Shifting towards innovation and technology application

Have you also noticed that increasingly local economic development is captured by the public sector, often from a governance perspective, while the role of the private sector and its own development gets reduced to a consultative stakeholder? I find this amusing, as the private sector is the acknowledged driver of growth and increased wealth. I have already shifted my attention to the stimulation of technology use and innovation in the private sector, as I cannot imagine a more strategic way to create a new future for our region.

But strangely, the private sector, at least at an organised level, has only in a few places in Southern Africa taken the lead in its own development. While the media and government complains about job losses, firm closures and the increased uncompetitive performance of the industries, industry itself seems to be waiting for government to bail them out!

At the moment I see only a few ways out of the hole that our industries are in. Firstly a more pro-active approach towards the use of technology and innovation is required. Government is not going to donate the machines, and nobody will give a firm the research. Firms need to invest in new technology. Secondly, at a collective level, industry bodies need to move from advocacy towards a more proactive approach of building value chains and industrial networks. Many famous developmental fads like value chains, incubators, clusters etc have their origins in the private sector, even if these instruments are often widely used and abused by the public sector. Why are we seeing so little investment in these instruments by the private sector for the benefit of a specific industry? Thirdly, industry needs to realise that both increased competition and increased globalisation have changed the rules. Just as governments have to deal with immigration and passport issues, business should become a bit more obsessed with shaping the economic, education and science policies of their countries.  If industry does not as a collective become more vocal about education standards, research missions or industrial support then we are in for a tough 20 years!!

Hey, what do you think we can do to inspire our industries in Southern Africa to become better organised and more involved?

How can we get businesses to start investing in the latest technology?

How do we get business to not only innovate in marketing and advertising (we are good at that) but also to invent new business models, new technologies and new solutions to the problems of the world?

Any ideas or proposals are welcome!!

Two attitudinal trends about human mobility in Southern Africa

There are two attitudinal trends that emerge when you work with government officials responsible for economic development in many Southern African countries. The first, is that foreigners with skills pose a threat to locals, and that they should be kept out of the country to protect local jobs. Despite popular belief, this is not a position that is unique to Africa (ask anybody who tried to get a VISA to Germany recently!).  The second, is that rural people should be kept (by force or incentives) in the rural areas, and that jobs should go to rural areas to make sure that people do not migrate to cities.

Both these trends are disturbing as it limits our options to makes economic development reach its objectives. It is so important to attract people with skills to a developing country, as research shows that the best skills and knowledge transfer in developing countries does not take place through knowledge transfers from universities, it takes place through knowledge transfer from suppliers, customers and competitors (UNCTAD LDC report 2007 and others). When you attract foreigners with skills to your country, you basically save education costs as these individuals were trained and gained their experience at the expense of another country. Unfortunately, xenophobic propaganda that is often fuelled by insecure local politicians have succeeded in making it very difficult for foreigners with skills to feel comfortable or safe in many communities in our region. Governments also use the ‘scarce’ definition to basically make it extremely difficult to attract people with scarce skills. For instance, a UNIDO study in the SADC region found that most small enterprises lacked accounting and basic management skills that undermines their chances of surviving or thriving. Yet, accounting and business management skills is not recognised as a scarce skill in most of the SADC member states. Fortunately that may be changing soon in South Africa, but it may still take time for the government to figure out the new relaxed rules and procedures to make it easier to attract foreigners with ‘scarce’ skills.

The 2nd trend is that government officials want to fight the flight of people from the rural areas to the urban areas. The World Bank 2009 World Development report is still one of the best publications to describe the new rules of human mobility. It is a fact, people (for now) are moving to cities and towns. And it is also a fact that people are more emotional or sensitive about this topic than many other development topics. Yet, statistics show that people are engaging less in subsistence agriculture in many Southern African countries, and farm labourers that used to exchange manual labour for food and tenure on commercial farms are increasingly left without jobs due to changes in labour laws and value systems  in many countries.

In a recent interview with a father that moved his whole family from a rural area in South Africa to a squatter camp (informal settlement) explained that it was better to unemployed in the city than employed in the country side. His kids are going to a school that offered much better education than the rural school, so even if government succeeded in creating jobs in the rural country side, people like his family may still choose to take their chances in the city. Even though many people may choose to move to the city, there are still large numbers of people that are not as mobile, due to personal health, cultural or other reasons. With every skilled or capable person that decides to leave a rural area, the remaining people are increasingly marginalised as the options to create jobs for the remaining people dwindles as the average skill level in the region declines. For instance, if a person with some farm management skills leaves and area, the chances of creating jobs through effective farm management competencies goes down. Therefore, one of the most important government interventions into the rural areas should be education, as this at least makes it easier for future generations to exercise their choice of whether they want to stay or move. In any case, people with better qualifications (and experience) are more likely to succeed in an enterprise (or farm) in a rural area.

I moderated a conference in the region recently, where several participants felt that people from the rural areas SHOULD NOT BE ALLOWED into cities! I was quite shocked by how many others publicly endorsed this opinion. Basically this argument will enforce a new divide, those with shops, banks cinemas, traffic congestions, better jobs and good schools, and those without. I cannot even imagine going back with my family to the small town where I grew up.

So as development practitioners we have to embrace the new challenges of mobile human beings. We have to make our counterparts aware of ‘scarce’ skills that are missing in the system, and the benefits of attracting people into local systems that have gained expertise and qualifications elsewhere as a means to build local competencies. Furthermore, we should not fall in the trap of believing that people from rural areas and other countries are here to steal jobs.

Also do not fall in the trap of stereotyping all people living in informal settlements as uneducated. The father I mentioned earlier is a qualified diesel mechanic that used to work in a rural tractor dealership. Understand that job creation in rural areas are difficult because of low volumes and the fact that people with skills and experience are (for now) moving to the urban areas. But we cannot prevent people from moving as this is an important choice for families to make. Rather, our spatial planning and city development strategies must deal with the fact that in the medium term more people are coming to cities.At the same time, the urban dynamics are changing. Cities are becoming the lifeblood of our African economies, and people live and work differently in these spaces. This also has an impact on our city management and our economic development opportunities. I sometimes wonder whether the poor public transport systems in South African cities are designed on the assumption that all the commuters will soon go away to where they came from.

The age of human mobility is upon us, and this is not only a luxury of only the wealthy. The poor, the desperate and the under valued people are also mobile, and when they move, they change the economic potentials of the spaces they leave behind as well as their destinations.

From good governance to good development governance

In its latest Least Development Country Report , UNCTAD is reflecting on the impact of the financial crisis on the 49 LDCs and is stipulating a move from “good governance” to “good development governance”. The report describes the weaknesses of the current “good governance” trend that has trapped many development agencies and governments, and provides recommendations on how to improve the impact of good governance interventions through a move to good development governance.

Development governance is about the processes, policies and institutions associated with purposefully promoting national development and ensuring a socially legitimate and inclusive distribution of its costs and benefits

 

http://www.unctad.org/Templates/webflyer.asp?docid=11721&intItemID=2097&lang=1

The UNCTAD LDC reports are an annual highlight, I strongly recommend that you take a look at this document.

 

Thin solar technology commercialised in South Africa

I was delighted to read in the South African Mail and Guardian this morning that a public-private partnership between the University of Johannesburg and several other partners (Sasol, the Central Energy Fund (CEF), the National Empowerment Fund and the University of Johannesburg) are working on a plant to commercialise thin-film technology in South Africa. The new technology is known as Thin Film Solar panels, and consists of micro-thin metallic film (only 5 microns thick) that converts light into energy at a fraction of a cost of the current Photovoltaic technology. Germany is a global leader in micro-film technology due to its huge investments into alternative energy technology, and the equipment needed to make the Thin Film Solar modules will be imported from Germany to the Western Cape province to establish a production facility in Paarl.

This is great news for several reasons. Firstly, researchers at Stellenbosch university are also working hard on new solar technology, thus creating a regional technology cluster effects (click here and here for more information). But perhaps the timing of this announcement is more important, as it coincides with the announcement that Escom wants to increase its energy prices by 45% for the next three years. At the moment, solar panels are still extremely expensive in South Africa.

A Google search for “thin film solar” found several sites that explained the technology, and it seems that similiar technologies have been commercialised elsewhere. It was not possible for me to determine whether the South African design differed than the technology described on Wikipedia.

South Africa have other reasons than our electricity shortage and price increases to invest in new climate friendly technology. Not only do we have to worry about our environment, but alternative energy could assist in overcoming the costs of connecting rural households to the grid. But at the moment the costs of alternative energy in South Africa is still very high. I cannot wait for the day that I can disconnect from the mainline power grid for environmental and cost reasons! Bring on the technology!!!!

This blog post was inspired by an article in the Mail and Guardian online, the original article can be found at  http://www.mg.co.za/article/2009-10-13-sas-thinfilm-solar-tech-at-commercial-stage

Innovative firms

Have you ever wondered why not all firms are innovative? If you are a development practitioner like I am, then you must have come across hundreds if not thousands of small and large firms that are not very innovative. This results in these firms also not being very competitive.

There could be many reasons why so many firms are not innovating, and one of these is that the firms are serving undemanding customers. This very often happens in rural or isolated areas, of where companies provide convenient goods and services.  Another reason why firms do not innovate is that innovation requires change, and this change is uncertain. This makes innovation not only risky, but also potentially expensive.

One of the reasons why development practitioners should try to stimulate the competitiveness of firms that they work with, is that increased competitiveness requires innovation. Again, this does not simply imply new products or processes are developed or improved, but also that firms try new management innovations. However, many development practitioners are not comfortable with competition, or do not understand the importance of competition to the socio-economic development of a society. There is a tendency in the field to try and get groups of individuals or firms to compete together against a competitor ‘out there’. This is a first step in the right direction, but we must also try to get our local firms to compete against each other. Thus we must try to create opportunities to collaborate, but at the same time we must try and increase or stimulate the local competition against each other. With this I am implying the nice and healthy kind of competition.

What is often forgotten in economic development, is that we are not only concerned with the health and the well-being of the business owners. Firms must also innovate to create better, healthier and more stimulating jobs, attract foreign investment, skills and knowledge into our areas, and finally, provide improved goods and services to local communities. The latter is usually overlooked. Thus, we want firms to be competing with each other, and together also competing with others, not only to make business owners and managers rich, but to ensure that our society in itself becomes wealthier and more innovative. This will then lead to more innovative and competitive businesses, and so the virtuous cycle is complete.

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

Moderating large events

I have just created a new sub-page on my experiences of moderating large(ish) events. With large I mean events with more than 50 people in, but still not 1000s of participants that Natasha Walker enjoys to facilitate!

There are some pictures on the page of the technology configuration and the role of the moderator in a large event.

Please take a look and contribute your experience of moderating or even participating in larger events.

Change in societies – part 2

In my work with trying to get the private sector to perform better, I often deal with sectors and their support institutions. Very often there are official or recognised industry bodies that are promoting the interests of industry. The least these industry bodies do is to organise an annual golf day, with some even playing an important role to lobby with government. The more organised sector bodies play an active role in sharing information, promoting standards amongst their members, or in some cases actively trying to develop their members or new markets. So these industry bodies often try to affect change in the way I described in the previous post.

But although these organisations are functional units themselves, they are actors trying to promote change in a small part of a society. This means that while they can affect change internal to their organisation through formal change or organisation development methods (using hierarchies, sanctions, incentives and process management), they have to also play a leading role in changing the society around them. The members of the industry body, their supporters and the broader innovation system related to this industry body is not physically part of the organisation, but forms a sub-group of the society around the industry body.

Several challenges arise in this process of trying to get a part of a society to change. The first challenge is that this process of upgrading the performance of industry is often not recognised as a change process. Secondly, societal change is a tough thing to do, and the body of knowledge on how to achieve change in societies is still in infancy. Thirdly, to affect change in a society it is important to appeal to the common identity or value system of the group being targeted, and very often both these factor are weak within industries. For example, some pharmaceutical companies consider themselves to be in the cosmetic sector, while others in health. This means that even if we classify a firm in a given sector, they may still identify more with another sub-group in the society.

For instance, in my earlier post I mentioned the importance of leaders using value systems to lead through example. How can this be related to trying to change the performance or behaviour of an industry? The answer is that we have to make positive examples of those that are early adopters, or leaders. By showing how some firms innovative, or overcome problems through innovative thinking, creates opportunities for others to imitate. Furthermore, industry bodies cannot really use incentives or sanctions to inspire change. However, they can play an extremely important role of communicating why behavioural change or improvement is necessary. If industry bodies cannot build a better case for why firms need to pull up their socks, cooperate better, compete more, innovate or invest, then nobody else will be able to achieve this until it is too late.

Thus, industry bodies have a critical role to play in using their organised members to inspire behavioural change or performance improvement. This process must be understood as a change process at the level of the society. The desired change must be seen in a systemic way to make sure that individuals are not just thinking about measurable improvements (such as time to assemble a gadget) but to also consider the societal change aspects (how to recognise the new values or how to know whom to follow)

Change in societies

The previous post described a typology of competitiveness that spans three levels. In order for individuals, hierarchies (e.g. firms) to improve their competitiveness or performance some kind of change of performance is required. While some of these changes are incremental and takes little effort, it may in many cases require a more concentrated effort to make a significant change. A few years ago Holger Nauheimer introduced me to three different levels of change that corresponds with the typology of competitiveness.

Firstly, there is change in the performance or behaviour of individuals. This may be related to an effort to improve competitiveness, or it may simply be a change of behaviour. Secondly, there are change processes in organisations in order to improve performance and competitiveness. Lastly, there may be changes at the level of the society that results in improved performance and competitiveness.

In the first instance, individuals try to change their performance or behaviour through a combination of self-motivation, self-discipline, practice and concentration. Whether the change is success depends largely on the self-control of the individual, and their own incentives and value system. For organisation to change may require small incremental improvements. In most cases a change process requires proper management, transparrent leadership, transparency and clear communication with staff. Management may decide to use a structured approach, drawing on topics such as organisational development, change management and project management. A combination of sanctions and incentives may be used to shape the behaviour of people in the organisation.

At the highest level, changes occur in societies. These changes typically affect the performance of individuals and organisation, and are also affected by the performance of individuals and organisations in the society. For leaders to influence the transformation in societies, clear leadership with strongly communicated values are required. In my imagination I can think of leaders such as Nelson Mandela and Barack Obama at being particularly good at this. The challenge with change in societies is that it is difficult to manage, due to the fact that incentives and sanctions are weaker. There is also growing awareness of the psychology of crowds and how people in societies create and respond to signals of change. At the same time, we don’t have to think of whole societies changing. Malcolm Gladwell in “The tipping point” explains that when a small enough part of a society change, that it could lead to a tipping point where a larger scale change in behaviour takes place. This activism of change agents in societies are what seems to be keeping many societies in check at the moment, while at the same time promoting ongoing improvement and advancement.

From a systems perspective, the changes in individuals, organisations and societies should be recognised as complex human and social systems. There are many feedback loops, and delays between interventions and results. Furthermore, there are complex dynamics between different elements of the system. Therefore the results of decisions to change are often unpredictable, and care should be taken to create a habit of continous improvement combined with reflective exercises to make sure that the people in the system are able to respond to surprises and changes in the dynamics.

Different kinds of competition

If we assume that competitiveness is essential for economic growth, then it is important to explore the reasons why so many people do not like competition. Perhaps we all work with someone who is very competitive that can turn even getting to the water cooler first into a life-and-death rush.  From a developmental perspective many people are uncomfortable with competition, because we have all seen so many people marginalised because of their uncompetitive situation. This despite the depth of academic literature on the importance of competition in allocating resources to the economic actors most able to convert the resources into goods and services productively.

However, we all love it when our favorite sports team out-compete their competitors. So it seems like we all dislike certain aspects of competition, and yet we also like certain aspects of competition.

To explore this topic more I will discuss 3 kinds of competition:

  • the characteristics of individual competitiveness;
  • the characteristics of organisational or team competitiveness; and
  • the characteristics of geographic competitiveness.

The characteristics of individual competitiveness

For the sake of this discussion I will use an individual athlete as an example. For our athlete to be able to compete in the 3000 meter track item, she needs certain clothes and shoes. She must work on her fitness and diet, and may require coaching to master the technical aspects of her item. But this does not yet make her competitive. In order to be competitive, she needs to practice hard. This requires mental and physical discipline, and would require many personal sacrifices. The more she competes, the more she would have to invest not only in participating in different events, but she may require sophisticated shoes, other gadgets, specialised coaching and other costs known only to athletes!

The characteristics of organisational competitiveness

For an organisation to be competitive, it requires more than the right gear, mental and physical discipline of a few individuals and an exercise programme. Organisations, whether it be private or public, needs more. It needs various management systems, protocols (some kind of a language or common code), and different modes of cooperation between individuals. Leadership, different specialised competencies and technology is used to increase the competitiveness of organisations. Think of a racing team, where even if there is a world-famous driver in the seat, need to operate almost like a single organism in order to outperform the other teams. Here it is not enough for one person to be smart, people need to be smart collectively. Leaders who can empower or develop their staff and that can optimise the talents or resources at their disposal can outwit their competitors through a process of ongoing innovation and investment.

The characteristics of geographic competitiveness

For individuals and organisations to compete, the competitiveness of their geographic environment will start to matter at some point. While a amateur athlete or a bakery can operate in many different locations, their ability to compete with their competitors are influenced by their environment. Michael Porter and other authors have all written about this phenomenon.

Places compete through the combinations and relationships between different individuals and organisations, and places where there is a dense interaction between different people seem to outperform places where the interaction and transactions are lower. There is also a relationship between the ability of firms to compete in their own geographic domains and their ability to compete elsewhere. Furthermore, as firms grow and become more competitive, they become more dependent on specialisation both inside the firm and in their environment. This means that places that cannot offer specialised services, either in the form of direct employment or through specialised providers or institutions, will be disadvantaged. To make this even more complicated, there is a relationship between the competitiveness of firms and individuals and the competitiveness of region, and vice versa. Societies or communities that are able to stimulate a competitive process or debate on different developmental or innovative approaches tend to also outperform regions where there are fewer options available due to an inability to manage the tension of a creative search process for different alternatives. For instance, in Germany, many development agencies compete for public funds through innovative bids, forcing these agencies to be creative in their approaches in order to achieve impact and resource optimisation.

Conclusion

We need to stimulate a competitive mindset both in individuals and organisations in order to strengthen the competitiveness of regions. To achieve this, we need to understand the different factors that hamper or stimulate competitiveness at the different levels, and the relationship between the different factors. Attempting to ignore competition and its role in resource optimisation in societies is futile, so we have to work on getting more people thinking about ways to improve competitiveness. The best thing we can do, is to equip the marginalised with the mental and physical discipline. One of the best ways to get these individuals into the race is through training (education) as this develops both the mental and physical discipline that is required to be part of the competition.