The fastest economies growing economies in the world are in the continent called Africa – Ghana (7.6%), Rwanda (7.8%) and Ethiopia (8.5%).
The growth of these economies can be attributed to market-creating innovations. Firms operating in these 3 economies understood that the key to long term growth and profitability is making products that are market-creating innovations. As a result, the economies have enjoyed growth and economic prosperity at the aggregate.
For investors (local and foreign) seeking business opportunities in Africa, it is important to understand the dynamics of the economies in the continent, seek innovations; a business without innovation strategy cannot innovate and create.
How can a company seeking to enter a complex continent as Africa innovate?
First, one must understand what really are innovations and different forms.
Innovation is a process of implementing new ideas to create value. This may mean creating a new product, service, system, or process, or enhancing existing ones.
Forms Of Innovation
Sustaining innovation: this is the form of innovation that continues; maintain the current output’s dimensions.
Innovation can also be continuous or discontinuously; it is continuous when an innovation follows a chronology or series of progressions without divergence from the existing pattern. While discontinuous innovation deviates from the status quo and enters a new dimension with great impact.
For instance, towards the end of every year, Apple (maker of iPhones and its accessories) is expected to come up with a new product, an iPhone with better performing features than the existing one. These innovations are for previous iPhone users and high-end customers. This innovation type goes for more money and it is good for innovation and advanced economies. However, their impacts are minimal, especially for emerging economies in Africa. How many people in the crowded bottom of the income pyramid in Africa can afford an iPhone that cost between 500 USD and 700USD?
Efficiency Innovations: An efficiency innovation is doing more with little or less. This innovation type enables firms to direct available resources from doing more with less to other production activities or process.
For instance, when a firm decides that instead of importing textile materials from Nigeria for factories in China. The firm now set up factories in Nigeria where the raw materials are in abundance, in addition to flexible labor laws and favorable foreign exchange. The firm has been able to free resources (cost of sourcing raw materials, insurance, freights cost). This eliminates jobs in China and creates new jobs in Nigeria.
The two innovations above sound fantastic however they do not enable long-term growth for firms, as well as economic growth and prosperity for the economy.
So what innovation type allows firms to enjoy long term growth and profitability and at the same time enables economic prosperity?
The Way Forward
Market-creating innovations enable expensive products affordable and accessible. These are products that only those at the top of the income pyramid can afford but now become accessible and affordable to the poor, about 700 million low-income earners. In addition, it creates new jobs, new products, value additions, solves distribution chains problems among others.
A good example is Tecno, an Asian manufacturer of mobile devices specifically for the African markets.
A Tecno phone cost around 20 USD, a smartphone with amazing features such as radio, better camera for dark skin, music player among others for the low-end income earners.
The rural poor people can now use their phones to advertise, offer their expertise to those in need of them.
The financial technology (fintech) and agriculture technology (agtech) companies are front runners, creating products that are affordable and accessible. In return, these firms are expanding rapidly, scaling in size and revenues, creating multiple products and services along the line.
M-Pesa, a market-creating innovations product, that enables people to send money and receive via SMS, pay bills, top-up their solar energy subscriptions among others.
AgroCenta, FarmDrive, AgroSpaces, and Farmerline are agriculture technology companies reducing barriers in communications such as language, literacy in farming by using technologies and digital devices to make available financial tips, weather forecasts, market information, and farming advice to the farmers.
What the continent needs most now is market-creating innovations across all sectors such as healthcare, insurance, value-addition among others. This is not far-fetched and unattainable.
Remember, “Firms trade, Countries do not trade”
- Adetunji Bolorunduro – Building A Strong Strategy To Win In Africa “https://www.gtejmedia.com/building-a-strong-strategy-to-win-in-africa/”
- Adetunji Bolorunduro – Opportunities In The Agricultural Sector in Africa “https://medium.com/adetunji-teejay-bolorunduro/opportunities-in-the-agricultural-sector-in-africa-62a0a225fd5d”
Adetunji Bolorunduro has expertise in Business Strategy, Business Development and Chinese Investments in Africa. He writes regularly for Richtopia, Africa Business Chamber of Commerce among others.
In addition, he is a co-founder of China Link Education (www.china-link-edu.com) and AfricaCv.com