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

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

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

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

So here are the emerging patterns of 2019:

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

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

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

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

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

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

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

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

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

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

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

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

 

Sources

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

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

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

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

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

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

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

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

 

Why are digital technologies absorbed so rapidly in many developing countries?

Globalisation-weary politicians and advocates of local capability developments and geeks or technology promoters have one theme in common: technologies developed in the First World not only disrupt domestic companies, but upset whole sociotechnical regimes in developing countries.  While the benefits of digital technologies are not disputed, what is disputed is how to solve this problem.  This is where the two groups of lobbyists part ways.

One argument is that if local companies had some protection, better incentives, more support and everything else on their wish lists, then local entrepreneurs would be able to come up with similar digital technologies. How long this is likely to take and whether it will succeed is usually not discussed to any real extent.

The other argument is that disruption is good, and that the services of, say, Uber or Amazon disrupt local monopolies and save consumers millions while allowing “new” entrants into the markets. What happens when these global companies lose interest and withdraw suddenly, or when all local capacity to compete has been eroded is also not discussed.

I will steer clear of these and other flashpoints. For me the key differentiator that counts in favour of global digital technologies is that they create MARKET platforms. By market, I don’t just mean a space where sellers and buyers can meet. These platform technologies invest heavily in overcoming many market and institutional failures. For instance:

  • Many digital marketplaces carefully create trust systems where buyers and sellers can check each other out.
  • Most digital marketplaces give you lots of technical information, reviews from other users, and links to comparable products in higher and lower price brackets.
  • Most digital marketplaces coordinate logistics, customs, invoicing, tracking and customer support.
  • They accept numerous currencies and numerous payment methods.
  • Users can switch seamlessly between different platforms (add something to the shopping basket on your phone, complete the order on your computer).

This means that these global platforms overcome many of the market, coordination and government failures that keep developing country entrepreneurs so busy. Even though I have shifted my understanding of how economies evolve beyond market failures, I still see them everywhere. Maybe they are not as quantifiable as many economic theorists would make them sound, but their archetypes and characteristics still show up. I have made a note to explore these market failure archetypes in a next post. (other posts on 3D printing, IoT; tech push fallacy article over here)

The most disruptive digital technologies can be described as platform technologies, which means that they create marketplaces with their own institutions, rules, laws, recourse systems, fair play policies and competition between providers. These platforms crowd in both sellers and buyers. That is what makes them so easy to use, for both buyers and sellers. They personalise the options for market players. They integrate service providers and even regulatory requirements. So even if a better local digital technology may be available, consumers will go where there are more products, and sellers will go where there are more buyers. These platforms often displace or disrupt previous widespread platforms. The mobile phone has in many cases displaced several platforms, including newspapers. 

The only way developing countries can respond is to make sure that they create the right market-supporting institutions. The challenge is that while global platforms often start in one or two markets and then scale up, developing country governments have whole economies that are in need of interconnected and interdependent platforms. The challenge is to figure out which platforms would be the best learning places for rapid learning, adaptation and dissemination.

If you would like to keep informed of my progress on this topic, you can sign up in the box on the left of this post (or here) to receive a personal newsletter from me. I promise not to clog your inbox with junk mail. The sign-up form will help me to figure out what topics you are more interested in.

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.