In search of innovation in firms

Thank you for your concerned messages about my recent whereabouts.

In the last few weeks I have involved in running a RALIS (Rapid Appraisal of Local Innovation Systems) with my colleague and friend John Lawson. This process is focused around three Institutes of Advanced Tooling in South Africa that are based in the Western Cape, Eastern Cape and Gauteng. We are looking at the innovation system around the tooling sector around these 3 centres and their key customers.

A literature search on innovation reveals that product, process and organisational innovation (a.k.a business model innovation) is commonly identified in the academic literature. Innovation does not take place in a vacuum, and a RALIS methodology allows us to better understand the determinants of innovative behaviour by firms. It is important to recognise that while tinkering about in a workshop is great fun, a lot of innovation in firms and between firms cost a lot of money and time, and the outcomes are uncertain. Therefore, we have to understand how and why firms innovate, and how the Institutes of Advanced Tooling can play a role to support innovative behaviour by firms in the South African Tooling sector.

Now many of you will know that my interest in the tooling sector goes back a long time. Firstly, the tooling sector is truly an important sector, as toolmakers make the machine tools and production equipment that is used by the manufacturing sector to produce just about everything that you see around you. Secondly, the tooling sector was one of the two sectors that I used to analyse market failures in a knowledge intensive business service market in for my PhD Thesis.

In the next few posts I will share some of the insights from this exciting process with you!

A tool used to make picture frames
A tool used to make picture frames
Tools and moulds
Tools and moulds

Understanding technology for climate change better

I received a book on climate change last year for my birthday called Ten Technologies to Save the Planet. It was a bit odd to receive this gift, as I don’t consider myself to be a tree-hugger. But my friend explained that this book will change my life and answer the many questions that I’ve been asking about how developing countries can engage in climate technology.

Chris Goodall, is a businessman and author of several books on climate change, including Ten technologies to save the planet. Ten Technologies To Save the PlanetThe book is divided into ten chapters, with each chapter focusing on a range of different technologies that are either developed or being developed to address a specific issue. For instance, there is a chapter on wind power that explains the existing technologies available today to utilise the energy created by the wind. There is also a chapter on alternative fuels that also explain and compare the different feedstock that are available for the production of biofuels.

Unfortunately the book does not deal with issues pertaining to economic development. For instance, I wonder how the global environmental and climate technology revolution that is driven by pro-environmental policies in Europe is going to put European and US manufacturers into the next “industrial revolution” while Africa is still a revolution or two behind?  I also wonder how the new climate market systems where companies can trade carbon credits can be used to get developing regions into the global market system. For instance, we have a lot of sunshine and a shortage of electricity generation capacity in South Africa. How can we solve this problem using some of the carbon credits or off-sets of European firms?

But this book is a must-read for development practitioners that are constantly confronted by dreamers who want to become rich or develop industry through investments into “amazing bio-fuel products”. It is now on the top 10 of my favourite books ever. I cannot wait to assess the next value chain for opportunities to reduce energy consumption or to identify opportunities for manufacturing firms to become competitive through better climate technology applications.

Read more about the book on Wikipedia, or visit the Carbon Commentry website where more information on Chris Goodall and issues around Carbon can be found.

I have uploaded all three the books by Chris Goodall onto the mesopartner store at Amazon.

Climate technology for competitiveness

Following the calls and e-mails I received based on the previous post, I thought it might be a good idea to expand on the idea of how climate technology could be used to increase the competitiveness of industry and of certain locales. By the way, you are welcome to share your ideas by commenting and uploading pictures on the blog directly!

What do I mean with “climate technology”? Climate technology refer to the many technologies that are now being developed out there, with well-known examples of solar geysers, solar panels and windfarms. But there are many other technologies that are being developed that range from insulations for homes and offices, to home electricity and heat generation. If you dig deeper, then you find that many industries are now becoming aware that they are using electricity to generate heat, and then using electricity to cool things down again (Have they never heard of heat conversion?). So people are generally becoming aware that if they can use less energy to produce a product, that they will ultimately be saving costs and saving the planet.

There are many forces for change other than the riots, protests and bickering at international conferences about the climate. Last week the first supermarket chain in South Africa was certified as emission free, with several large retailers like  Massmart, Woolworths and Marks and Spencer in the process of assessing their emission footprint. These retail chains are now starting to assess how their COMPLETE supply chains are dealing with the environment.They are not only looking at their consumer goods, but also at their total operation. This is just one way that value chain promotion and climate technology is related.

What do I mean with climate technology as a means to increase the competitiveness of industries? Let me first create a picture of the South African manufacturing environment. In general, our manufacturers are losing out to more productive and lower cost Asian producers. But the South African manufacturing industry is still world class in many fields and in many advanced production methods, especially in shorter niche production runs. Furthermore, despite the brain drain that has affected the economy, South Africa still has a rich expert base in diverse technological fields ranging from electronics, metals, to chemicals and all the way to nuclear research. Compared to many other developing countries there is a rich institutional layer (ranging from research institutes to specialised tertiary institutions) that is supporting the private sector.

I believe that we should be actively mobilising the South African manufacturing sector into climate technology, as the international pressure on industries, government and consumers will only increase in the future. Many of these different users of technology are going to start making decisions not only the utility of the product that they are purchasing, but they will increasingly assess the environmental footprint of the product. Furthermore, industries that adopt climate friendly technology are reducing costs in new ways, increasing their cost and brand competitiveness.

Locales or places that start to promote climate technology might be able to get a headstart on other regions, and there are many places where the scale of environmental or climate pollution could actually be used to start completely new climate technology research and development capacity. I can think of the very sensitive waterlands in the Chrissiesmeer region in Mpumalanga province in South Africa that is under threat from coal mining as an example of an area that could provide a critical incentive for the development of a new industry of climate technology producers and service providers (see feature on the Carte Blanche investigative journalism programme).  The demand for this kind of technology is there, yet the environmental lobby is still trying in vain to fight industry.

But there are several obstacles, and the first is the limited economies of scale. If the cost of researching and developing new technology is set aside, then costs of finding potential customers (search costs)  or applications for new technology is high, and the scale of return is uncertain. Therefore investors are hesitant to enter many market segments. With Southern Africa’s tendency to perform well in small scale and specialised production the risk is lower, if only the producers could identify the right market opportunities. But government and development practitioners would have to play a critical role in supporting this new marketplace, and often public funds is needed to get this kind of initiative off the ground. The current policy obsession with benificiation and final product manufacturing is in my view misguided, and should focus on the strength of the South African industry to develop advanced niche technologies.

Secondly, I get the feeling that many people think that this interest in climate technology and the environment is a fad that will go away. Help, any ideas out there?

Lastly, as development practitioners we must get business, governments and households to understand that using new climate friendly technology save costs for the society on some new fronts. There is more to it than just saving the planet (although that is a good enough reason), it could also mean increasing the cost competitiveness of a company. It could mean smarter ways of doing thing, like finding ways to generate electricity and heat at a home or a business, instead of digging up roads and building coal fired power stations.

So when you conduct your next value chain assessment, ask yourself how the different links in the chain could benefit from technology that is climate friendly. Look at places where heat, steam, chemicals or other byprodycts are generated that may be of value to somebody else.