The pace at which South Africa is innovating needs to accelerate if the country hopes to continue to compete in the 21st century. This is according to the Accenture Innovation Index released at the Innovation Conference held yesterday in Johannesburg. The index shows that innovation has increased by four points in 2016, a pace not required to for a stable economic growth.
Analysis of the results puts the majority – 57 percent of companies surveyed that scored less than 52 points out of a possible 100 – into the innovation laggard category. Only 29 percent can be categorised as innovation leaders. However, there is one further category that is truly setting the pace – innovation value champions.
“Digging deeper into the research we found that eight percent of companies are successfully managing to convert innovation into substantial bottom line growth,” said William Mzimba Chief Executive of Accenture South Africa and Chairman of Accenture Sub-Saharan Africa.
“These innovation value champions are seeing returns on their innovations in excess of 40 percent and generate three times more value on their innovation investments than market average.”
“The innovation excellence of innovation leaders and value champions sets a benchmark for corporate South Africa. So, how can laggards close the gap to become leaders? And what is it that innovation champions are doing differently to achieve such impressive returns on their innovations? The first, most significant finding is that innovation value champions invest more in innovation,” said Mzimba.
“On average, South African companies invest 13.7 percent of their annual revenues in innovation and realising a 14.5 percent return. Innovation value champions invest 17.8 percent of revenues and their average return is 42.6 percent – almost three times higher than the market average.”
Mzimba further emphasised that investment is not the only factor that underpins their success. “A strong innovation culture is central to their innovation strategy, they use digital as a business enabler and as a revenue generator, and they leverage the power of ecosystems to gather intelligence and insights that help them differentiate their offerings in the market.”
In this year’s Accenture Innovation Index results, there are three stand-out dimensions of innovation maturity in which innovation leaders are gaining momentum: Engagement, Resources and Digital.
Engagement: Innovation embedded
To achieve a truly sustainable innovation ecosystem, engagement needs to be encouraged and facilitated on all business and employee levels. Among South African companies surveyed, levels of engagement have increased by seven percent to 50 percent in 2016. This is driven primarily by innovation leaders who are acutely aware that for innovation to be embedded within their organisation it needs to be a persistent mindset among all employees.
Engagement is an important recurring theme in the 2016 Innovation Index with companies continuing to drive innovation from within their organisations. Notably, almost 70 percent of companies reported that their employees see innovation as an important part of their day jobs and believe it has the ability to enhance the life span of a company, its products and services.
innovation value champions see embedding innovation in their organisations as a cornerstone to their innovation strategy. Their talent development is directed at acquiring new skills to support innovation and they have a high success rate in terms of retaining top talent to support innovation, and attracting and acquiring new talent to drive innovation.
The Accenture Innovation Index results show that innovative businesses encourage their employees to be innovative and openly promote the use of interactive tools and digital platforms for employees to pursue innovation.
This is in line with Accenture’s 2016 Tech Vision report, an annual report that identifies technology trends essential to business success in the digital economy, which shows that 76 percent of South African businesses believe a more fluid workforce will improve innovation.
The index indicates that 95 percent of innovation leaders are giving more control to their employees to ideate and innovate, and are offering strong incentives and opportunities to encourage and cultivate innovation.
Incentives include professional development, varied work assignment opportunities, financial rewards and annual rewards programmes recognising innovation.
The value of internal collaboration is also receiving strong attention – 85 percent of Innovation Leaders are making use of dedicated multi-functional innovation teams to generate new ideas, and have dedicated innovation teams set up to manage innovation.
Resources: The power of the ecosystem
Along the innovation value chain, resources in the form of financial capital, human capital and partner relationships are needed to generate ideas, facilitate innovation and bring it to fruition.
In 2016, the Resources dimension of innovation maturity measured by the Innovation Index witnessed an impressive general increase of 20 basis points from 2014 to reach 55 points. This score was primarily driven by innovation leaders who increased their score in the Resources dimension by 32 percent to reach 77 points.
In an increasingly competitive world, companies need to take advantage of a wide range of resources to innovate; they cannot rely on ideas to come only from within their organisation. Encouragingly, the use of Open Innovation, which is characterised by partnerships among a range of players in a global ecosystem, is a strong theme emerging under the Resources dimension in this year’s Innovation Index as a means to drive innovation agendas.
“Our results show that 66 percent of innovation leaders are proactively embracing innovative ideas that come from sources inside the organisation as well as platforms and channels located externally. Innovation value champions clearly see opportunities in leveraging a broader ecosystem: 71 percent look to academia, clients, customers and suppliers to crowdsource information to innovate rather than relying on traditional sources,” said Mzimba.
Digital: leading in the new
Innovation Leaders are using analytics to drive innovation – a successful strategy that laggards are not taking full advantage of. Big Data analytics enables companies to harness data and use it to identify new opportunities and more efficient ways of doing business, as well as speed up decision-making and attend to customer needs with precision.
Digital technologies are also being adopted by innovation leaders internally to support business process innovation and streamline operations. This translates into significant cost efficiencies within the business.
Digital technologies are also being used for process automation, with over half of South African organisations currently automating their core business processes, and eight in 10 innovation leaders moving to automate core business processes as part of their digital progress.
The digital environment makes a strong customer focus a competitive advantage. By leveraging digital, South African organisations can improve their cost-to-serve throughout each layer of the value chain.
Innovation Leaders are also strongly invested in reducing the time to respond to customer needs.
They are using digital technologies to improve their service delivery and, ultimately, customer satisfaction; social media for product and service promotion; and technology apps to improve route-to-market processes, ensuring market strategies are optimised for their business.
The journey from laggard to leader
Overall, South African companies understand the importance of open, collaborative innovation and the positive impact it can have on employee engagement and company performance. Accenture believes that South Africa needs to catalyse change to drive next steps.
The Innovation Index provides some insight into how the country’s innovation value champions and leaders are building successful systems of innovation. If South African companies can better mobilise their resources, engage their talent and leverage digital technologies, they can increase their innovation success.
However, the journey from innovation laggard to leader requires a new mindset and adequate investment in innovation and development. To become an innovation value champion, companies must take the next step, creating an innovation ecosystem designed to capture value and promote and reward risk-taking and performance.
R33 Million Boost For Job Creation And Innovation In SA
The Craft + Design Institute (CDI) has launched R33 Million in funding to boost SME growth, job creation and innovation.
The CDI has raised the R33m to establish three funds – a Growth Fund, an Innovation Fund and a Loan Book – these funds will be managed by its investment arm, CDI Capital.
The funding will be for developing 60 growth oriented SME’s and 20 innovative technological solutions – and to create 600 permanent jobs in the process over three years.
This funding has been enabled by the National Treasury’s Jobs Fund through the Government Technical Advisory Centre (GTAC), the Technology Innovation Agency (TIA), and the Western Cape Department of Economic Development and Tourism (DEDAT).
CDI Capital was specifically incorporated as a CDI subsidiary in 2016 to catalyse funding for SMEs. A level 1 B-BBEE company, it aims to combine government grants with corporate Enterprise Development spend and private funds to de-risk investments in SME’s to stimulate growth and returns.
The Growth Fund is open to businesses with turnover or assets of more than R1m with the ability to create permanent jobs. Applications open on the 27th of November and close on the 31st of December 2017. For specific criteria and more information on the grant please visit www.cdicapital.co.za/GrowthFund
The Design Innovation Seed Fund (DISF) is open to inventors who believe they have protectable innovative technological solutions that could impact on specific sectors and could create permanent jobs. This is the third round of this fund. Applications open on the 27th of November and close on the 31st of December 2017. For specific criteria and more information on the grant please visit www.cdicapital.co.za/DISF
In addition to the grant funding products, CDI Capital will also launch a R3.5m working capital and term loan facility at reduced rates for the duration of the three-year project to provide access to cash flow during the growth stage of these, and other qualifying SME’s.
The CDI has 16 years of experience in SME development and started supporting development in the craft and design sectors nationally in 2015. Signaling this change, the organisation changed its name in September from the Cape Craft + Design Institute to The Craft + Design Institute.
According to Erica Elk, Executive Director of the CDI, it was a landmark moment in the organisation’s history.
“Over the past few years our team has successfully taken our services across the country – we have conducted a business and product development workshop series in every single province and received incredibly positive feedback. The message clearly is ‘more please’.”
Elk said that there is a consensus in South Africa today that SMEs hold the solution to our intractable problems of a sluggish economy and high unemployment rates.
“In most countries, SMEs play a vital role as drivers of economic growth, innovation and job creation, but, in South Africa, this value is yet to be properly realised. To achieve this, the challenges experienced by SMEs need to be addressed. Namely access to markets, finance and credit, infrastructure, resources for R&D, and access to adequately skilled and work ready labour.”
She added that the CDI, through its specialised investment arm CDI Capital, is gearing up to provide solutions to some of these challenges, particularly in the craft and design sector and related sectors where design and innovation can catalyse growth.
“Our first Jobs Fund project, completed successfully in December 2015, had 45 participating companies creating 464 jobs off an investment of R14.5m. This was 105% of the target of jobs to be created. Participating SMEs grew their combined annual revenue by 73% over three years – from R60m to R104m. Funds were used to improve their products, processes and competitiveness through the acquisition of new machinery or specialist staff, and to expand local and international market reach.”
“We also completed a first round of DISF grants in 2016, and are currently working with seven innovative SMEs in round two – round one attracted private funding of over R10m in equity funding into some of the high-potential innovators. The DISF gives innovators and entrepreneurs in the Western Cape an opportunity to get the finance and support needed to get their ideas to the next stages.”
“We have put a significant amount of work into developing these offerings, not only ensuring good governance and appropriate monitoring and evaluation measures, but realising real and sustainable impact with the businesses we support. We are excited to have raised R33m to launch this new funding for SMEs, and we thank our funders and supporters – we look forward to making meaningful investments.”
“Now – having led the way with investment from the public sector – we would like to partner with the private sector to support and strengthen this initiative. We believe this project – which aims to catalyse innovation, support growth orientated SME’s and create 600 jobs – would be an ideal Enterprise Development spend opportunity. CDI would gladly partner with corporate growth orientated accelerators and mentorship programmes to further strengthen the support offered to the participating SMEs.”
Najwah Allie-Edries, Deputy Director General: Employment Facilitation within the Jobs Fund:
“The Jobs Fund supports this initiative in recognition of the critical role that SMEs play in creating a more inclusive economy and job creation and also because it will contribute toward CDI becoming a more self-sustaining entity. The aim of this initiative is to provide appropriate financing options to SMEs in the craft and design sector in order to catalyse sustainable growth which will result in attracting further investment into a sector that has often been neglected. The introduction of a revolving loan facility will not only ensure that over time more SMEs can benefit from access to finance, the enhanced revenue streams will also contribute to the CDI’s goal of becoming a sustainable entity in its own right.”
Mr Vusi Skosana, Head: Technology Stations & IATs (TSP) at TIA, said that the Technology Innovation Agency (TIA), an agency of the Department of Science and Technology, was established with an objective to support the State in stimulating and intensifying technological innovation in order to improve economic growth and the quality of life of all South Africans by developing and exploiting technological innovations.
Solly Fourie, Head of Department, Department of Economic Development and Tourism, Western Cape Government:
“We know that there is a strong need to develop and improve the socio-economic conditions of the citizens in our region. To this end, the creation of a healthy and vibrant regional innovation system can be a catalytic driver of sustainable economic growth and development. But neither DEDAT, nor the WCG, are able to tackle this alone. The partnerships created through the Seed Fund and Jobs Fund; and initiatives like it, go a long way to creating an enabling regional innovation system in which we collectively draw on the Quad helix’s expertise and resources; promote local industry and attract and grow innovative businesses. By doing this, we are crafting the best possible conditions for businesses to develop in this region.”
Start-ups Require A Strong Legal Foundation Webber Wentzel Ignite
Entrepreneurs, start-ups and scale-ups are a lifeline to South Africa’s economy.
Entrepreneurs, start-ups and scale-ups are a lifeline to South Africa’s economy. It is however a harsh environment and many entrepreneurs find themselves in a situation where they are wearing many hats and navigating potential pitfalls without the knowledge that many professionals have from years of experience.
This is especially true from a legal point of view where entrepreneurs are faced with real world regulatory challenges that could have far-reaching consequences on their fledgling business, such as financial regulatory, tax, exchange control and intellectual property.
A common example is that start-ups often forget to secure the rights and licenses they need to operate. For example, would you invest or partner with a company that:
- doesn’t have a legal right to use their brand
- doesn’t have proprietary technology; and/or
- is reliant on a third party agreement that doesn’t permit commercial use?
Related: How To Raise Working Capital Finance
These avoidable shortcomings often result in failures at critical junctures. The specialist legal services needed to avoid these problems are typically not easily accessible to start-ups.
With this in mind, Webber Wentzel has launched a project called ‘Webber Wentzel Ignite’ – a legal incubation programme that will provide selected entrepreneurs and innovators from any sector with:
- tailored legal services valued at up to ZAR 100,000;
- bespoke mentoring and training support – focused on legal knowledge and developing key legal skills relevant to start-up businesses; and
- targeted networking and profile-raising opportunities.
Video about Ignite
Webber Wentzel is not asking for equity or exclusivity; only an opportunity to connect and make a difference as a trusted advisor over the long-term. It is a wonderful opportunity that will set the selected entrepreneurs apart in the marketplace. Applications close on 15 January 2018
SMMEs So Much Focus On Funding, But What About Skills
A study by StatsSA which surveyed households and obtained evidence relating to skills development and unemployment between 1994 and 2014 showed the following.
I think we can all agree that the funding of small businesses is only part of the solution. What is possibly more important (as an enabler) is the initial assessment of the level and adequacy of skills existing within new or developing enterprises and to evaluate what further skills development or training is required to ensure a firm business foundation and sustainable growth is achieved.
A study by StatsSA which surveyed households and obtained evidence relating to skills development and unemployment between 1994 and 2014 showed the following:
- During this time frame across the South African working population of households there was an increase in skilled labour (21% to 25%), with a shift away from semi and low-skilled labour.
- What is interesting to note in the growth of skilled labour is the disparity within the different race groups.
*For the purpose of this analysis, the occupation types were used to infer skills levels based on the Quarterly Labour Force Survey. Skilled: manager, professional, technical. Semi-skilled: sales and services, clerk, machine operator. Low-skilled: domestic worker.
This is clear evidence that the role of enterprise and supplier development is a crucial one needed to up-skill and train the broader population. It is one thing to provide finance and access to markets, but without the appropriate skills development to make these investments sustainable is would be a fruitless exercise.
The role that the private sector plays in post investment business support and capacity building is incredibly important. There is a requirement to build both technical skills as well as overall business management skills. This in my view is when we will start seeing real impact. In order for the enterprises to be effective in the contracts that they are awarded a focus on skills development (by both parties) is required.
In an economy where growth has crawled to a near halt, SMMEs cannot be expected to be the holy-grail for job creation. Making an impact in increasing the potential salary earning or employable workforce is key and therefore skills development requires a multi-faceted approach:
- From early education phase – where emphasis must be placed at school level for entrepreneurship training and opportunities is a key enabler. Entrepreneurship should in essence become a career option to consider. Innovation must be incubated. The world is changing and the skills required to be productive are changing as well.
- Clear regulations and commitment to quality interventions should be stipulated at policy level to incentivise skills development/ skills transfer from large corporates to small businesses.
- Without looking at the bigger picture these developmental areas are without support – so a holistic approach to skills development – mentorship, networking and overall business acumen are skills that often distinguish between those who do well and those who don’t in business. It needs to all work harmoniously and as an effective and efficient ecosystem reliant on each other’s strengths and support and mutually beneficial objectives.
At the end of the day, an enterprise should leave an ESD programme empowered to stand and survive in the business world. We know that we are losing the challenge when time and time again we see developing enterprises moving from one ESD programme to another with nothing to show for it. Monitoring and evaluation of these enterprises is therefore also essential to track growth and success – but also to identify areas of weakness or need for further intervention.
At the heart of ESD is the notion that larges businesses/ corporates should move beyond compliance (aka box-ticking) and toward the heart of transformation. Intertwined here is the responsibility to use development interventions and activities in a deliberate and focused manner so that the skills level in small businesses can move upwards and ensure the longevity and success of growing enterprises.
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