arguments of why there are rather several smaller disruptions taking place. The credit for coming up with the image in the article goes to Zenebe Uraguchi from Helvetas. He is also the person that convinced me to write this article, and who guided me when I felt stuck. Thank you, Zenebe! Take a look at some of Zenebe’s posts on the Inclusive Systems blog of Helvetas.

The second half of the article I wrote is about figuring out which social technologies to develop that are needed to make certain technologies usable or beneficial to societies. Many of these social technologies are cultural or organisational, but there are also many public institutions and public goods that are lacking in developing countries.

To me, it feels that we are still just scratching the surface when it comes to helping the meso organisations of developing countries cope with technological change.

However, it is exciting that my research into discontinuous technological change and the necessary social and technological institutions that are required in developing countries is of interest to development organisations and governments.

I am looking forward to your comments, questions, contradictions and ideas!

Best wishes,

Shawn

Pondering disruptions and industrial revolutions

I am asked almost daily about my opinion about “the fourth industrial revolution”, technological disruptions and the impact on jobs.

Depending on who asks, I might fire off a statement like “I don’t believe there is a fourth industrial revolution underway”. Or perhaps I might be a little bit more popular and say “I don’t think there is one, but probably many smaller revolutions going on”. I must be honest, I have also told several leaders in business and government, “definitely, and you had better pull up your socks and scan the horizon so that you don’t get caught with your pants down”.

I do feel a certain responsibility towards those that ask me these questions. I am all too aware that my response might encourage somebody to think more seriously about their organisation’s ability to sense change and to respond. Or my response might paralyse, or maybe even give somebody a reason to remain complacent. The truth is, we simply do not know the exact answer or extent of the technological changes around us.

When the change is as complex as it is now, and so dispersed across many actors in the economy and the world, we simply do not know. We can measure patents, imports, exports, value add, jobs, but we simply do not know how many entrepreneurs, government leaders or citizens are reading up on new ideas, trying new combinations, dreaming in the middle of the night of new business models and arrangements. These changes, when they aggregate into a pattern or a groundswell, often only make sense looking back. When we look back we see those moments where shifts took place, where tipping points were reached, where narrow or broad revolutions took place. But in the present moment, it is just foam, sweat and conflicting messages in the news that seems to make us numb.

Maybe it deserves a blog post on its own, but what we have to bear in mind is that in the original meaning of an industrial revolution, the “industrial” should be understood as technological change. The revolution describes what happens to many forms of social institutions. That means small and large, formal and informal social institutions are too clumsy, too rigid, fitting an older order but not ready for the new order. So it is not the autonomous vehicle that will disrupt us (well, maybe us geeks might be very distracted by them); the disruption will come from the massive investments that would be required in transport infrastructure, in the way we move around, in the way governments regulate, collect taxes, and so on. Maybe it challenges how companies are organised, maybe it completely challenges global supply chains or creates new markets that are much better than older markets. The physical technology, when it outpaces the evolution of the social technologies, disrupts the latter.

I must say this in stronger terms. When the evolution of the physical technologies is too far ahead it destabilises the society, because the required social technology modules are not available. It destabilises because the “have’s” can draw from other societies social institutions, while the rest are left out behind a huge and growing barrier.

For me, that means that we should figure out ways to enable experimentation and innovation in social technologies because this is the hard part. Investing in a specific physical technology and the required knowledge to use is still the easier bit. Figuring out how to crowd in a broad cross-section of the society, how to get more people to try new ways of managing, new forms of enterprise, new arrangements of market and non-market actors; that is where we need resilience and creativity.

In South Africa, I feel that we are all too focused on the physical technologies, the gadgets. Yet, our societies ability to raise new enterprises, to experiment with new management models, new ways of doing business enabled by new technologies, is just too low. Despite having richly diverse demography, having people with great experience and qualifications unemployed or employed and frustrated, we are simply creating or encouraging too few people to venture out and start something new.

The difference between the terms Fourth Industrial Revolution and Industrie 4.0 matters

There are two terms that many of my clients use interchangeably, which really bothers me. The first is the term “the Fourth Industrial Revolution”, and the other is “Industrie 4.0”. What bothers me is that these two labels represent two concepts that only partially overlap. Sometimes they are conjoined with an “and” in a sweeping statement to emphasise just how pervasive and disruptive a specific technology is, and how utterly unprepared everybody is.

The Fourth Industrial Revolution is a concept that was popularised by Klaus Schwab and the World Economic Forum (although the name goes back almost 50 years). Many international consultancies have also developed instruments and advisory services around this theme (I admire their animations and graphics). The Fourth Industrial Revolution is a banner over many new technologies. Most of the technologies that are highlighted by the WEF are not new, e.g. 3D printing, sensors and artificial intelligence, whereas the narrative of the Fourth Industrial Revolution highlights the effects of the convergence of several scientific and technological domains (take a look at this link to read more about some of the technologies). Due to the reach of digital technologies, smartphones and global software platforms, new applications of technology are spreading very fast. It almost seems as though the rapidity of technological development is increasing, and that the depth and breadth of convergence and its impact on industries, firms, governments and whole societies is potentially disruptive. Hence the “revolution” part.

I must add that not everybody is convinced of this revolution. Some argue that we are still in the third revolution, albeit in a second or third extension. Others argue that we are already undergoing the fifth or sixth revolution. Then one might also argue that revolutions are usually not predictable, or that revolutions go hand-in-hand with massive social, political and institutional upheavals, which we have not yet really seen. Others, like Carlota Perez argue that these revolutions are unavoidable, and that governments have a key role to play in preparing for societies to cope with these wave of change. In fact, we have not seen massive employment displacement in Europe attributed to massive technological disruption, despite all the machines, robots and drones. I for one am also not convinced that the technologies and their convergence are revolutionary. What I find really eyebrow-raising is the immense interest of capital and political elites in technology, and all the hype around these technologies. I must also confess that I am impressed by how well the applications, use cases and adaptation paths of many of these technologies are described on the web. For instance, take a look at the Blockchain use cases on the WEF site here.

The second label is Industrie 4.0. It is usually spelled this way because the concept originated in Germany as the rallying cry of their new “High-Tech Strategy” which has emerged over the last ten years. The German high-tech strategy has a dual focus. The first and often overlooked emphasis is on continuing the incremental and export-oriented technological development that German manufacturers are known for. It builds on Germany’s current excellence and ability to innovate, especially at the level of product and process technologies.

The second and more frequently discussed drive of the German Industrie 4.0 strategy is all about digitalisation, knowledge intensification, trust building, dialogue and networking (some topical areas are described here). Digitalisation is not only about connecting things to the internet, but also about manufacturers being smart about integrating their suppliers, clients and internal processes. Improving the competitiveness of German manufacturing and making the society, workplaces and communities healthier and happier in the future are recurring themes. So are the environment, the circular economy and the importance of investing in longer-term technological platform and capability development. What only a few people in Germany would acknowledge is that this high-tech strategy was a response to the realisation that Germany was not as digitally savvy as one would have expected (to see the Tuft Universities renowned digital performance assessment of countries head over here). The Industrie 4.0 strategy in Germany (and now also in many other countries) is already quite mature, decentralised and, dare I say, pervasive. Also, Germany is very critical of its own performance. For instance, the Federal Ministry for Economic Affairs and Energy (BMWi), publishes an annual assessment (only in Germany) of the digital performance of Germany on their website at www.bmwi.de).

 

In Germany, and increasingly in other EU countries, it seems that every university, technology centre, industry association and consultancy is involved in cluster activities, Industrie 4.0 readiness assessments, technology demonstration, research and so on (look here to see a list of “testbeds” in Germany). The snowball is gaining momentum. Different ministries and spheres of government are coordinating around clearly described projects that are managed transparently and concurrently (look at the Platform Industrie 4.0 website to see the number and composition of initiatives). Many initiatives, such as industry mobilisation, making constructive policy inputs, developing standards for data integration, compatibility, etc. are being driven by private sector organisations, private sector representatives, science and engineering bodies or associations (Here is a link to the National Academy of Science and Engineering website).  Manufacturers in Germany are at this moment spoiled for choice when it comes to choosing which technology service provider to use to solve a problem or test a new solution (link to use cases, link to tech support centres). Both public and private service providers are striving to be relevant, at the cutting edge and valuable to the private sector.

Now this second label, Industrie 4.0, is something that the developing world should take note of. This industrial strategy is about much more than adding digital capability to existing products and processes. It is about a modern digital business model which is smart, has strong feedback loops within the organisation and beyond, and reaches out to suppliers, supporting institutions, clients and devices ( go here to assess your readiness and to see how wide this assessment is). It is not only a public strategy, but has now become a private sector strategy too. It is about deep integration, collaboration on long-term technology and capability development, co-funding, skills development and standards, and is globally focused.

I believe that this second label has the potential to disrupt the developing world far more than the Fourth Industrial Revolution notion can. If we do not respond, our developing country manufacturers may be left behind.

This is not about tweaking existing products, adding sensors or tracking data. It is about improving the ability of organisations to make sense of change, future possibilities and their performance within this fluid context. It means that those local companies that could be globally competitive would be under pressure if they were not able to tap into or track this gaining momentum in Europe and elsewhere.

Decision makers in business and government in developing countries often underestimate the funding and effort that go into building trust, collaboration and joint problem solving or policy making in Europe and beyond. Both Industrie 4.0 and the Fourth Industrial Revolution are not about products or process technologies, they are about new business models and new ways of collaborating, with the long-term intent of laying new foundations for the future.

If you are a supplier to European manufacturers, be alert, be proactive! Get involved.
If you are competing with European products and businesses, be awake!

This is not a project for your design team, your IT department or functional managers. This is a strategic re-think of your whole organisation and how it develops new capabilities, how it measures and interprets data and how it works with other organisations. This is not a quick fix, this requires a longer-term holistic re-think of your technological capability, of the new applications that may be possible and of new forms of collaboration, co-competition and integration all enabled by digital technologies.

So why do I argue we need to understand these terms? I see the Industrie 4.0 movement as a strategic and intentional approach to shaping the future. While the Fourth Industrial Revolution narrative of the WEF and others helps us to understand what has already changed. It helps us to respond better, while the other urges us to actively get involved in shaping the future. I know this difference is subtle, and I know that the WEF is also trying to shape the future, but the popular narrative about the revolution is unfortunately often about technologies and how we respond to them.

Futurists and local economic development

Futurists use a forward-looking philosophy to chart their organisations’ strategies. They are not so caught in the here and now. Rather they imagine and then mobilise people towards a future that does not yet exist. It means you can not yet plan for it, you first have to imagine it. Futurists are not caught up like most of us with trying to make what we have to work better, nor are the plugging gaps. They force us to think about completely new architectures of technology, social arrangements and capabilities.

Elon Musk and Jeff Bezos are considered global futurists. Many of the near emergent technologies, like driver-less cars or advances in artificial intellegence were hard to imagine just a decade or two ago, now they seem to be around the corner. Yet, cities, business and governments are still planning with a short term cycle, mainly using what exists or what is lacking as guiding their decisions.

A lot of emphasis here in South Africa are placed on data, prioritising left behind areas and dealing with social integration. Every now and then I wonder if we are not simply getting better at preparing for the past? You know, that one that will never come back? What if the very industries that we have now will not be viable in just a few years? What if the cities and towns that emerged around old industries are no longer viable or sustainable?

This morning I read about New York hiring a futurist to help them imagine and plan for the future on a CNN site.

“In an unlikely move for a city, New York is also hiring a senior futurist to gather insights on possible cultural, economic and environmental changes ahead”

Wow, imagine we could do that here in South Africa? I know we have a long list of problems that require our immediate attention, but should we not set aside some time to also imagine the longer term future? That way, bureaucrats and technocrats can develop better models and designs that can be presented to politicians and citizens. More important, we can get more designers, engineers, scientists and business people mobilised to think about and design for a future that is imminent.

“New York’s latest efforts are designed to be proactive, rather than reactive”

From my perspective, most of our companies and local governments are not ready for what is coming. We are all caught with trying to cope with what is and what should have been done. Then our local political climate sucks a lot of energy from our economy, resulting in resource rich companies growing while all the rest is holding up their breaths, waiting for something to happen.

I know this sounds negative, but with the digital revolution in manufacturing, and the rapidly integration of fast numbers of enterprises into the networked knowledge economy, I see many of our industries falling behind. Not all companies, but many. I often ask my students to imagine the following:

  • What does the future of local economies, secondary cities and the currently unemployed in South Africa look like?
  • What are technologies that we can expect to have a profound change on our country in the medium to longer term? What does this demand from our institutions, policies and businessess?
  • Can we get more people involved in thinking about the long term future?
  • How do we shift from a low skills labour intensive economy towards a knowledge economy without leaving millions behind?
  • What do we have to equip our students and children with to empower them to shift with the times and prepare for this future?

We have so many priorities that we have to address at the same time. Perhaps while we are running on this treadmill we need to also think further into the future.

Just thinking out loud!

The photo at the top of this post was during a Local Economic Development study tour I led to Germany together with Frank Waeltring in 2009. The tour group was a diverse range of senior government officials and the objective was to learn about Germany’s experience with economic change, industrial change and cooperation between many different stakeholders in a decentralised way.

 

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.

 

Twelve business ideas that are changing the world – Link

Here is a link to a 12 episode series published by the Times and the Times Online. In the series, they interview 13 influential business figures from a wide range of sectors as they explain an idea that they think is fundementally changing the way we do business today. Although some episodes were published as long ago as 2007, most are still relevant and though provoking. The Times now charge for their content, so I found that these episodes sometimes download from Podcast Directory, and at other times don’t….

Here are the direct links to the episodes:

1. Medicine in the developing world

Innovative partnerships are crucial to overcoming diseases like malaria, which, as well as their devastating cost in human terms, are hampering the economic progress of developing nations

2. Government as a business

A strong and efficient public sector is fundamental to the strength of any society, and governments can draw lessons from the private sector

3. Micro finance and its role in 3rd world poverty relief

The provision of financial services in the developing world is a crucial means of ensuring sustainable economic growth and lifting people out of poverty

4. Private equity modern entrepreneurship

Sir Ronald Cohen, Founding Partner and Executive Chairman, Apax Partners Worldwide. Successful entrepreneurship and the importance of the private equity industry in the British economy

5. Vacating HQ: how social innovation is redefining the corporate world

Ben Verwaayen, CEO, BT: Technology is changing the way we do business, bringing the world’s best talents together

6. The flexibility of industry’s new access to capital

Sir David Walker. Author, the Walker Report into private equity. Tuning the balance between transparency and secrecy in the world’s most private industry

7. The business of engineering

Engineering has changed the world and can continue to do so, but first it must change its own fate

8. The evolution of the equity market

From their origins in the seventeenth century, today’s high-tech stock exchanges are playing a crucial role in global economic development and are at the heart of the globalisation story

9. The day corporates gained responsibility: the chief executive’s view

How companies turned the inevitable into the profitable

10. The day the corporates gained responsibility: the investors view

11. New world order

The global marketplace for skills is revolutionising business and communities – but where will it lead?

12: The democratisation of information

Jay Adelson, Founder and Chief Executive, Digg. The internet is changing the way we access and share information, and it gives us all a voice

13: Powering the future

Britain must reinvent its attitude to energy if it is to meet the challenges of climate change and fuel inequality

I hope that you are able to download these episodes.