Study shows how South African companies are managing their innovation

The Global Innovation Survey done at the end of 2011 showed that South Africa dropped 16 places since 2009, from 43^rd to rank a disappointing 59^th, in terms of innovativeness.

Other top findings:
* In South Africa, most organisations view innovation as a source of competitive advantage and are focusing their innovation mainly on product innovation (60.5%) and business model innovation (57.9%).
* Most of the innovation outcomes in these industries are process-orientated or incremental in nature, and the ultimate benefit of this type of innovation outcome is often difficult to measure.
* South African organisations focus more on incremental innovation (50%) than radical innovation, but in most instances there is a combination of focus areas. Organisations are not concentrating on one type of innovation at the expense of another.
* 85.4% of those polled see the development of an innovation strategy as critical to innovation, only 44.9% of organisations have an innovation strategy in place.
* Creativity and lateral thinking is viewed as both a critical activity and a standard requirement for innovation success.
* Innovation activity predominantly takes place in an ad hoc manner and reward and recognition mechanisms are not addressed adequately (38.8% actively reward innovation efforts).
* Only 26.8% actively measure the outcomes of their innovation.

Read below for further detail:

The importance of innovation in the organisational environment is constantly debated and emphasised. It is not new, but it is most certainly a hot topic. If you Googled 'definition of innovation' back in 2008, you'd have 2.5 million results; two years later, 26.4 million; in early 2011, 66 million hits; and on 26 October 2011, 125 million. Globally - people are becoming interested in the notion of innovation.

In the recent Global Innovation Survey, South Africa dropped 16 places since 2009 from 43^rd to rank a disappointing 59^th in terms of innovativeness.

To find out how South African companies are addressing innovation, two local companies, Innocentrix and Digital Bridges, both residents at The Innovation Hub, teamed up to conduct an insightful poll on innovation in South Africa. The intention of the innovation poll was to get an impression of the type of innovation management practices adopted in South Africa.

Henra Mayer, CEO of Innocentrix, and Kate Elphick, director at Digital Bridges, investigated innovation management approaches and structures, innovation measurement and methods of demonstrating innovation value, type of innovation focus and important elements for successful innovation in the organisational environment. They also posed general questions around innovation enablers and challenges, and solicited responses on the distinguishing factors between successful and unsuccessful organisations.

Results:

The results - which the researchers admitted included a bias towards innovation-focused organisations and individuals - provide current insights which beef up the recently released 2008 South African Innovation Survey and put a South African spin on the findings of the 2011 Global Innovation Index.

In South Africa, most organisations view innovation as a source of competitive advantage, and are focusing their innovation mainly on product innovation (60.5%) and business model innovation (57.9%).

The sample consisted mostly of the general business (33.3%), finance (31.4%) and government and parastatal (16.6%) sectors. Most of the innovation outcomes in these industries are process-orientated or incremental in nature and the ultimate benefit of this type of innovation outcome is often difficult to measure.

South African organisations focus more on incremental innovation (50%) than radical innovation, but in most instances, there is a combination of focus areas. Organisations are not concentrating on one type of innovation at the expense of another.

Similar results are found on the types of innovation focus in other parts of the world. Although 85.4% of those polled see the development of an innovation strategy as critical to innovation, only 44.9% of organisations have an innovation strategy in place. Creativity and lateral thinking is viewed as both a critical activity and a standard requirement for innovation success. Project management software for project implementation (59%), general innovation training (56.1%) and resource planning (55%), are also viewed as standard requirements expected to be in place in support of innovation.

The ability to demonstrate value from investment in innovation still seems to be a major challenge. Almost half of the organisations surveyed (46.3%) commented that they do not actively measure innovation outcomes and therefore are unable to tell whether innovation efforts are impactful or whether they add to the bottom line.

Some interesting comments summarise the findings of this poll:

* Innovation remains something that is prized, but not managed or driven adequately.
* Innovation management has to really put a lot of emphasis on the softer issues around employees.
* Innovation needs to be part of an organisation's strategy for it to be effective.
* People often feel like lone rangers and would appreciate the backing of an institution.

The results of this poll provide an emerging picture of South African organisations as very aware of the importance of innovation. Organisations also know what should be done in this regard, for example, formal strategic planning, networking, interaction, collaboration, measurement and external link.

It is, however, evident that the required level of strategic intelligence for innovation is not yet in place at most firms. Innovation activity predominantly takes place in an ad hoc manner and reward and recognition mechanisms are not addressed adequately (38.8% actively reward innovation efforts), and innovation value are not sufficiently demonstrated (only 26.8% actively measure innovation outcomes). This reinforces the view that innovation receives more lip service than actual strategic support or financial backing.

The picture of the state of innovation in South Africa is not rosy, but the good news is that South African organisations are realising the importance of innovation and that the necessary steps are being taken in the right direction.

One of the stand-out South African initiatives is the science and technology park, The Innovation Hub, the purpose of which is to catalyse development and commercialisation of innovations with potential to contribute to the socio-economic development and competitiveness of Gauteng and South Africa. More of these initiatives are needed throughout the country though.

So, how does this result compare to the status quo in other countries? Henra Mayer, CEO of Innocentrix, says there are always exceptions, but according to Professor Oerlemans, full professor in Organisation Studies and founding member of the Centre for Innovation Research at Tilburg University, the Netherlands and extraordinary professor Economics of Innovation at the Graduate School of Technology Management, University of Pretoria, South African organisations still lag behind their counterparts in other parts of the world (EU, USA, East Asia) in terms of successful innovation management.

“This, however, might have something to do with the industrial composition of our country,” she says. “Although the picture is changing, manufacturing, raw material extraction (mining) and agriculture, together with the suppliers to this industry, still represent a substantial part of our economic activity. Local R&D spend does not compare with that of other countries, while the advanced economies are largely made up of services representing a more progressive knowledge economy.”

Kate Elphick, director of Digital Bridges, concludes that if South Africa is going to compete with the rest of the world in innovation, it is going to have to improve the consistency and effectiveness of its innovation activities and invest more strategic thinking into creating competitive advantage.

“There is still much that needs to be done to actively grow innovation as an inherent competence in this country. Innovation activities are still in the process of being addressed, or are taking place by means of trial and error,” says Elphick.

She drives her point home by quoting Booz Allen Hamilton, who reviewed the top 1 000 corporate spenders on R&D every year, and found there is almost no relationship at all between spending on innovation and superior financial returns. What they did discover, though, was that those companies with a deliberate innovation process - one with links to corporate strategy and customer needs - achieved up to 40% higher growth in their operating income as a result.