Improving the value proposition of the meso layer to enterprises

When working to improve the performance of any sector or value chain, we are often confronted with a range of meso organisations or programmes designed to support upgrading, skills development and better decision making in small businesses in the targeted sector.

While mapping these organisations is not so difficult, figuring out what each organisation is doing, offering or whom they are targeting with their services is much harder. If it is hard for me to do I can only how hard it must be for an overstretched entrepreneur working on a dozen burning issues.

Recently, Annelien and I, worked together to map the meso landscape in a specific sector in South Africa. We used an expectations matrix format to get more than 40 meso programmes to express what they expect of each other. Perhaps I can write about how we did that in a later post.

In a public workshop, each organisation had a chance to respond to the expectations expressed in them by all the other organisations in the sector. In general, it was clear that most organisations did not have a clearly specified service offering that made it explicit who they were trying to help, what had to be in place at the enterprise, what the benefits or value of their service were and what it cost. While many programmes had objectives and indicators for their work in support of the specific sector, it is tough to find clear information, contact persons and engagement processes outlined in marketing or online material.

What can be done to improve the visibility and value addition of the bio trade Meso system?

  • Make services descriptions more explicit. For instance, clearly describe how each service offering addresses user needs. How can each offering be accessed by entrepreneurs?
  • What resources or capabilities does each organisation have in place? Is the support aimed at particular links in the value, a specific range of species, or does it provide general support to all business activities?
  • Clearly state which kind of enterprise and at what level of competence enterprise must be to benefit from the service. For instance, state explicitly what the preconditions are to use a particular service. Must the enterprise already have a two-year track record? Must they have a particular kind of technology in their operation? Is this service only useful for certain kinds of companies in specific sectors or stages of development?
  • Which kind of enterprise can not be assisted? For example, can the organisation help all sizes of companies? Can only community projects be helped?

It is helpful to think of the meso landscape in its present state as being very diverse with many organisations, programmes and resources. The challenge is that from the perspective of enterprises and other support programmes, the meso landscape is like a labyrinth. It is hard to navigate and only those with huge tenacity or resources can afford to go door-to-door to find specific support for their challenges. Often the quality or effectiveness of the support available is also hard for entrepreneurs to assess.

While it will be easy for some meso organisations to improve the visibility and access to their services, others may struggle.

  • Some organisations might only have to improve their marketing and information material. If they are already clear about who, what and how they support the sector, then they have to make this more explicit.
  • For other organisations, improving their offering may require designing specific services or making certain resources available. Or perhaps a more specialised programme would have to work closely with other complementary programmes to improve their impact.
  • There could also be organisations that provide specific services to a more general target market, so perhaps they must make their offerings a little more explicit without making it specific to the bio trade sector.

To summarise my argument. In many developing countries there many development programmes or targeted support programmes aimed at addressing market failures or performance issues at the level of enterprises. Some are more generic, promoting, for instance, start-up support. Others may be more technical, like providing export promotion support. The main point is that these organisations often offer products and services that are very vaguely described. This means any enterprise (or other meso programmes) may have to spend a huge amount of time to figure out where to get support. This increases search and discovery costs, it raises coordination costs and it reduces the quality and effectiveness of public goods available to society.

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.

Identifying the meso organisations that strengthen technological capability

This article is from the Mesopartner Annual Reflection 2019 (Cunningham, 2019). In this article, I explore how one could go about to discover the network of meso organisations in a country that helps the private and the public sector to strengthen technological capability.

During the past year, Mesopartner has been working with the Trade and Industrial Policy Strategies (TIPS) and the Department of Trade and Industry (the dti) in South Africa to develop a strategy to identify and respond to discontinuous technological change (see Article 11 in this Annual Reflection). As part of this research, we developed an approach to map the technological landscape of meso organisations that can assist South African enterprises and government programmes to adapt to technological change.

First, we developed a framework to identify meso organisations and functions. Various typologies were evaluated that could be used to classify, measure and manage the performance of those organisations involved in technology dissemination or building technological capability. We started with four typologies of public technology diffusion proposed by the OECD (1997) that are based on operational focus:

  • Supply-driven: programmes to transfer and commercialise technology from government research programmes to private enterprise, both high-tech and low-tech. It also involves education, skills development and standards.
  • Demand-driven: these initiatives start with a diagnosis or the perspective of enterprises and aim to respond to the challenges or opportunities faced by private enterprises. These could be aimed at plugging specific performance, technology and capability gaps in the enterprises and are often focused on smaller businesses.
  • Network-based: these are often sub-national or regional, and are aimed at creating or strengthening bridging effects, inter-firm partnerships in promoting information flows, and the diffusion of technology. Examples are cluster promotion, strengthening of industry or business associations, and fostering collaboration around skills development, research and development, or the development of shared infrastructure.
  • Technological capability dialogue, adaptation and socio-technical infrastructure building: these intentional initiatives are aimed at working on a system-wide level to upgrade the technology diffusion capability of the national system of innovation within the context of global and regional economic and technological change and opportunities. This is often in the form of dialogue and reflection about why certain initiatives are not yielding the expected results, or why certain industries are not striving to increase their innovation, use of technology or competitiveness. An example is the effort by several government departments to collaborate in a national digitalisation strategy, or the effort around the mining and ocean economy in South Africa in the past few years.

Some of these organisations are created to enable international trade. An example is the South African National Accreditation System (SANAS) and other organisations involved in South Africa’s technical infrastructure. Other domestic organisations could be created to support a shift in the economy through a supply-side focus, such as the National Cleaner Production Centre, which provides technical support and training to the manufacturing sector. Programmes and functions established through industrial, innovation, education or technology policies should also be assessed as part of the framework.

As we started identifying and mapping the meso organisations, we realised that two critical types of actors were not captured by the typology we created:

  • Private actors that provide public goods or mixed goods, such as technology demonstration, training and the provision of technology modules in open-source formats. For instance, Siemens in South Africa provides demonstration facilities and accredited technical training courses to the public.
  • Intermediaries or facilitators in the system that broker relationships between different meso organisations and other actors. They may do this as part of another mandate, or they may be set up for this purpose. For instance, in South Africa, there is a huge education crises. A range of non-governmental organisations has emerged that provide important services to the marketplace and the public sector. Many of these organisations conduct research, provide lecturer training, develop training content in open-source format, mobilise public and private stakeholders into collaborative projects and provide public information on shortcomings in the education system. These organisations are critical to overcome coordination failures and to strengthen information flows between different actors in different spheres of society. However, in a typical meso mapping exercise these, organisations could be overlooked or ignored because the public sector or development cooperation partners may see them as interfering in functions that should be provided by the public sector.

International organisations, consultancies and programmes should also be considered in this framework. For instance, as part of executing its commission with various clients, Mesopartner often plays an intermediary role connecting various meso organisations, policymakers, researchers and leading firms to strengthen dialogue or joint decision making, or supporting collaboration. Other organisations that advise industries and governments and create publicly accessible advisory content should also be included.

A challenge that many developing countries face is that meso organisations have to work hard at creating capabilities that should have already existed five years ago, while trying to keep abreast of new international and domestic shifts that require new management capabilities, human resources, technologies and strategies. Not only the private sector can be overwhelmed or paralysed by competing technological choices, but public sector management can suffer the same symptoms. This means that in the framework provision should be made to differentiate between basic (or fundamental) offerings and future-oriented or more advanced offerings. This is not an additional kind of organisation, but it could be different functions provided by the same organisations

While some organisations may be more important for improving the productivity and competitiveness of incumbent firms, others may be more relevant for lowering entry barriers to new start-ups and investors. Even if new start-ups lack market access or technological experience, in a dynamic environment their different knowledge and unique technological capability may put them at less of a disadvantage than the incumbents.

Some meso organisations may be hard to classify because they offer diverse services to different beneficiaries. For instance, universities often play an essential role in lowering the costs of gaining access to new knowledge, codified knowledge and research. At the same time, a university may offer industry access to scarce equipment on a pay-per-use basis, while a university laboratory may offer certification or analytical services to another research group. Or a research programme based at a university may be a sophisticated client to a private enterprise that specialises in advanced equipment, while the same enterprise may be dependent on post-graduate students from the university. Some of these relationships and interdependencies are impossible to map without deep insight into how knowledge, technological ideas and people flow between organisations in the public and the private sectors. Yet it is possible for the same organisation to show up in different typologies, in different markets served, or in multiple roles.

Next year we will have to try and figure out how to map these organisations without making it overly complicated and difficult to use, maintain and adapt.

Notes:

This article is an output of our Mesopartner research theme on technological change and the changing role of the meso landscape. For more information on this theme or to become involved head over to the Mesopartner Research Theme page.

To stay abreast of my research, please sign up for my personal newsletter here.


Dr Shawn Cunningham

Sources

CUNNINGHAM, S. 2019. Identifying the Meso organisations that strengthen technological capability. Mesopartner Annual Reflection 2019

OECD. 1997. Diffusing technology to industry: government policies and programmes.

Series: Meso Institutions as enablers of Self-Discovery and learning

This is the first post in a series that will investigate the network of organisations that enables the economic agents in an economy to master new technology and to prosper.

In every economy, there are organisations that emerge to address all kinds of market, structural and organisational failures. We call these organisations Meso Organisations, and they perform meso functions aimed at improving the economic performance and prosperity of the micro-level. While some meso functions may be more about creating a regulatory framework and others about education or technological services, in essence, all meso functions are about disseminating knowledge between economic actors.

Diversity (or variety) of options is a prerequisite for evolution to work. In natural evolution, variety is created by random mutations in DNA, while variations in the economy are created through an ongoing process of self-discovery at different levels, involving different segments of the society (Hausmann and Rodrik, 2003). Rodrik (2000) states that this process can be called a meta-institution. He argues that if it is democratic and participatory, this kind of arrangement typically results in higher-quality growth. This discovery process draws heavily on the ability of groups of organised people in business, government and civil society to conduct a process of combining existing ideas with new ideas in novel designs. It involves both reflecting on the status quo, and imagining alternative arrangements. 

Nelson (2003:20) stresses that “some of our most difficult problems involve discovering, inventing and developing the social technologies needed to make new physical technologies effective”. The more distributed this kind of search is, the better the variety created and the stronger the resilience of the system becomes.

Businesses that are able to generate or recognise modules that work better and that can be repeated elsewhere by drawing on their past experiences have a huge advantage over businesses that are not able to do so (Dosi and Nelson, 2010; Beinhocker, 2006; Nelson and Winter, 1982). Schumpeter already argued some time ago that innovation consists of “the carrying out of new combinations”, with many of these combinations depending on past knowledge or understanding of physical, social or economic properties (Schumpeter, 1934:65-66). Dosi and Nelson (2010:103) argue that the ability of firms to learn, adapt and innovate is generally highly heterogeneous, idiosyncratic and unevenly spread.

Not all the knowledge needed to conduct ongoing discovery processes is available within a single individual or organisation. Hence social infrastructure, technology, education and business networks are essential in connecting organisations into broader networks of knowledge (Hidalgo, 2015). This is where the diversity, adaptability and resilience of the network of meso organisations and their functions play a critical role.

The factors within firms and beyond firms, including the landscape of meso organisations collectively describe the technological capability of an industry, country or a sub-national region. The dynamic of how these factors influence each other is the essence of the innovation system of a country, industry (sector) or a location. The innovation system is not so much about the presence of any given organisations, as their ability to network and cooperate in disseminating and adapting knowledge.

Now to connect this concept of technological capability back to the meso organisations. Meso organisations and their functions are critical in disseminating technological knowledge in a society, industry or a region. The process by which these organisations emerge and adjust is unique and depends on the context. I am genuinely intrigued by how these institutions emerge, adapt and change over time to form modern organisations that can respond to, anticipate and adjust to structural change and patterns of economic or innovative underperformance in the economy. 

 

Sources

BEINHOCKER, E.D. 2006.  The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, MA: Harvard Business School Press.

DOSI, G. and NELSON, R.R. 2010.  Technical change and industrial dynamics as evolutionary processes. In Handbook of the Economics of Innovation. Bronwyn, H.H. and Nathan, R. (Eds.), Amsterdam: North-Holland, pp. 51-127.

HAUSMANN, R. and RODRIK, D. 2003.  Economic development as self-discovery. Journal of Development Economics, Vol. 72(2) pp. 603-633.

HIDALGO, C.S.A. 2015.  Why Information Grows: the Evolution of Order, from Atoms to Economies. New York: Basic Books.

NELSON, R.R. 2003. Physical and Social Technologies and their Evolution. Piza, Italy: Laboratory of Economics and Management, Sant’Anna School of Advanced Studies.

NELSON, R.R. and WINTER, S.G. 1982.  An Evolutionary Theory of Economic Change. Cambridge, MA: Belknap Press of Harvard University Press.

RODRIK, D. 2000.  Institutions for high-quality growth: What they are and how to acquire them. Studies in Comparative International Development, Vol. 35(3) pp. 3-31.

SCHUMPETER, J. 1934.  The Theory of Economic Development. Harvard, MA: Harvard University Press.

 

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.

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.