How Africa Can Eliminate Poverty with Market-Creating Innovation I

As the saying goes: ‘necessity is the mother of innovation’. This justifies the fact that, many countries have experienced several breakthrough in innovation during crisis such as natural disaster, epidemic, war amongst others.  These crises triggered the invention of technologies and ideas that leapfrogged some countries to their current developed state. But in Africa, a continent gripped with unemployment, poverty, hunger and more, the case is different. Africa’s poverty rate is yet to spark creative thinking and action to save the continent from poverty. For instance:

In the early 1880s when the Switzerland’s cold winters (bad weather) forced many Swiss farmers indoors, they did not die of hunger or migrate to other nations, but this helped them to find work creating and assembling watch components indoor. As a result, Swiss watchmakers were able to produce watches at much higher volumes than their rivals.

Rather than find sustainable solutions to Africa’s current economic situation, African leaders have become international beggars, engrossed with constant solicitation of grants and mortgaging the future generations with unrepayable loans from other continents.

The common trend is that Africa is now a dumping ground for used items and goods made by other continents. These goods create jobs, add values to the producers’ capitals and assets, as well as create markets to improve the living standard of other continents prior to their importation in Africa.  With this, the goods do not contribute to the growth of African Gross Domestic Product (GDP), as GDP measures the total value of everything produced by all the people and companies in the country. Economically, this reflects negatively in Africa’s balance of trades with other continents. So, whenever Africans import, they shrink their hard currency reserves and devalue their indigenous currency.

All hope is not lost. To create sustainable economic development and lift Africa from the agony of poverty and hunger, we need leaders, innovators, entrepreneurs and businesses to make serious commitment to market-creating innovation.

How Market-Creating Innovation Can Develop Africa

Africa’s ability to sustain its economic growth will depend mainly on how quickly it will be able to shift from reliance on traditional commodity markets to modern economic structures that focus on market-creating Innovation, which is defined as innovation that transforms existing product and service offerings into products and services that are cheap enough and accessible enough to reach an entirely new population of customers. Because this type of innovation opens up new markets and embraces new consumers, it thereby makes economies expand by creating new jobs as new supply chains are created around them. It makes complex and expensive products simpler and affordable and attractive to previous non-consumers, that is, the segment of the population who would benefit by owning a product, but cannot afford it due to the product’s cost or its complexity. This is what Africa needs, because when you create a business that targets a segment of the market that has never been targeted in Africa, you will inevitably hire people to make, distribute, sell, and service the product.

Other types of innovation exist such as: disruptive, creative destruction, performance-improving innovations and more, but they often involve leveraging technology that enables the company to produce more products with less staff because they are substitutive. By contrast, market-creating innovations will be distinct in their ability to create many jobs in Africa because of their relentless focus on non-consumption. If African nations should target non-consumption, they will build potential to develop businesses that can create enormous wealth and can also have transformative developmental impacts. Market-creating innovations in this case will pull people from non-consumption of a particular product or service to consumption by developing a profitable business model targeted at the majority of people in Africa who, historically, could not afford the product or service. For instance:

In the early 1900s, only extremely wealthy people in the United States could afford automobiles and less than 10% of U.S roads were paved. When Henry Ford informed his partners and investors that he wanted to develop cars that the average American could afford, Malcomson’s banker and uncle, John Gray, put in $10,500 into the venture.

A massive effort to develop American roads went underway shortly after with funds from gasoline taxes. In this case, the innovation caused the economic development and infrastructure spending. Before Henry Ford democratised automobiles, there were more than 1,000 automobile manufacturers in the United States. Most of them focused on sustaining innovation and efficiency innovation that were targeted at the richest members of society and as such, had limited impact on the U.S economy when compared to Ford Motor Company.

This indicates that by investing in market creating innovations, African nations can reap enormous returns, create jobs, and engender economic growth that stimulates national development. It is never late to begin in this journey. As a latecomer, Africa has the benefit of tapping into vast quantities of market-creating innovations worldwide. For example, the continent’s leapfrogging into the mobile revolution in the late 1990s illustrated the power of latecomer advantages. For instance:

Sudanese billionaire, Mo Ibrahim, tapped into this struggle when he built Celtel long after GSM revolution in other continents. In 1998, he started a wireless telecommunications company in Malawi, Zambia, Sierra Leone, and Congo, some of the poorest countries in the world. Mr. Ibrahim’s company, Celtel, opened up new markets and embraces new consumers, creating new jobs and supply chains in countries where it operated. Seven years later, and after building a business model targeted at non-consumption, he sold his company for $3.4bn.

The Role of African Leaders

At the end of the day, African leaders must realise that it is not societies or governments that create jobs, but it is entrepreneurs and businesses that choose to spend or not, invest or not, hire or not. This insight should give African leaders and policymakers the ability to collaborate with companies, entrepreneurs, and investors as never before to create the conditions most likely to unlock sustainable economic growth in Africa.

But one thing is sure, developing market-creating innovations requires greater investment in smart government than in the common practice of extractive based development in Africa. We must enhance ease of doing business in Africa and support any well-established investment and innovation with capacity for transformative economic development and national prosperity.

While we have considered this, it is also noteworthy to consider the all-inclusive innovation – sustainable innovation. Find out from our next article how sustainable innovation can help Africa to achieve the United Nations Sustainable Development Goals (UN SDGs) by the year 2030.

Retrospect

1. Can Businesses Really Exist Without Causing Harm?
2. Why Extractive-Based Nations Fail: Between Resource and Knowledge-Based Economies
3. 2018: The Nigeria We Want
4. Towards The Bleak Future of Crude Oil: What Nigeria Should Do Now
5. Fiscal Sustainability: Between Nigeria’s Debt Plan and the 2018 Budget
6. Mainstreaming Street Hawking in a Formal Economy: An Inclusive Approach to Development
7. Nigeria’s Economic Growth in 2018 and the Hope of the ‘Common Man’.
8. The Reality of Nigeria’s Recession Exit: Between GDP Growth and Sustainable Development
9. Financial Inclusion: Are Nigerian Banks Getting it Right?

Reference

1. Create New Jobs With Market-Creating Innovations. PwC, 23 March 2016
2. Entrepreneurship and Sustainability (v. 1.0)
3. Eight Attributes of Successful Market Creating-Innovations. Efosa Ojomo, Aug 24, 2016
4. Greater Awareness of the Effects of Innovation. Jan Willem Velthuijsen
5. How African innovation can take on the world. Calestous Juma, CNN, August 15, 2013
6. Making the Case for Market Creating Innovations — a Look at the Ford Model T. Efosa Ojomo, Harvard Business School, Dec 1, 2015
7. New View on Innovation from Christensen. Gregory Smith, December 24, 2014
8. Sustainable Innovation: A Competitive Advantage for Innovation Ecosystems. Kaisa Oksanen, Antti Hautamäki, October 2015
9. Sustainable Innovation: Key conclusions from Sustainable Innovation Conferences 2003–2006. Martin Charter & Tom Clark, The Centre for Sustainable Design, May 2007
10. The Power of Market Creation. How Innovation Can Spur Development. Bryan C. Mezue, Clayton M. Christensen, and Derek van Bever, January/February 2015 Issue
11. 3 Big Differences between Sustainable Innovation and Regular Innovation. Lavery Pennell, 20 Jul 2015