Instigating innovation in traditional industries

Originally published in January 2016, revised in March 2018

The average manufacturer in a developing country often grapples with the notion of innovation. That is why such industries are often called “traditional“, although almost all industries will have one or two outliers. While governments, such as the South African government, offer incentives to stimulate innovation, most manufacturers do not identify with the term “innovation” the way governments use it. For instance, when governments use the word “innovation” they often mean “invention“, in other words something that can be protected, copyrighted and owned (see more about the differences between innovation and invention here). While I understand the argument for patenting and protection, I think this narrow definition of innovation is inhibiting many industries from increasing their productivity and competitiveness by copying what works elsewhere (this is just a process of catching up). It also fails to recognize that in many value chains the manufacturers themselves make components or sub-systems that go into overarching architectures (defined by standards, compliance, specifications), so their design authority is limited in scope.

Innovation_invention

Here is a list of synonyms from thesaurus.com for innovation that I have assessed to see how enterprises might understand or react to these words:

  • Modernization – many enterprises dream about this but often do not have the financial means nor the organizational capability to pull it off (one day, some other time)
  • Contraption – many innovations and most inventions result in one of these. You can see them standing in  corners in most factories
  • Mutation, addition, alteration, modification – this is what most innovations in traditional industry would look like. They are doing this all the time as their machines get older, but this behaviour is mostly not recognized nor speeded up.
  • Newness, departure, deviation – the bolder enterprises with more financial and organizational capability might try these, but it takes capital to maintain.

Most people understand innovation as an outcome, but the word is a noun that implies change and novelty. It is about a shift, even if it is often incremental. The reason why so many of our enterprises in South Africa are not regarded as innovative is because they struggle (or perhaps do not have the organizational capability) to manage several simultaneous change processes. As Tim Kastelle posted some years ago, change is simple but not easy. Although this is often described as a technology problem it is really a management problem (see some older posts here). I would go even further and state that in many industries the margins are so narrow that even those enterprises that have a reasonable management structure would struggle to finance many innovations at the same time.

However, in my experience of having visited more than 50 manufacturers every year since 2009, I am always stunned and awed by how ingenious these companies can be. They keep old machines running, often modifying them on the fly. They operate with a fluctuating and unreliable electricity supply, inconsistent water pressure and often hardly any technical support. What policy makers often do not realize is that in developing countries it takes a lot of management time and capacity just to keep the throughput going. The time and effort to go and explore “change” beyond what is necessary in the short to medium term is very costly. The costs of evaluating new ideas, new technologies, new markets and better suppliers are all far greater in developing countries than in developed countries. Yet at the heart of innovation is the ability to combine different inputs, different knowledge pools, and different supporting capabilities with different market possibilities.

There are two implications for innovation promotion practitioners.

  1. The process of instigating innovation must start with recognizing how companies are innovating NOW. How are they modifying their processes (and products), and how much does it cost? What are the risks that are keeping them from introducing more novelty? Perhaps they could use the Horizons of Innovation to create a portfolio of innovation (change) activities that can be identified at the enterprise or industry levels.
  2. It is hard if not impossible for different manufacturers in most countries to figure out what others are struggling to change at a technological level. Use your ability to move between enterprises to identify opportunities to turn individual company costs into public costs (this is often cheaper). Do not take the innovation away from enterprises, but use your meso level technology institutions to try and accelerate the learning or to reduce the costs of trying various alternatives. Be very open with the results to enable learning and dissemination of ideas.

The process of instigating innovation must start with recognizing where manufacturers are naturally trying to change, just as a change process in an organization must start with understanding current behaviour, culture and context. Somehow innovation has become so associated with contraptions and narrow views of technology that the body of knowledge of organizational development and management of change have been left behind.

Four functions of innovation and technology management

Originally published in November, 2015, revised in March 2018

I would like to continue the “Instigating Innovation” series (see opening post herewhere to start and the post about culture here). The idea behind this series is that I explain innovation management concepts that can be used by both enterprises and technology transfer and industry support institutions.

To recapitulate: I believe that many industries are struggling to modernise because their supporting institutions use completely different frameworks to manage innovation (or perhaps the supporting institutions make their choices as randomly as enterprises do). One of the first concepts that a tech transfer institute or industry support organisation should transfer to enterprises is “how to manage innovation and technology”. Just because there is an engineer or an MBA/PhD in a company does not guarantee effective or creative management of innovation and technology.

Today I shall focus on the four broad functions that must be managed strategically in every enterprise and supporting institution. Even if someone in the organisation has the job title of Innovation Manager or Technology Manager, these functions should still be visible throughout the organisation. In other words, this is not somebody’s job, but it helps if somebody coordinates these activities.

The four functions agreed by most scholars and innovation experts can be summarised roughly as:

  1. Searching and scanning for new ideas and technologies, both within and beyond the organisation. This includes looking at technologies that could affect the clients of the organisation, and technologies that could disrupt markets and industries.
  2. Comparingselecting and imagining how different technologies could impact the organisation, its markets and its own innovation agenda.
  3. Next comes integrating or deploying the technology or innovation into the organisation. This includes adjusting processes and systems, scaling up implementation, and project managing the whole change process.
  4. The last step is often overlooked, but new technology and innovation often make new ideas, innovations and improvements possible. I call this last step exploiting the benefits of a new technology or idea. This could involve leveraging some of the additional benefits or features of a technology, perhaps by creating a new business unit focused on an adjacent market or particular offering.

When I visit institutions, organisations and companies, I always ask “who is thinking about change taking place beyond your industry or key technology?”. I cannot tell you how often I hear that “the CEO” or “the production manager” are on top of new developments and will be attending a tech fair next year. How can this huge responsibility fall on the shoulders of one or two people, who are at the same time biased towards the current strategy which favours justifying past (sunk) investments? Or if you ask “How did you choose between two technologies?”  you will be surprised how little time was spent considering new business opportunities, or how few companies asked for on-site demonstrations or samples from their preferred technology providers.

I will refrain from being too critical of technology transfer institutions and industry-supporting organisations, except to say that these organisations should be a prime example to industry of how to scan, evaluate, compare and integrate new ideas and technologies. We don’t just want to see the shiny machines and neat facilities, we want to understand how you arrived at your decisions, and how you made the best of your investments after implementing the change. Furthermore, industry wants to know what’s next, or what’s beyond their vision and how it may affect their industry.

To bring it all together, the technological upgrading of industries is plagued by many different market failures. These failures include the tendency NOT to invest due to high research costs, due to fears about making the wrong choices, or because so many decisions and changes must be made at the same time – this while the business continues, markets fluctuate, and technologies change faster and faster. Companies (and institutions) cannot afford just to kick start innovation management immediately before making a change (or when forced by external forces to make a decision). These functions must be managed strategically on a continuous basis, both at the level of top management and within the different functions of the organisation. Both companies and their supporting institutions need to manage innovation and technology, not only from an operational perspective (striving for continuous improvement, etc.) but also from a strategic point of view.

 

If the culture cannot change then the business cannot change

Originally published in August 2015, revised in January 2018

I received many comments and tweets about the previous post. Thank you for ideas and comments

Some agreed that innovation is the result of culture. Some said that culture is not only created by management, but also by staff. For instance, the admin pool in a traditional engineering company can be very innovative (and creative) even if the rest of the business is stuck in the 1980s.

Somebody told me that creating an innovative culture is in itself a chicken-egg (low equilibrium) situation, because for a leader to create (or enable) an innovative culture takes innovation in itself. You can see where this is going.

Then I discovered a recent cartoon in my inbox by Hugh Macleod of Gapingvoid fame. This cartoon says it all.

An organization that cannot change its culture (due to too rigid systems, due to lack of management capability, due to its people) has become trapped in time. While some organizations may exist like this due to sheer momentum, due to protection (by law), by continuous funding, or for whatever reason, will struggle to adapt to external change. These organizations are not resilient and they are at the mercy of external supporters (a.k.a clients, benefactors, funders or shareholders).

I was also asked how some organizations can still innovative despite a poor innovation culture. Again, it is of course possible to replace a machine, or for a few people in an organization to design something brilliant, or for a new process to emerge. Of course it is possible. But it takes much more energy, determination of a few, and some really tenacity to be innovative in an un-innovative (what is the right word here?) culture.

I am sure more comments will come.

Cheers, Shawn

I appreciated the comments received by e-mail, but wonder why people are not posting comments to this article? Is the WordPress registration process to difficult? Please let me know. And keep those comments coming!

Innovation as cultural as opposed to innovation as a technique or function

Originally published in August 2015, revised in January 2018

Reflecting on the correspondence I have received after my previous post and recent training sessions with manufacturers, I have come to realise that people are looking for tools and tricks to encourage innovation in their workplaces. Sometimes it is actually not even about innovation, but about making up for poor past decisions, such as not investing in technology or market development when they should have. Others think of innovation as a function or as a management tool that can be standardised into a job description or an area of responsibility. While this is possible in some contexts, I don’t find this approach to innovation of much use in the smaller and medium-sized manufacturing firms and the research/technology institution space in which I am working.

For me, innovation is firstly a value, a perspective of how organisations should be. When management says, “We are an innovative organisation “or” We want an innovative culture “or” Our reputation is that we are innovative”, then we can move to tools, portfolios, tricks and tweaks (those things that people in innovation functions must attend to). Many textbooks, articles and blog sites on innovation and technology management are then useful. Actually the challenge is to decide which of the bucket loads of advice to use, and consultants such as I typically help organisations to choose a few tools and provide guidance on how to use them fully and consistently. I would dare to say that it is relatively easy to help companies that are already innovative to become more innovative.

 

What really intrigues me is those organisations that do not think of themselves as being innovative, or that are from industries considered to be traditional and not innovative. Perhaps they used to be innovative, or perhaps they are innovative in some areas but not in others. Perhaps they had one or two tricks in the past that have now become irrelevant. These could be extremely competent organisations, such as a university department, a manufacturer of highly specialised industrial equipment or an organisation that simply designs and manufacturers exactly what its customers order. Even if the outputs of these organisations can be described as ‘innovative’, they do not necessarily have innovative cultures that are constantly creating novel ideas, processes and markets. In my experience these organisations have brilliant technical people, but management is often not able to harness the genius, experience or creativity of its people. The main reason for this is not a lack of technique, tools or tricks, but the lack of an innovative culture, leading to a lack of innovative purpose.

These organisations are trapped. They are equipped for the past, and they are paralysed by all the choices they have to make for the future. For management, it feels as though everything it has in place is inadequate and needs equal attention, ranging from attracting staff with better or different qualifications to finding new markets, developing new technological capability, sorting out cash flow and capital expenditure, and addressing succession planning.

Improving the innovation culture of an organisation is a complex issue. It is not about tasks, functions or tools, but about changing relations between people within and beyond the boundaries of the organisation. Innovation in these organisations is a sideshow, a project, whereas it really needs to be central to the business strategy, a different way of looking at the world.

When working with organisations that must improve their innovative culture, interventions like motivational speeches and optimistic visions of the future are not useful and could in fact deepen the crises facing management. Nurturing a culture of innovation goes far beyond establishing or refining innovation management functions. It is a strategic issue that is initiated by top management, but that will soon spill over into every area of the organisation, hence it cannot be driven by a management function called ‘innovation’.

Improving the innovation culture process starts with connecting management back with its people. It starts in the present, the now, not with future scenarios, not with using innovation techniques and better analytical tools, and in most cases not with some or other management fad. It goes beyond trying to improve products, processes or business areas, beyond gaps in management’s capability. It must look at the relations between people, between what people know and can do now (or knew and could do in the recent past), and the potential people see to make small improvements. It is essentially about many dialogues happening throughout and even beyond the organisation. After cultivating dialogue, management needs to empower the organisation’s people to allocate resources to activities that strengthen the learning culture, that turn even small improvement projects into processes that broaden thinking, deepen learning and motivate people to think beyond just their specific tasks.

When management has the courage to decide to improve its culture of innovation it starts a process that cannot be described as incremental improvement, as that sounds too directed. It is rather like a deepening, or an awakening, where employees are inspired to contribute, and management is more aware of what it can do to enable its employees to become more innovative on all fronts. Of course, management faces the risk that outdated management approaches that do not seek to empower employees to be creative will be exposed, and some tough decisions will have to be made.

To nurture an innovative culture requires innovation in itself. It requires management at different levels to rethink its roles from being directive to being enabling, from being top down to being more engaged with its teams.

Instigating innovation: Where to start

Originally published in 2015, revised in February 2018

I am currently focused on strengthening the manufacturing sector. I am speaking more and more at meetings and events, in boardrooms and to post-graduate students about innovation. In this increasingly engineering-minded world people frequently ask me for tips on how to get innovation going.

Some of the ideas people put forward are:

“How about an idea box?”
“How about canvassing ideas for a new product design from our customers?”
“How about rewarding our engineers with a profit share if they design a new product?”

However, the truth is that many manufacturing enterprises, especially the smaller ones, are too narrowly sliced into specific functions. They are mimicking large organisations and by doing so are giving up any flexibility and resilience that they might have had. Designers design, manufacturers manufacture and salesmen sell. This functional division of their hierarchy makes information flows about potential improvements, new market opportunities and some old tricks that could become useful again very difficult. The cost of coordination in these enterprises is very high. In these silo-based organisations the cost of finding information, new signals and new ideas from outside the organisations is extremely high, and in general they struggle to learn. Why I mention them is that innovation is something that most organisations are already doing, they just do not recognise it as such. Innovation is lost within functions, or is overlooked because a project is focusing on addressing some or other need. Every improvement project could also be used to change or improve the culture of innovation, to deepen the use of knowledge and to increase capabilities and options for an uncertain future.

A second problem is that most smaller manufacturers are mainly focused on product innovation. Which does not mean being focused on knocking the socks off their customers with frequent improvements or brilliant designs. Unfortunately, many of the more traditional manufacturers are focused on how to reduce the price or how to sort out quality issues. This is actually a kind of process improvement, but a very narrow one. The limitation of this incremental approach is that you can at best only grow and develop as fast as your customers can articulate what they want. Competitors or substitutes can also upset market relations by coming up with novel solutions that an incremental approach struggles to generate.

A third problem is that innovation is only carried out when customers demand it. It is passive. It functions in bursts to get things right, and then it settles into a problem-solving mode until the next customer makes some unreasonable demands. One should be grateful when clients give you a piece of their mind, but this is still far too passive to my way of thinking.

What many manufacturers lack, especially those in the more traditional sectors such as metals and engineering, is a focused effort by top management to build a culture of innovation that is actively trying to find product, process and business model improvements. The effort must be focused internally in order to constantly rethink the business and its core processes, and at the same time it must be focused externally on what customers and competitors are doing. The really good companies are also looking beyond current markets and competitors at new technologies and how they might shape the future.

Thus far I have addressed the business perspective. However, research organisations, technology transfer centres and industry support centres can also become trapped in a low-innovation culture.

I am currently working with a few industry groups and research and technology centres to find out how these organisations can move beyond the “catching up” and responding to change modes towards anticipating what will come next. This sounds perfectly simple, but by merely mobilising more and more people in the organization to search for what’s next has already yielded amazing results in a short time. Perhaps I am being over-optimistic, but I can already sense the innovation culture change in these organisations as more and more people become involved in searching for possibilities.

Here’s an apt quote attributed to William Gibson: “The future is already here – it’s just not evenly distributed”.

The first kind of search is to get more people involved in searching for what is already present within the organisation, but is not recognised or is not being used to transform the organisation. The second kind of search is to go beyond the organisation in related and unrelated markets and technologies. Take trends such as the global shift to automation, or the new developments in artificial intelligence and play with these within your organisation. Wonder out loud with your people about what this might mean for the organisation, for clients, for suppliers. How might these technologies or trends influence their investment decisions, their viability or their business models? Use these vague concepts to rethink the organisation, its networks, its technologies and systems.

That is what I call instigating innovation, when the dialogue led by the leadership mobilises more and more people within and outside the organisations to start thinking creatively, connectedly and in new ways about the future and the present. Lay a strong foundation for innovation by getting more people to think, imagine, connect ideas and improve.

New series: Instigating Innovation

I have been developing a new capacity building method and training approach that brings together my work in innovation systems promotion  and my work on improving technology and innovation management. I call it “Instigating Innovation”.

I chose “instigating” because it has a more positive ring to it than provocation or incitement. While it is a noun with mainly a positive tone, it is a bit more aggressive than support, enable or encourage or even stimulating. I have been referred to in my past as an instigator of change so I thought this was a good idea.

Why was this effort firstly necessary and secondary so rewarding?

My work on innovation systems is mainly aimed at assisting meso-organizations such as technology transfer centres, research centres and universities to be more responsive to the needs of the private sector. While it only takes a few interviews by a senior decision maker from one of these institutions to a few leading enterprises to get the organization to improve its offering to the private sector, it does not solve the problem that these institutions often needs a continuous process of innovation itself. So while they can respond to the needs of the enterprises (for instance by launching a new service, or making a key technology available, etc), they often are not able to innovate constantly in order to anticipate what they private sector might need in the future.

With my other hat on, working in the private sector to improve the management of technology and innovation is focused on helping individual and on rare occasions, groups or networks of enterprises to formalize or improve their management of innovation. Here my challenge is that most enterprises innovate by accident, or have elements of an innovation management approach in place without knowing it. But it is not systematic nor is it consistent.

So both supporting institutions and enterprises lack some very basic frameworks to focus their existing development and learning processes to ensure not only short term results (new products & services, process improvements, cost reduction, etc) but to also ensure longer term success (playing in the right markets, selecting the right technologies, investing in the right kind of knowledge, partnering with the right people, etc). Furthermore, most enterprises and supporting institutions have something else in common: they often face resource constraints with the most versatile of their staff being involved in problem solving and not thinking about the future and what may be possible sometime down the line.

I set aside most of March and had great fun reading through my collection of articles, books, reports of past missions, and speaking to entrepreneurs and development practitioners I trust. Based on this investigation I decided on the following criteria for instruments to include in the Instigating Innovation module:

  1. Each instrument or concept must be relevant to both enterprises and meso-level organizations05 building innovative capacity small
  2. Each instrument must provide a very simple framework that can be illustrated on a flipchart
  3. The simple framework must be usable as a workshop format that allows people to reorganize or explore their current and future practices
  4. The frameworks must be scalable, both in depth (allowing pointers for a deep dive into an issue) and in width (useable for a product, issue, portfolio or the strategy of the organization as a whole).
  5. Lastly, I did not want to be the consultant with a project, I want to be the facilitator that enables change and that builds long term sustainability into the organizations that I work with.

This was a very rewarding exercise. Not only do I love reading about innovation, change and technology, I love finding better ways to explain these concepts. It was also great to find a way to connect my work on innovation systems, which often seems abstract, with the tough decisions that the enterprises that I work with must confront and address. I tend to work in the more technical domains dominated by academics, engineers, scientists and manufacturers, so finding a simple yet convincing way to add value to what these clever people do was important.

I will in the next few posts reveal a little bit more of the tools I selected and how it can be used.

Thank you for the EDA team in Bosnia and Herzegovina who motivated me to turn this idea into a capacity building format and who agreed that I try “Instigating Innovation” on their team during my visit to Banja Luka in May 2015!

Instigating Innovation in Banja Luka with the team from EDA
Instigating Innovation in Banja Luka with the team from EDA

Post 5: Various regulatory and environmental factors that shape the behaviour of enterprises

This is the 5th post on building technological capability. I have written many posts before on the environment in which innovation and technological capability development takes place, so this will only be a short summary.

In this perspective, we investigate how various regulatory and environmental factors shape the behaviour of enterprises. It combines the meta level (sociocultural) and macro level (generic framework conditions) of the systemic competitiveness framework (Esser et al., 1995).

Specifically, we seek to establish whether or not firms have to innovate through the incentives created in the broader environment. Firms’ innovative efforts are not usually the result of enthusiasm for innovation but the outcome of necessity – firms have to innovate because their competitors are innovating too, and because they will get forced out of the market if they do not innovate. In turn, this means that firms that are experiencing little competitive pressure will often not be inclined to put much effort into innovation, which is perfectly rational as innovation always involves cost and risk. It is important to note that the enabling environment is not only a function of different kinds of government policy, it is also affected by private sector policies such as decisions to collectively invest, collude and compete.

While some of these issues can be identified through desktop research, interviews with key industry leaders or experts will quickly reveal which socioeconomic factors affect the investment and experimentation appetite of the business sector.

A second dimension relates to the incentives for other actors in the system to support the development of technological capability in formal and informal institutions. For instance, national-level policies direct universities to offer particular kinds of courses, but do they provide the incentive for academics to develop teaching or research programmes that improves the capacity of enterprises or innovators?

Hint: I have learned that when interviewing entrepreneurs to understand their perspective on the innovation system (a.k.a the technological system) around them, never to start with the regulatory environment and the broader environmental factors. You will hear a million reasons why the whole system is conspiring against entrepreneurs to be competitive, innovative and optimistic.

Gaining a deeper understanding of an innovation system and how to build technological capability is not rocket science. I propose that you start with understanding the enterprise perspective on collaboration on competition first (post 1 and 2 in this series), then continue to better understand the relationship between formal education and the industry (post 3), then the creators and disseminators of informal and technical knowledge (post 2) and only then ask about the regulatory systems and the environmental factors.

In the end it is not about the presence of entrepreneurs, institutions that enable knowledge to flow, institutions that address persistent market failure, or an supportive framework conditions. While all of these matters, it is about how they interact. A checklist approach will not work. Having a university or a few innovative enterprises does not guarantee that a society or community has institutionalized technological capability. Technological capability is about the dynamism between these different factors, it is about relationships, spill-overs and trust. These are only created over time as a result of positive interaction between individuals, organizations, both formally and informally.

Post 4: Technological Institutions that disseminate knowledge

This is the fourth post in this series about building technological capability.

In 2011 I explained how we define technology in a broad way. This definition looks beyond hardware to include knowledge and organization of the different elements. For instance, if a company decides to achieve a new standard of compliance, that is seen as a technology. This technology involves the way processes are organized, the knowledge of how to achieve and maintain this new standard, and the physical and knowledge infrastructure involved in the enterprise.

Firms depend on a variety of public and private technology institutions in order to compete, innovate and grow. Examples range from access to basic research all the way to access to technical problem solving. The measurement, standards, testing and quality assurance (MSTQ) of a country is also assessed from this perspective. The density of interaction between various technology institutions, as well as the interaction between the firms and the technology institutions, is an important factor in the innovation trends in a sector. Various kinds of technical services such as knowledge-intensive business services play an important role in knowledge spill-overs between different firms.

We call all these carriers of technological knowledge “technological institutions”. While some of these institutions are publicly funded (like a research centre, national standards organization or an start-up incubator), some could also be privately funded (like a supply chain development office at a multinational, a specialized equipment provider that provides training and technical support, etc). Specialist and technical service providers, management consultants, researchers and manufacturing extension experts all fall under this broad category. Some charge full service, others provide public goods, but all disseminate knowledge to enterprises.

An organization like a Technology Transfer Centre hosted by a University is located between an Education Institution (post 3 in this series) and a Technological Institution, and often it behaves like both. The Technology Stations Programme in South Africa is an example of an institution designed to fit the space between technological intermediaries, universities and enterprises.

It is noticeable that in many developing countries, the technological institutions that disseminate technological knowledge and that makes scarce technology available to industry are weak or missing. While some stronger enterprises may require and be able to absorb more technological knowledge, the domestic institutions often provide generic services that do not meet the expectations of these leading enterprises. In middle income countries, leading enterprises may simply disengage from the domestic technological institutions and engage with service provided in other countries, further reducing the scale of knowledge dissemination and weakening the system further. This leads to a situation where most enterprises in the country only have access to generic and low-value services, while leading companies and multinationals connect with global sources of knowledge and technology.

You may be surprised to find out which organizations are identified by enterprises if you asked them where they receive technological and specialized knowledge from. I typically ask “who do you turn to when you get stuck?”. In most cases, equipment suppliers, engineers employed by larger companies, or a junior lecturer with high levels of enthusiasm are identified as the most important sources of knowledge or technological advice. I have found this same pattern in many countries, the most important carriers of knowledge are not formal organizations, but individuals.

The result is that the cost of finding knowledge, or gaining access to scarce technology is high, and that those with broader networks are most likely able to gain access to this important resource while those that depend on public goods or generally available information are unable to access the necessary information.

I will explain in a future post how we can diagnose and improve the domain of technological institutions in order to improve the technological capability of enterprises.

Series: Building technological capability

In the next few posts I will focus on building technological capability in developing countries. I am specifically thinking of Sub-Saharan Africa as I write these posts, but I am sure that some of the ideas will be relevant to my colleagues working in other parts of the world.

What do I mean with technological capability? We see technological capability as going beyond what firms can do, to what societies or parts of society can use or do with technology. It is a capability that is manifest in products and processes, but that arise from a capacity to match a problem or opportunity with technological systems, sub-systems or combinations of systems. This means that technological capability is not only about technological skills (for instance in knowing how to combine different technologies, or what the latest advances are), but also has business and networking skills to identify and recognize opportunities, discover what solutions can fit the context and constraints (like performance specifications, prices, volumes) and how to organize supply, delivery and maintenance. It thus combines all the elements of innovation including product knowledge (understanding components, sub-systems, architectures), process knowledge as well as business knowledge.

To build technological capability in a country or an industry is the result of an ongoing search process where networks of businesses, academia and government officials search for what is possible at reasonable value and margins, what can and what cannot be done within the local context. What can and cannot be done in the local context is a complex issue that is affected by four factors that I will briefly outline below. It is not only an engineering design problem, and it is not only about products and patents. It is not about a lack of knowledge or a lack of PhDs and engineering students. There are several things that must be worked on at the same time but a whole range of actors working towards different goals.

In many instances the public sector is more eager to develop domestic technological capability than the private sector itself. The private sector in Sub Saharan Africa is in most countries fragmented, and search costs as well as coordination costs at the level of products, processes and networks are very high. That is why those that can afford to take risks and that can afford to take a long term view will most certainly benefit disproportionately to those who are driven by short term profits. For instance, local manufacturers of components that invest very little to nothing in R&D cannot be expected to compete in the long run with international or regional competitors who are investing in R&D.

My late friend and business partner, Jorg Meyer-Stamer argued that there are four pillars [1] that technological capability is built on:

  1. The skill of the producers to imitate and innovate at product, process and business model levels. This is largely dependent on pressure to compete as well as pressure to collaborate with each other;
  2. The economic, political, administrative and legal framework conditions, which determine whether incentives to develop technological capability exist. In the past, it was often not recognised that these incentives do not exist in many developing countries, especially if an import substitution policy relieved companies of all pressure to be competitive or to innovate;
  3. Direct support by technology-oriented state institutions or specific types of knowledge intensive service companies – depending on the given development level, the competition situation and the characteristics of a technology branch in the given country. These organizations disseminate technical and expert knowledge between different actors, knowledge domains and industries and play a critical role in the use of and application of tacit and explicit knowledge;
  4. Indirect support by the public and private educational system; in addition to a sound basic education it is important that technical training of a suitable quantity and quality is available at the secondary-school level and also in the universities. The private sector often plays a role in short term training aimed at particular technology applications. Overall the responsiveness of the education sector in identifying and responding to changes in how technology is applied, developed or used in society.

The close interaction between these four pillars creates technological capability. Thus technological capability differs between countries and even within countries because the context differs. A single firm may in the short to medium term manage to get a sophisticated product into the market, but to sustain its position it will sooner or later need to tap into the education system, the knowledge networks of intermediaries and technology experts, or in supplier networks. Technological capability is not measured at the level of patents or products developed (this does not measure the system, it measures a single firm), but is best measured at the level of regional or international competitiveness of industries, entrance of new domestic and international competitors, and exports.

What developing countries fail to achieve is to crowd in many firms and industry networks by creating public goods that intensifies competition and that force firms to collaborate on critical issues like skills development, the development of industry specific infrastructure, etc. Despite being a big buyer in many countries, procurement patterns, priorities and performance criteria are not available to domestic producers (until it is too late). The education sector is mainly funded to provide basic and undergraduate education along strict disciplines, not to constantly upgrade the existing workforce to cope with technological shifts and the integration of different knowledge bases. Universities are funded to do research at a product or process level, not to do applied research that will modernize industries. The importance of various networks of technological intermediaries and knowledge providers are overlooked.

The private sector must also shoulder some blame. Industry bodies are often mainly focused on advocating for favorable conditions to protect existing investment or interests, not on increasing local supplier networks or building industries. Firms would often rather collude than collaborate. Industry associations are typically organized via traditional sub-sector structures, while global production is becoming more integrated, multi-disciplinary and application orientated.

In closing, technological capability is not only created through policy. It is not created through industrial or innovation policy, although it helps. It is not created by individual champion firms, although this certainly makes it easier. Technological capability is built as a result of an innovation system where the context matters. Firms able to manage their own internal technology and innovation are essential, but these typical arise out of public funded investment into technology intermediaries, management capability and the overall performance in the education sector. It is not possible to increase the technological capability of a group of firms in a particular industry without looking at the broader context where the four areas outlined earlier shape the outcomes in the medium to long term.

From my experience in assisting to promote technological capability in developing countries an ongoing facilitation effort funded by the public sector AND the private sector is needed to broker collaboration, but also to look at ways that local demand can be met by the broader system in the long term. In many countries and industries the best host for such a process is a technology intermediary attached to an university or a development programme, with a mandate to build networks around local opportunities that is not only about engineering, but also about reducing the costs of finding opportunities, suppliers and suitable technologies.

 

Notes

1 – These four pillars later became the foundation of the RALIS methodology that we use to diagnose and improve innovation systems.

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.