The last few days I have been a participant in a conference about transformative innovation policy. It was quite a treat to be a participant in an event and not to be a moderator or speaker. The Transformative Innovation Policy Consortium is an initiative of the Science Policy Research Unit (SPRU) at the University of Sussex. Many other governments, research alliances and academics are part of this initiative.
It was great to hear the voices of the gurus whose material I usually only get to read. A core concept of the initiative is the idea that there are 3 frames of innovation policy (Schot & Steinmuller, 2016). In my vocabulary a frame is the punctuated equilibrium that exists between paradigm shifts. The first frame of innovation policy was mainly about R&D and regulation. The second frame shifted towards national systems of innovation and entrepreneurship. The third and most recent shift is towards transformative innovation policy. I will not go into the description of the frames, I want to focus on one thought that struck me during the conference, and it is about the organizations (or agents) that are supposed to help on this process of transformative innovation.
Economic change is a complex process. Transformative innovation tries to achieve a particular (broad) kind of change in a society. A wide range of organizations in the science, technology and innovation domain would have to collaborate and even change themselves to enable or promote transformative change. While some changes may have to do with technology development, adaptation or other kinds of innovation, other changes would be more about social technologies like improving cross silo collaboration, mobilizing a broader range of civil actors into innovation activities, experimenting with policy and learning by doing. However, many these organizations themselves are often very rigid, hierarchical, and to some degree clumsy, especially in developing countries. What I mean with clumsy is that research requires a degree of planning, organizations need to coordinate across disciplines and themes, and that governance and oversight remains necessary and important. So when there is a sudden shift these organizations struggle to change quickly. They are rigid, and many of their internal systems and the predominant organizations culture are designed to withstand distraction, and to plow straight on through obstacles, resistance and confusion. So to a large extent, many of these organizations are primed to ignore weak signals, soft voices and serendipity.
These kinds of organizations are my clients. So let me not complain too much about their ability to make sense of what is going on around them. The ideas shared in this conference would inspire many of my clients and friends working in the Department of Science and Technology in South Africa, and the network of academics, researchers and technology centers we have here. I am excited about many of the concepts, but also weary that there is little space to fail or time to lose due to political and societal pressure to show results.
Every year our family travel together to Germany for a company meeting, and to host the annual Summer Academy. Here we have learned how in Germany, especially in Berlin, the community can reflect on the past in order to participate in the present and better navigate the future. Our family is always struck by the many museums and events that looks not only at German history, but also mistakes and darker periods in Germany’s past.
One such event is the annual Media and Light display that is projected against the facade of the Marie-Elisabeth-Lüders-Haus over the river Spree. This thirty-minute installation is entitled “Dem deutschen Volke – Eine parlamentarische Spurensuche. Vom Reichstag zum Bundestag” (To the German People – A journey through parliamentary history from the Reichstag to the Bundestag). It shows the history of parliamentarianism in Germany and of the Reichstag Building in Berlin. This journey through the past 130 years shows how the Reichstag building is used and has always been a reflection of the state of German democracy.’ The official site of this show is hosted on the Bundestag website. The show is 30 minutes long and is repeated every evening from mid May to Mid September
Imagine we could do this in South Africa? Would that not allow us to have a more meaningful discussion of our past, to help us understand how we are all shaped by decisions, actions and influences from the past? What would the Union Buildings tell us?
This display is special to our family for several reasons:
there are several light sources. Video footage, shadows and colors are projected onto several buildings, while music from Paul van Dyk (Wir Sind Wir) and Die Toten Hosen (Tage Wie Diese) fades in and out around the narrative. When the narrator talks about the wall, a spiked fence shadow is projected over one of the facades (see picture above), while later the whole building is behind barbed fence.
the sound is amazing, even if the narrative is in German.
the people we take with us are touched by the footage, even if they don’t understand a word. These are typically participants in the Mesopartner Summer Academy from many developing countries where they too tend to sweep past decisions under the carpet.
this display also reveals something about the German culture that we admire, the ability to debate, discuss and deliberate in a very transparent way. Even if it is about taboo decisions.
we get the idea of one nation, even there are different opinions. Even if this is expressed in German.
Head over to Youtube. Here is one link to a show recorded in 2016. Here is another link. Alternatively, search for Film- und Lichtprojektion im Parlamentsviertel.
If you have seen the show, share your thoughts, your photo or your impressions. Some German translations of some of the text would also be welcome!
In the last few months I have been going back to my change and organizational development roots. I have been on a journey to reconnect my more recent insights on systemic change and innovation systems with my earlier experience in process consulting, supporting organizations to change. I have rediscovered many old ideas that are still extremely valid and useful. I even have to wonder how I forgot some things that once were so important to me. Also, some things that did not seem all that important 10 years ago now seems far more important, but I digress.
Let me share an example of how a more recent insight about innovation became more powerful when I looked at it from an organizational development perspective. In my training work on innovation systems, I often lay a foundation with some simple concepts. One such building block is the idea that there are three kinds of innovation: product, process and business model. Product innovation is the easiest (you need to mainly be creative, know something about either a key technology or a key market), with process and business model innovation often being more difficult because you might need more abstract thinking capability, technical and others skills from beyond your organizations as well as a creative imagination. Easy enough, all the participants nod their heads in agreement and indicate that I can move on. Yet, back at the office this was not so simple.
I noticed that a few of my favorite technology and R & D centres here in South Africa were struggling with this very simple idea. They were mainly focused on product innovation, arguing that their behavior is shaped by the incentives created by public grants that supported them to develop products for wanna-be entrepreneurs (I wrote about the importance of technological capability here). It was convenient to blame the public grants for this incentive, and everybody knew that the results less than ideal (many of these wanna-be entrepreneurs did not stand a chance in the market as they lack technological capability and or business experience). Thus the Status Quo was maintained with everybody talking about changing but not really making the shift. Until the easy funding became less easy. It was at this point that some management teams realized just how entrenched the culture of product innovation was, and how dependent these organizations have become on public grants.
So I had the task of coaching a team to think through this change process, to reduce their dependence on public funding by helping their team to shift to process innovation from a mainly product innovation focus. This meant that instead of designing, prototyping and manufacturing a particular product for a wanna-be entrepreneur, they shift their attention to helping existing companies or entrepreneurs with a track record improve, enhance or expand their process technologies so that they can themselves develop, prototype and manufacture new products.
Interestingly enough, the technological capabilities for product innovation and process innovation for this particular engineering group have a lot in common. It is mainly the internal processes, arrangements of teams, self assessment criteria (are we making progress?) and the identity of the organization that had to change to make this shift. This in itself meant some business model innovation was required. They also had to become better in forming partnerships with other technology providers. In complexity thinking language, the physical technologies and entrepreneurial technologies will remain largely the same, but many additional or different social technologies would be needed. For instance, some additional skillsets are needed that are more expensive and not typical to technology centre at universities. Lastly, this process focus shift would require far more work on the premises of the client, and also working with many other unknown technologies and sectoral requirements, which meant that concepts such as self-management, temporary work teams and many parallel projects also had to be tried out. It started sounding more and more like a completely new organization and a major disruption that this client could not afford. Starting over was simply not an option. And the individuals in the current team was a real asset. If this team could not make this shift then very few would be able to make it.
It was agreed that we needed an adaptive process, a series of small experiments that allowed them to try some process innovation applications. The horizons of innovation provided a useful framework (Tim Kastelle inspired me about this model, recently Ralph-Christian took it further). We captured their current technological and market capabilities and agreed that this focus had to be maintained while we find ways to explore the adjacent technological and market spaces without breaking the bank. Tim Kastelle always say 70% of the focus should be on the current block (horizon 1). We did this by first looking which process innovations would be interesting to some of their existing markets (we found a few). The we looked at where their current technological capability could be used in new markets, but in a process innovation way. This could be done by investigating some economic sectors a little deeper. Thus most of the energy of management remains on the current technological base and markets, with an additional focus on process innovations in an adjacent markets and technologies. We were all surprised that these ideas required very little additional funding (at first), with more specialized equipment and skills required if any of these ideas took hold.
The moral of the story is this. It sounds simple to say “shift attention from product innovation to process innovation”. People might actually agree this is important. But to make this shift requires many internal changes. A process of exploration and mental simulation using a simple framework was all it took to identify some areas where the current management team with its current resources could try several new ideas, without much change to the business plan or operations of the organization. I am very pleased with this outcome.
Thanks to the team for trusting me to facilitate this process. You know who you are!
I am often asked whether one person or function in an organization is sufficient to coordinate and manage innovation. The answer is “no”. While I agree that it is very hard to get whole organizations to think about innovation, it certainly is a distributed capability.
Let me just recap. Back in 2015 I wrote that most innovation gurus identify four functions of innovation and technology management:
Searching and scanning for new ideas and technologies, both within and beyond the organization. This includes looking at technologies that could affect the clients of the organization, and technologies that could disrupt markets and industries.
Comparing, selecting and imagining how different technologies could impact the organization, its markets and its own innovation agenda.
Next comes integrating or deploying the technology or innovation into the organization. This includes adjusting processes and systems, scaling up implementation, and project managing the whole change process.
The last step is often overlooked, but new technology and innovation often makes 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.
Now these four functions could obviously be coordinated at a central or top management level, but at that level it would probably look at broader innovations in terms of high level product positioning, reforming key business processes, or considering different business models. Some would call this strategic innovation management. However, this function depends on many other decision makers, technicians, business unit managers and experts distributed throughout the organization to be repeating these four functions within their own context. Perhaps some individuals or units are more focused on certain technological capabilities, while others may be more focused on specific markets, territories and client types. Within each of these focus areas, individuals or teams responsible for the coordination of innovation would have to make sure they tap into the knowledge and understanding of their internal experts and staff, their external networks and even beyond. So the four functions are repeated at lower levels, each time more granular or domain specific (or context sensitive) than levels higher up.
Perhaps innovation coordinators at higher levels would be more focused on trends beyond the organization and even beyond their clients or markets, and most certainly the higher up you go the longer the planning time horizons would be. A great example of this kind of structure is explained in a forthcoming article by Jeffrey Immelt of GE in the Harvard Business Review. In GE they had both the top down functions, but then they also paid great attention to creating from the bottom up similar functions. During this process Jeffrey explains that they realized they needed to create these structures within sub regions, with more autonomy to make context specific decisions.
Within a larger organization, good ideas (a.k.a innovations) from one unit is not immediately copied elsewhere. This is the wrong approach to scaling. Instead it goes in at the first function (Scanning) of other units, where the suitability of the idea and its effect on the business unit or technological capability is assessed. This means that top management can detect good ideas in how rapidly they are taken up within the organization. Perhaps they need to play a role in making innovations that seem to be working in one area known to others. This reduces the dependence on “strategic bets” by top management. Also this means that scanning is not only about looking beyond the organization, it could also mean scanning internally in other units or over the whole organization to try and detect ideas that are being tried out, taken up or discarded.
You cannot centralize innovation at the levels of product, process and business models only at the top of an organization, even in a small company. So you have to find ways to distribute this capability throughout the organization. It is not smart if only higher levels of management are scanning the horizon, trying to wrap their minds around emerging trends like the impact of Amazon on an industry, Industry 4.0, the internet of things or additive manufacturing. Perhaps at higher levels there should be a push to get more people elsewhere in the organizations empowered and mobilized to make sure that the four functions of innovation are distributed, that more people are scanning, more people are thinking about the future, trends and change.
In the image included in this post, the arrows are flowing down, because I believe that leaders need to push the push functions down in their organization. As these functions are distributed through the organization, it would become more important to figure out how to feed the ideas, insights and innovation from the distributed organizational system to improve organization wide strategic insight. Also, the up arrows would make it possible for cross pollination, where ideas that works in one area are fed into the scanning functions of another business unit.
A final point is that learning is not only about what works (down arrows and up arrows). Learning is also about remembering what did not work, but also, what was not tried (arrows ending in space). Organizations that maintain up a repertoire of (failed or half-baked) ideas have a better stock of concepts that they can consider, recombine and re-imagine as they go forward.
A final word to technological institutions, industry associations and programs aimed at improving industry or regional innovation and competitiveness. These four functions are not only for inside a firm, they are also relevant to your organization. But these four functions typically play out a the level of the innovation system, the network or industry. Somebody somewhere better be scanning the horizon for what is coming, what is being tried and what seems to be working, and so on. If your industry is not scanning, then the long term viability of the industry you are trying to promote is under threat. This is where think tanks, academic research centers and strong industry associations (meso organizations) that can promote industrial change, collaboration and modernization become very important.
Contact me if I can help your organization improve the four functions of innovation within your organization and between your organization and others.
Here is the foreword of the paper. It explains in a nutshell what this document is about.
It was a great privilege to be asked by the GIZ on behalf of BMZ to write a discussion paper on Germany’s contribution towards the Agenda 2030 from a knowledge, technology and innovation perspective as well as a great responsibility. Much deliberation and reflection has taken place in the last six years around this topic, but this work has by no means reached a conclusion as there is much more that can yet be done.
We support the view that a broader understanding of the role of science, technology and innovation is needed, and that building the capacity and capability of innovation systems in developing countries is vital. This is precisely what the Agenda 2030 and the Addis Ababa Action Agenda are demanding from the international development community and developing countries. The long-overdue global consensus on the role of science, technology and innovation as a cross- cutting theme is an exciting development, one which requires a re-think of traditional sectoral or topical development programmes and how they can benefit from this theme.
Our work in this field has made us well aware of Germany’s long-standing track record as a development partner in science, technology, knowledge and innovation support for develop- ing countries. This has been occurring not only on the of cial public policy level, but also on a broader level where universities, science and technology organisations, economic development programmes and private companies are interacting, sharing, learning and exploring with counterparts in developing countries. The sheer diversity, depth and scale of the options that Germany can now offer may even appear to developing countries to be overwhelming and hard to navigate.
Although many elements of the German Innovation System are plainly visible and well known, beneath the surface there are elements that even our German counterparts sometimes overlook or take for granted. The German Innovation System is a complex one that is still evolving. It has a long history, and many of the current system features were shaped by intentional and unintentional decisions made long ago. Developing countries need help to fathom which ideas can be transferred and learned from, and which ideas are not suitable to their particular context. Furthermore, there are many factors that are not so obvious, which makes it harder to learn from or transfer ideas from Germany to developing contexts. In this respect we should always be aware that Germany’s science and technology activities are organised on a highly decentralised way, whereas in many developing countries science and technology decisions are often more centralised.
As Mesopartner we often work both on the side of the developing country and on the German side to broker relations, build networks, enable exchange and support knowledge and technology transfer. We have seen the extent to which German technology, support and expertise have made a difference in the countries in which we work, even when science, technology and innovation are not the main issues being dealt with. But we have also seen the shortcomings of too great a focus on hardware, training, patents and blueprints and too little emphasis on human capacity, partnerships, networks and adaptation to the local context.
We would love to hear your feedback on this discussion paper. It provided us with an opportunity to rework much of our previous work on innovation systems promotion in developing countries. There is also a chapter about the evolution of the German Innovation System.
You are welcome to also visit the publications page on this website where several of the other papers that I have contributed to are listed.
Yesterday I started the long overdue process of spring cleaning on my blog site. As we approach the end of winter here in Pretoria it seemed like a good idea to spend time on this long overdue task.
Let me start by thanking those who have chosen to receive my blog updates via email. Whenever I post something I am always conscious that I am contributing to the unread messages load in your inbox. I would love to hear from you if there is anything that I can do to make the emails you receive from me something to look forward to.
Let me tell you what I have done so far in my spring cleaning process.
Yesterday I figured out how to create a new page from a post category. So if you look on the top right of the menu bar on the blog site, you will see “Globetrotting”. This Globetrotting page will automatically update every time I write something about my travels. This is a great feature of WordPress, as it allows me to create pages where a lot of related content can come together. I decided to start with globetrotting because many of my fellow South Africans are always very intrigued by the places I visit and the things I see. At this moment there is only one post, but I promise to write some more soon.
On the left side of the page there is a category page. I want to remove this, but before I do, I ticked the option to show how many articles I have posted under each category. I am in the process of tidying up the categories, so there is a hierarchy of sub topics that you will be able to see. I will leave this category page for a few days, I find it interesting to see how many articles I have under each category. It also reveals which topics I have paid enough attention to. Let me know what you think and whether you think any particular topics deserve more attention. The tag cloud is still on the left. Some people told me they like the tag cloud, but to me it looks messy.
Take the poll at the bottom of the post to let me know which one you prefer, the category list, tag cloud or site menu?.
I have also tried to tidy up the home page of the blog and updated some of the links. I disabled the silly site menu that was on the left hand side. Any suggestions on how to improve the blog would be welcome.
During July 2018 I visited Prague with my family. In the parks they had pianos that people could simply play on. They were tuned. And no, they were not bolted down! For us South Africans the idea that something as expensive as a piano can stand in a public space is just mind-boggling. Then the finer details, like the paving, a chair and nice roof.
For the last few years I have been playing with and actively following the developments around the Product Space methodology and logic. It is such a powerful instrument that I use often to support my clients, but also as I try to make sense of technological change around the world. I am grateful for Ricardo Hausmann and Cesar Hidalgo and their teams in responding to my many questions, and their patience when I tried to figure out how to get my own product space server going.
Here is an image of the complete Product Space map from the Atlas of Economic Complexity page (you can also download the book from here). The image below shows where different industries are on the map. I work mainly in the blues, purples and some other colors I can cannot name on the left half of this map.
Beyond the great visual interfaces and interactive tools that the Harvard CID and MIT Media Labs offer, there is a great depth of knowledge and insights about how economies change. Take a look at this quote in a summary by Hidalgo and Hartmann on the OECD Insight page (the link to the main article is at the bottom of the OECD page)
“Scholars have argued that income inequality depends on a variety of factors, from an economy’s factor endowments, geography, and institutions, to its historical trajectories, changes in technology, and returns to capital. The combination of these factors should be expressed in the mix of products that a country makes. For example, colonial economies that specialised in a narrow set of agricultural or mineral products tend to have more unequal distributions of political power, human capital, and wealth. Conversely, sophisticated products, like medical imaging devices or electronic components, are typically produced in diversified economies that require more inclusive institutions. Complex industries and complex economies thrive when workers are able to contribute their creative input to the activities of firms.”
As I mainly support developing countries, this paragraph is really important to me. Perhaps this explains why I have become increasingly cynical of much of economic development practice. I find that in developing countries the governments but also international development often concentrate on value chains or sub sector support activities or private sector development strategies that focus exactly on the wrong parts of the economic system. These sectors are at the edges of the product space, with very low skill requirements and with little technology spill overs from these sectors to other parts of the economy. This focus is largely because of a belief that jobs can be created easily in these sectors (in the shorter term), instead of focusing on areas of the economy where economic complexity can be strengthened (in the longer term). It saddens me to hear of another development project, focusing “directly” on a group of firms, farmers or beneficiaries, in order to create jobs. This will not help in the longer term, even if may help in the shorter term. Often the reason offered for bypassing local stakeholders, government programs, etc are that they are “part of the problem” or “too slow”. No wonder the inequality is rising and growth is slow.
Economic complexity is a measure of the knowledge in a society that gets translated into the products it makes. The most complex products are sophisticated chemicals and machinery, whereas the least complex products are raw materials or simple agricultural products. The economic complexity of a country depends on the complexity of the products it exports. A country is considered complex if it exports not only highly complex products but also a large number of different products. To calculate the economic complexity of a country, we measure the average ubiquity of the products it exports, then the average diversity of the countries that make those products, and so forth.
To change the productive structure of an economy will take both public and private focus on building the right kinds of institutions, both formal in the sense of organizations, policies, etc. and informal institutions, in terms of trust, cooperative capability and maybe even cultural change. On a few occasions I have been accused that my focus on knowledge intensification, innovation systems and complexity only benefits the “have’s” and excludes the “have nots”. To work with institutional or structural change you will almost certainly work with wealthier, or more powerful counterparts. Like the management of an university department, senior government officials or an entrepreneur that is trying new combinations. My argument is that this accusation confuses target groups (those that we can work with to enable a change) with beneficiaries (those that will ultimately benefit from change). Furthermore, if we have to work with academics, scientists or pioneering entrepreneurs, we must certainly set conditions that ensure that benefits are inclusive and not exclusive. It means that the focus in development needs to shift on purpose towards enabling more responsive and forward looking institutions, institutions that lowers the costs for entrepreneurs to try new combinations, institutions that equip employees to find opportunities to contribute their knowledge, skills and creativity towards more complex and valuable economic activities.
Marcus Jenal and I have tried to contribute to this discussion with our paper about Systemic Change that was published at the end of last year. For more information, see this post on our Systemic Insight page. This is the site where we write about our thinking into how complexity thinking can be used to improve development.
In July 2017 we (mesopartner) will host the next annual Summer Academy. This year is special for me, because the theme of the event is about meso-organisations in the economy. Meso organizations are often taken for granted. And it is often assumed that leading or growing a meso organization is like managing a business or a project.
We believe these organizations, and especially their leaders, need some special attention.
For those that wonder what is meant with “meso”, it refers to a specific kind of organization or program that is created with the intent to overcome a whole range of market failures in an economy. Meso-organisations are known by their specificity, for instance to assist specific industries to modernize, or to support start-ups, or to promote investment in particular new technologies or a specific sub-national region. The reality is that while we describe their role in terms of market failure, competitiveness and growth, very often these organizations, their funders and even their clients have very little interest in theoretical concepts like market failure, systemic competitiveness, innovation systems or even modernization. They have a mandate, a limited budget, and many competing demands.
Most of my work is about helping leadership teams of meso organizations to make better sense of their context, to design better programs and services so that they can have a bigger effect on the industries they serve, or to become more resilient.
Increasingly our focus is on helping these organizations to become more innovative, not only in their product/service offerings, but in the way they unleash the creativity of their staff, their networks and how they all learn and discover what is possible in their given social and economic context. It is about stretching the capability, the influence and the adaptiveness of the meso.
To manage a meso organization takes a special kind of person.
Firstly, the leader must meet the demands of their funders or stakeholders. They must be able to handle a huge bureaucracy and lots of reporting on the often seemingly senseless of indicators and targets that funders require. Spare a thought for those that depend on several sources of funding.
Secondly, the leader must meet the demands of industries, clients, wanna-be entrepreneurs and dreamers that come knocking on their door. While we can collectively call these businesses “clients”, they are in fact a very diverse group with a mind numbing diversity of requirements, demands, capabilities and competencies. While in an industrialized country it is sufficient to work with those enterprises that shows the right kind of curiosity and willingness to pay for top notch external support, in developing countries these meso organizations are often under pressure to work with lagging enterprises that are struggling to master the basics, marginalized groups and must also contribute to all kinds of social objectives. It is not simply about being at the cutting edge and competitiveness, but also about creating pathways for others to follow. This is very hard to do when there are huge shortages of professional management in companies, poor schooling and a whole host of interconnected market failures that seems to hold everyone from reaching their full potential.
Thirdly, these leaders must contend with their organizational context. For instance, many meso organizations I work with are associated with research institutions or universities. That means there is a demand on these centers to contribute to the academic objectives of their host. This includes creating opportunities for students to gain work experience, providing post graduate support, procuring raw material and components and running a business through an administration designed for another purpose.
My list could go on. But perhaps at another time.
We’ve been developing tools, instruments and concepts targeted at meso organizations for more than 10 years. This year we will focus on these, without losing focus on promoting the healthy economies of territories and industries.
I am looking forward to the Summer Academy where we can explore these and other issues. Every year we attract a range of experts and practitioners from around the world where we learn together and get to explore issues that we face in the field with a combination of theory and practical simulations. I hope to see you there!
Klaus Schwab, the founder of the World Economic Forum, argues that the single most important challenge facing humanity today is how to understand and shape the new technology revolution. What exactly is this revolution, and why does it matter, especially for Africa?
The “fourth industrial revolution” captures the idea of the confluence of new technologies and their cumulative impact on our world.
Artificial intelligence can produce a medical diagnosis from an x-ray faster than a radiologist and with pinpoint accuracy. Robots can manufacture cars faster and with more precision than assembly line workers. They can potentially mine base metals like platinum and copper, crucial ingredients for renewable energy and carbon cleaning technologies.
3D printing will change manufacturing business models in almost inconceivable ways. Autonomous vehicles will change traffic flows by avoiding bottlenecks. Remote sensing and satellite imagery may help to locate a blocked storm water drain within minutes and avoid city flooding. Vertical farms could solve food security challenges.
The machines are still learning. But with human help they will soon be smarter than us.
The first industrial revolution spanned 1760 to 1840, epitomised by the steam engine. The second started in the late 19th century and made mass production possible. The third began in the 1960s with mainframe computing and semi-conductors.
The argument for a new category – a fourth industrial revolution – is compelling. New technologies are developing with exponential velocity, breadth and depth. Their systemic impact is likely to be profound. Policymakers, academics and companies must understand why all these advances matter and what to do about them.
So why does the fourth industrial revolution matter so much – specifically for Africa? And how should the continent approach the risks and opportunities?
The revolution’s most exciting dimension is its ability to address negative externalities – hidden environmental and social costs. As Schwab has written:
Rapid technological advances in renewable energy, fuel efficiency and energy storage not only make investments in these fields increasingly profitable, boosting GDP growth, but they also contribute to mitigating climate change, one of the major global challenges of our time.
Some countries’ growth trajectories may follow the hypothesised Environmental Kuznets Curve, where income growth generates environmental degradation. This is partly because natural capital is treated as free, and carbon emission as costless, in our global national accounting systems.
New technologies make it possible to truncate this curve. It becomes possible to transition to a “circular economy”, which decouples production from natural resource constraints. Nothing that is made in a circular economy becomes waste. The “Internet of Things” allows us to track material and energy flows to achieve new efficiencies along product value chains. Even the way energy itself is generated and distributed will change radically, relying less and less on fossil fuels.
Perhaps most importantly for African countries, then, renewable energy offers the possibility of devolved, deep and broad access to electricity. Many have still not enjoyed the benefits of the second industrial revolution. The fourth may finally deliver electricity because it no longer relies on centralised grid infrastructure. A smart grid can distribute power efficiently across a number of homes in very remote locations. Children will be able to study at night. Meals can be cooked on safe stoves. Indoor air pollution can basically be eradicated.
Beyond renewable energy, the Internet of Things and blockchain technology cast a vision for financial inclusion that has long been elusive or subject to exploitative practices.
No revolution comes without risks. One in this case is rising joblessness.
Developing countries have moved away from manufacturing into services long before their more developed counterparts did, and at fractions of the income per capita. Dani Rodrik calls this process “premature deindustrialisation”.
The employment shares of manufacturing, along with its value addition to the economy, has long been declining in industrialised nations. But it’s also been declining in developing countries. This is unexpected, because manufacturing is still the primary channel through which to modernise, create employment (especially by absorbing unskilled labour) and alleviate poverty. Manufacturing industries that were built up under a wall of post-independence protectionism are starting to decompose.
The social effects of joblessness are devastating. Demographic modelling indicates that Africa’s population is growing rapidly. For optimists this means a “dividend” of young producers and consumers. For pessimists, it means a growing problem of youth unemployment colliding with poor governance and weak institutions.
New technologies threaten to amplify current inequalities, both within and between countries. Mining – typically a large employer – may become more characterised by keyhole than open heart surgery, to borrow a medical metaphor. That means driverless trucks and robots, all fully digitised, conducting non-invasive mining. A large proportion of the nearly 500 000 people employed in South African mining alone may stand to lose their jobs.
Rising inequality and income stagnation are also socially problematic. Unequal societies tend to be more violent, have higher incarceration rates, and have lower levels of life expectancy than their more equal counterparts.
New technologies may further concentrate benefits and value in the hands of the already wealthy. Those who didn’t benefit from earlier industrialisation risk being left even further behind.
So how can African countries ensure that they harness this revolution while mitigating its risks?
African countries should avoid a proclivity back towards the import substitution industrialisation programmes of early independence. The answer to premature deindustrialisation is not to protect infant industries and manufacture expensively at home. Industrialisation in the 21st century has a totally different ambience. In policy terms, governments need to employ systems thinking, operating in concert rather than in silos.
Rapidly improving access to electricity should be a key policy priority. Governments should view energy security as a function of investment in renewables and the foundation for future growth.
More generically, African governments should be proactive in adopting new technologies. To do so they must stand firm against potential political losers who form barriers to economic development. It pays – in the long-run – to craft inclusive institutions that promote widespread innovation.
There are serious advantages to being a first mover in technology. Governments should be building clear strategies that entail all the benefits of a fourth industrial revolution. If not, they risk being left behind.