HomeBusiness DigestThe Human Capital Telescope: Open innovation can assist economic recovery

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How can we say that we have a liquidity crisis when an estimated US$3,5 billion dollars is said to be circulating outside the formal financial system? Given that local consumers are buying foreign-made products, can we say we have a problem of poor local demand? Michael Dell founded Dell Inc. in 1984 with just US$1 000 dollars and a simple bankable idea. Today Dell Inc. is a multi-billion dollar business.  Money chases bankable ideas.

Battered by the then unprecedented economic crisis in the 1930s, the tottering US and European economies were rescued by novel thinking — the now famous Keynesian economic thought. Up until the onset of the Great Depression, Adam Smith’s ideas of free market economy had been held as sacrosanct. Keynes challenged this largely accepted economic paradigm, arguing that occasional government intervention was necessary to stabilise an economy (not destabilise it). 

 

The problem with Zimbabwe’s economy is partly Schumpeterian. Joseph Alois Schumpeter would say our business ideas and models have simply reached the end of their entrepreneurial lifespan. We are capitulating to the more efficient global and regional entrepreneurs that Schumpeter calls creative destroyers. We seem to have exhausted the dividends of the entrepreneurial cycle that started during the UDI in the 1960s period in which sizeable local import-substituting manufacturing was birthed. 

However, open innovation can kick-start a new Schumpeterian entrepreneurial cycle for Zimbabwe.

The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (ie patents) from other companies. In addition, internal inventions not being used in a firm’s business should be taken outside the company (eg through licensing, joint ventures or spin-offs. The classical model of generating innovations solely from internal Research & Development (R&D) is being replaced by models that work at the interface of the organisation and external entities — either competitors or strategic partners or individuals.

 

Germany, Europe’s biggest economy and the world’s fourth largest economy, with a Gross Domestic Product of US$3, 3 trillion, is undoubtedly Europe’s biggest manufacturing hub. According to recent research by three management scientists, Ulrich Lichtenthaler, Martin Hoegel and Miriam Muethel,  published in September last year, nearly two thirds of German firms that were surveyed were actively engaged in open innovation. In the US, serial innovators such as Procter & Gamble, the diversified pharmaceutical and personal care products giant famous for introducing disposable baby nappies (diapers), develop 50% of their new products through open innovation.

Two phenomena taking root in Zimbabwe point towards the need to embrace open innovation.

Foreign brands free-riding

Digitalisation of media is constantly exposing Zimbabwean consumers to foreign-made brands. More poignantly, the advent of free-to-air as well as prepaid digital satellite television (DStv) has provided virtually free access to Zimbabwean audiences for South African brands. Free- to- air television is arguably the most potent foreign brand evangelisation platform, with its ability to reach the masses of low to medium income consumers in Zimbabwe. As an illustration, a Nando’s advert appearing on free-to-air prime time viewing will be watched by masses of people in Zimbabwe, helping to strengthen the Nando’s brand in Zimbabwe. 

 

A number of foreign brands popular in Zimbabwe such as Kellogg’s, Koo and Sunlight are advertised through both paid digital satellite and free-to-air channels. Zimbabwean consumers we interviewed indicated that although some foreign brands are manufactured in Zimbabwe they prefer those imported from South Africa due to their perceived superior quality. There is a salient lesson here for Zimbabwean firms. The final arbiter of quality is the consumer. In Quality Management, quality is a function of a user’s perception of the ability of a product or service to meet their expectations.

One result of foreign brands free-riding on digital media is that the Zimbabwean consumers’ expectations are subconsciously being ramped up, widening the ‘quality perception gap’ between Zimbabwean and foreign-made brands. Currently, the South African banking wars pitting Capitec Bank and the Big Four to court low-income earners by slashing transaction and service fees is playing out on adverts reaching Zimbabwean consumers via free-to-air channels. This, arguably, is subliminally shaping our Zimbabwean consumers’ banking expectations.

Zimbabwean firms should take advantage of the increased expectations of Zimbabwean consumers, owing to incessant exposure to foreign brands, by involving the ordinary consumer in their innovation ecosystems. To understand the ever-granulating nuances in consumer expectations, multi-source idea input should feed into our Zimbabwean innovation systems. Failure to do so will accelerate the foreign-local brand equity gap.  

Diaspora diversity springboard

Diversity is a major source of innovation. Researchers on innovation and creativity have established that major innovations germinate at the nexus of diversified experiences, ideas and entities. This phenomenon is referred to as the Medici Effect. The Medici Effect explains to a large extent why the US has been the world’s most prolific generator of innovations.

 

The US was founded by the Pilgrim Fathers on the principles of liberty and freedom of expression. The US became a haven of refuge for those seeking religious and political liberty, resulting in a culturally and intellectually diverse society. It is this diversity that has spawned innovation after innovation by the US, from nuclear physics to social networking.

 

Ernest Hamwi, the inventor of cone ice cream was from Syria and so was Steve Jobs’ father. The inventors of Google and Amazon.com attributed their creativity impetus to Montessori education. Montessori is an education paradigm in which, among other peculiar pedagogic traits, students are allowed to explore their inquisitiveness. Ancient Egypt was able to lay the foundations of modern food security and taxation systems because one Pharaoh accepted ideas from a foreigner by the name of Joseph to navigate through an unprecedented economic crisis.

Population estimates of Zimbabweans living in the Diaspora range from three to five million. In essence, Zimbabwean society, viewed through an innovation potential lens is becoming both culturally and intellectually diverse. The diverse experiences of Zimbabweans in the Diaspora provide a window of opportunity for Zimbabwe to establish indigenised versions of the Medici Effect. 

This window of opportunity should not be frittered away. A low-cost open innovation idea-sourcing model is appropriate for Zimbabwe.

Edison Nation model

A firm called Edison Nation, which also runs a reality show called Everyday Edisons, uses the show as a sounding board and broker of innovative product ideas from ordinary people. Edison Nation is built on the notion that ordinary people can generate powerful ideas that can result in inventions, just like what the legendary serial inventor Thomas Edison did. Edison Nation’s model is relevant to Zimbabwe due to its simplicity. I

 

n the Edison Nation model of open innovation, individuals are invited to submit ideas they believe can solve an everyday problem to improve a consumer’s experiences.  Ideas so-submitted are then analysed by Edison Nation’s business and product development teams for commercial viability. Once the idea is commercialised the ideator and Edison Nation split profits from the product 50-50.

One idea submitted to Edison Nation on October 27 2009 by Betsy Kaufman, a former TV anchor, was developed into a product called Eggies®System. TV anchor-turned-inventor Kaufman conceived an idea of boiling an egg without the shell. Edison Nation adopted the idea on 29 December 2009 and developed it into a commercial product.

 

What made this open innovation-sourced product a success was that the idea addressed at least one key customer-job-to-be-done need. Kaufman’s boil-eggs-without-the-shell idea addressed the job “help me avoid the unpleasant experience of peeling a hardboiled egg.” This resonated with many consumers. Arthritis sufferers, for instance, gave very positive reviews of the Eggies System.

There are many Zimbabwean Kaufmans in every economic and social sector who are sitting on bankable ideas. They may not be holders of Phds.

 

Chulu is a management consultant and business strategist. Let’s discuss at brettchulu@consultant.com.

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