Monday, October 8, 2012

NATIONAL INNOVATION SYSTEMS AND THE NIGERIAN CHALLENGE



 
The Need for Innovation

Developing nations with unique features like large market size and growth rate, access to regional markets and skilled/cheap labour, have a lot to offer. Asides serving as consumer nations and probably manufacturing centres due to relatively cheaper labour, the earnings of these nations would be greatly increased when they begin to add a certain level of originality to their products.

For such nations, their global competitiveness can be greatly increased when it is difficult to find alternatives for their products and services without violating proprietary rights. In many of Nigeria’s industrial sectors, finding originality would be the next step after achieving an effective manufacturing capacity and the firms that would solve this riddle would be the kings of the future.

The nation of India, for example, has achieved tremendous feats in becoming one of the manufacturing hubs of the world. She has, however, not particularly done well in the area of increasing home-grown innovation contribution. This shallowness would be the bane of developing nations that rely more on assembling and manufacturing (rent-seeking) led industrialisation without commensurate increase in innovative capacity.

This concern is justifiable because, though manufacturing and assembling is a great place to start as it opens up the nation to direct foreign investment, the demands for the product of such industries can change with changes in the technological, political and economic landscape. This was the case with some South Asian nations like Vietnam and Malaysia when the multinational companies moved to more promising India and China. The future of a nation’s economy is more assured when they’re the ones creating the products of the future and not just the place to mass produce them.

In this respect, Nigeria though far from achieving sufficient manufacturing and assembling capacity can create a system of innovation that could help her lead the future in a post-industrial knowledge based economy. One major likely advantage is that unlike India, China and other South Asian countries that built their economies around rent provision for Multi-National Companies, Nigeria may not suffer the inertia that such institutional paradigms creates. It could be easier to build a knowledge-based industry from the scratch than to transform a purely mass-production paradigm to an innovation hub.

Innovation, however, does not just come about. According to the founder of modern management, Peter F. Drucker, it is a product of a cold-eyed commitment to the source of innovation; it demands deliberate inquiry and organisation.

What really is innovation?

Innovation is the means by which entrepreneurs either create
new wealth-producing resources or endow existing resources
with enhanced potential for creating wealth - Peter Drucker

Innovation is the profitable implementation of strategic creativity
- Elaine Dundon

National Innovation Systems

The term “National Innovation Systems” is used to describe the set of complex processes of interactions between private and public actor-institutions that are involved in the development, transmission, modification and commercialisation of new knowledge and technology within a nation. It is a process-based concept that seeks to evaluate the innovative capacity of a nation from the standpoint of the processes that lead to innovation.

The Innovation system approach is a deviation from the linear approach that evaluates inputs rather than processes and linkages. Before the concept of National Innovation Systems became common, a Nation like Nigeria could assess her commitment to developing new technologies and enterprise by measuring the amount of funds committed to research and development in both the public and private sector: the number of publications from her academic institution, the number of postgraduate qualifications and also by the amount and ease of access to R & D funding by the Industry.

The linear approach assumes that as long as researchers engage in research activities and government provide the right incentives that someday, the spark would happen. This has not been found to be true; experience has shown that the level of interaction between the actors plays a more important part. Like a chemical reaction, Innovation requires some raw materials to happen but catalysts are often required to reduce the barriers to change and ensure that useful outcomes emerge. Hence, the emphasis should be on the quality of the linkages and not just the quantity of inputs. Also, the demands for the outcomes of this chemical reaction should be sustained so as to ensure a self-sustaining reaction.

It is observed that certain localities happen to have a relatively higher level of innovative capacity. In these regions, nations or parts of a nation, the amount of inputs and the degree of interaction required for innovation to happen has been achieved and sustained. This is seen in the notable trend towards the creation of specialised knowledge centres near leading universities that are oriented towards research and development on particular technologies.

The Silicon Valley in California (near Stanford University and the University of California), a biotechnology cluster in the Boston area (near the Massachusetts Institute of Technology) and a communications cluster in New Jersey (near Princeton University and the former Bell Laboratories) are examples of such innovation-clusters in the United States of America.

In these clusters, we can say that a self-sustaining reaction has been achieved as high levels of technical collaboration, technology diffusion and personnel mobility within these sectors has contributed to the improved innovative capacity of enterprises in terms of products, patents and productivity.

Nigeria’s National Pharmaceutical Innovation System

Within the Nigerian Pharmaceutical Industry, for example, the actor-institutions include the pharmaceutical companies, academia, public pharmaceutical research institutions, clinical research centres, technology transfer offices, government, financial institutions, media, and knowledge management consultancy firms.



Fig. 1 Schematic Representation of National Innovation Systems

The concept of National Innovation Systems is based on the premise that provided there are sufficient inputs from the actor institutions like increase in Research and Development funding, increased access to finance, technology transfers and adequate government policy and regulation. The focus should be on aligning the interests of these actors and decreasing barriers that militate against such interactions.

These interactions could be in the form of industry-sponsored research collaborations, contracts, research industry forums and technology prizes.

An examination of the level and efficiency of the interaction between these actors would provide valuable insight on the state of the Nigerian Innovation System. The quantity and quality of the interactions between actor-institutions in this industry could be evaluated along these lines:

1.               Interactions among enterprises, primarily joint research activities and other technical collaborations.
2.               Interactions among enterprises, universities and public research institutes, including joint research, co-patenting, co-publications and more informal linkages.
3.               Diffusion of knowledge and technology to enterprises, including industry adoption rates for new technologies and diffusion through machinery and equipment; and
4.               Personnel mobility, focusing on the movement of technical personnel within and between the public and private sectors.

From my experience in the knowledge management Industry, the actor-institutions within the Nigerian pharmaceutical ecosystem have achieved a certain level of development sufficient to be active participants in sustainable innovative systems. The missing link, I believe, is the deliberate commitment to processes that ensure sufficient and effective interactions. This will demand conscious steps to remove the traditional barriers that impede these interactions.

In other industries, the actor institutions may not have been well developed and the development of such institutions is the first place to start. A major Industry of concern is the agricultural sector which is in dire need of innovative strategies. Besides the development of innovative products and processes, a major area that requires innovation is in management. The need for management innovation is very much needed across the actor-institutions to ensure quality linkages.

Areas for Innovation
The challenge is therefore three-fold:

a.      To create value (product and service innovation)
b.      To offer value (process innovation)
c.       To sustain the offering (management innovation)

Let’s consider a software developer who has completed a demo for an enterprise information system that would be of great help to a particular segment of the manufacturing industry. The software developer has succeeded in creating a solution. His work must have been helped by the things he learnt at the university (actor-institution). The strategy for offering that solution to the market in a way that assures maximum profitability for him is often of more significance than the solution itself. Assume that he would need additional financing (another actor) to be able to get his solution across to the market (as a company most likely) that needs his software. How can he negotiate to obtain this finance, reach his market and still maintain considerable ownership of the proceeds of his invention? The strategy that answers these questions is often an innovation in itself.

The processes that would help this innovator create, modify, own, transmit and sustain the provision of his innovation demands a lot of linkages across different institutions like: Academia, Private firms, Intellectual property offices, trademarks, financial institution (debt or equity) and the government who regulates the business arena.

Definitions
Product innovation is the development of new products or services with enhanced value or the addition of greater value to old products or services. Google, Facebook, iPod, iPad and BlackBerry are product innovations.

Process innovation is exemplified by Michael Dell’s direct sales marketing of computers, e-bay’s online sales of virtually everything and Apple’s iTunes application that sold single tracks rather than the conventional CD album. These firms did not develop new products or services; rather, they developed new and better processes for doing the same things.

Management innovation was what happened with the development of the Franchise system for business expansion. It is seen in the management style at Apple Computers. At Onel Consults Ltd, a business development consultancy firm in Nigeria, the management system is such that allows a horizontal leadership structure and an ownership structure for employees.
Venture financing and public limited liability companies are more or less a system of management innovation.

The challenge therefore is to allow each actor to understand their roles within this system and maximise their contribution by achieving effective interaction.

WHY NATIONAL INNOVATION SYSTEMS?

Some of the many reasons for this overwhelming need for such relationships include:

1.      The application of knowledge is the value expanding factor for all resources.
2.      Global competitiveness and mass scale production has placed a huge demand for greater productiveness.
3.      Economic activities have become increasingly knowledge-intensive.
4.      In today’s world, the determinants of success of enterprises, and of national economies as a whole, are  increasingly  more  dependent  on  their effectiveness  in  gathering  and  utilising knowledge  whether they be in the private sector, public  sector or academia. 
5.      Knowledge is domiciled in people, proprietary documents and institutional systems.
6.      The increasing cost of developing new products and services requires effective collaboration.

Given the relatively different paradigms that exists within the industry, government, research institution and the myriad of other concerns that relate to intellectual property management; actor-institutions that promote interaction within the national innovation system would have a great role to play in achieving a sustainable innovation system within the Nigerian industrial sectors.

As shown above, at the heart of the National Innovation System is the innovative firm which must find within the myriad of actors; processes and strategies that would result in the profitable development of new products and services. The role of the government would be to stimulate greater inputs across the participating actor-institutions and reduce barriers to interaction.

The Nigerian Science, Technology and Innovation Policy document that was released of late has these words as the statement of commitment from the president, Goodluck Ebele Jonathan.

”We are going to run our economy based on Science and Technology….because there is nowhere in this World now that you can move your economy without science and technology. For the next 4 years we will emphasize so much on S&T because we have no choice, without that we are just dreaming….”

The President is very much correct; towing the path of innovation is no longer the characteristic high sounding ideals of beady eyed researchers or is it restricted to corporate vision statements hung on the wall to massage the ego of executives and perhaps impress shareholders. Driving innovation in today’s global knowledge economy is basically a question of survival.

For many Nigerian industries, it could decide who would be here ten years from now.

References

1.      Drucker, P.F. (2003). The Discipline of Innovation. In Best of HBR, The Innovative Enterprise, Harvard Business Review, EBSCO Publishing.
2.      Federal Republic of Nigeria, (2011). Science, Technology and Innovation (STI) Policy, September, 2011.
3.      Okwonna, N. (2012). The Heart and Art of Innovation, Onel Media Services, Lagos, Nigeria
4.      Organisation for Economic Co-Operation And Development. 1996. National Innovation Systems, 1996.
5.      Rajan, Y. S. (2012). ‘Shaping the National Innovation System - The Indian Perspective.’ The Global Innovation Index 2012, Chapter 7, p. 131-141

NATIONAL INNOVATION SYSTEMS AND THE NIGERIAN CHALLENGE



 
The Need for Innovation

Developing nations with unique features like large market size and growth rate, access to regional markets and skilled/cheap labour, have a lot to offer. Asides serving as consumer nations and probably manufacturing centres due to relatively cheaper labour, the earnings of these nations would be greatly increased when they begin to add a certain level of originality to their products.

For such nations, their global competitiveness can be greatly increased when it is difficult to find alternatives for their products and services without violating proprietary rights. In many of Nigeria’s industrial sectors, finding originality would be the next step after achieving an effective manufacturing capacity and the firms that would solve this riddle would be the kings of the future.

The nation of India, for example, has achieved tremendous feats in becoming one of the manufacturing hubs of the world. She has, however, not particularly done well in the area of increasing home-grown innovation contribution. This shallowness would be the bane of developing nations that rely more on assembling and manufacturing (rent-seeking) led industrialisation without commensurate increase in innovative capacity.

This concern is justifiable because, though manufacturing and assembling is a great place to start as it opens up the nation to direct foreign investment, the demands for the product of such industries can change with changes in the technological, political and economic landscape. This was the case with some South Asian nations like Vietnam and Malaysia when the multinational companies moved to more promising India and China. The future of a nation’s economy is more assured when they’re the ones creating the products of the future and not just the place to mass produce them.

In this respect, Nigeria though far from achieving sufficient manufacturing and assembling capacity can create a system of innovation that could help her lead the future in a post-industrial knowledge based economy. One major likely advantage is that unlike India, China and other South Asian countries that built their economies around rent provision for Multi-National Companies, Nigeria may not suffer the inertia that such institutional paradigms creates. It could be easier to build a knowledge-based industry from the scratch than to transform a purely mass-production paradigm to an innovation hub.

Innovation, however, does not just come about. According to the founder of modern management, Peter F. Drucker, it is a product of a cold-eyed commitment to the source of innovation; it demands deliberate inquiry and organisation.

What really is innovation?

Innovation is the means by which entrepreneurs either create
new wealth-producing resources or endow existing resources
with enhanced potential for creating wealth - Peter Drucker

Innovation is the profitable implementation of strategic creativity
- Elaine Dundon

National Innovation Systems

The term “National Innovation Systems” is used to describe the set of complex processes of interactions between private and public actor-institutions that are involved in the development, transmission, modification and commercialisation of new knowledge and technology within a nation. It is a process-based concept that seeks to evaluate the innovative capacity of a nation from the standpoint of the processes that lead to innovation.

The Innovation system approach is a deviation from the linear approach that evaluates inputs rather than processes and linkages. Before the concept of National Innovation Systems became common, a Nation like Nigeria could assess her commitment to developing new technologies and enterprise by measuring the amount of funds committed to research and development in both the public and private sector: the number of publications from her academic institution, the number of postgraduate qualifications and also by the amount and ease of access to R & D funding by the Industry.

The linear approach assumes that as long as researchers engage in research activities and government provide the right incentives that someday, the spark would happen. This has not been found to be true; experience has shown that the level of interaction between the actors plays a more important part. Like a chemical reaction, Innovation requires some raw materials to happen but catalysts are often required to reduce the barriers to change and ensure that useful outcomes emerge. Hence, the emphasis should be on the quality of the linkages and not just the quantity of inputs. Also, the demands for the outcomes of this chemical reaction should be sustained so as to ensure a self-sustaining reaction.

It is observed that certain localities happen to have a relatively higher level of innovative capacity. In these regions, nations or parts of a nation, the amount of inputs and the degree of interaction required for innovation to happen has been achieved and sustained. This is seen in the notable trend towards the creation of specialised knowledge centres near leading universities that are oriented towards research and development on particular technologies.

The Silicon Valley in California (near Stanford University and the University of California), a biotechnology cluster in the Boston area (near the Massachusetts Institute of Technology) and a communications cluster in New Jersey (near Princeton University and the former Bell Laboratories) are examples of such innovation-clusters in the United States of America.

In these clusters, we can say that a self-sustaining reaction has been achieved as high levels of technical collaboration, technology diffusion and personnel mobility within these sectors has contributed to the improved innovative capacity of enterprises in terms of products, patents and productivity.

Nigeria’s National Pharmaceutical Innovation System

Within the Nigerian Pharmaceutical Industry, for example, the actor-institutions include the pharmaceutical companies, academia, public pharmaceutical research institutions, clinical research centres, technology transfer offices, government, financial institutions, media, and knowledge management consultancy firms.



Fig. 1 Schematic Representation of National Innovation Systems

The concept of National Innovation Systems is based on the premise that provided there are sufficient inputs from the actor institutions like increase in Research and Development funding, increased access to finance, technology transfers and adequate government policy and regulation. The focus should be on aligning the interests of these actors and decreasing barriers that militate against such interactions.

These interactions could be in the form of industry-sponsored research collaborations, contracts, research industry forums and technology prizes.

An examination of the level and efficiency of the interaction between these actors would provide valuable insight on the state of the Nigerian Innovation System. The quantity and quality of the interactions between actor-institutions in this industry could be evaluated along these lines:

1.               Interactions among enterprises, primarily joint research activities and other technical collaborations.
2.               Interactions among enterprises, universities and public research institutes, including joint research, co-patenting, co-publications and more informal linkages.
3.               Diffusion of knowledge and technology to enterprises, including industry adoption rates for new technologies and diffusion through machinery and equipment; and
4.               Personnel mobility, focusing on the movement of technical personnel within and between the public and private sectors.

From my experience in the knowledge management Industry, the actor-institutions within the Nigerian pharmaceutical ecosystem have achieved a certain level of development sufficient to be active participants in sustainable innovative systems. The missing link, I believe, is the deliberate commitment to processes that ensure sufficient and effective interactions. This will demand conscious steps to remove the traditional barriers that impede these interactions.

In other industries, the actor institutions may not have been well developed and the development of such institutions is the first place to start. A major Industry of concern is the agricultural sector which is in dire need of innovative strategies. Besides the development of innovative products and processes, a major area that requires innovation is in management. The need for management innovation is very much needed across the actor-institutions to ensure quality linkages.

Areas for Innovation
The challenge is therefore three-fold:

a.      To create value (product and service innovation)
b.      To offer value (process innovation)
c.       To sustain the offering (management innovation)

Let’s consider a software developer who has completed a demo for an enterprise information system that would be of great help to a particular segment of the manufacturing industry. The software developer has succeeded in creating a solution. His work must have been helped by the things he learnt at the university (actor-institution). The strategy for offering that solution to the market in a way that assures maximum profitability for him is often of more significance than the solution itself. Assume that he would need additional financing (another actor) to be able to get his solution across to the market (as a company most likely) that needs his software. How can he negotiate to obtain this finance, reach his market and still maintain considerable ownership of the proceeds of his invention? The strategy that answers these questions is often an innovation in itself.

The processes that would help this innovator create, modify, own, transmit and sustain the provision of his innovation demands a lot of linkages across different institutions like: Academia, Private firms, Intellectual property offices, trademarks, financial institution (debt or equity) and the government who regulates the business arena.

Definitions
Product innovation is the development of new products or services with enhanced value or the addition of greater value to old products or services. Google, Facebook, iPod, iPad and BlackBerry are product innovations.

Process innovation is exemplified by Michael Dell’s direct sales marketing of computers, e-bay’s online sales of virtually everything and Apple’s iTunes application that sold single tracks rather than the conventional CD album. These firms did not develop new products or services; rather, they developed new and better processes for doing the same things.

Management innovation was what happened with the development of the Franchise system for business expansion. It is seen in the management style at Apple Computers. At Onel Consults Ltd, a business development consultancy firm in Nigeria, the management system is such that allows a horizontal leadership structure and an ownership structure for employees.
Venture financing and public limited liability companies are more or less a system of management innovation.

The challenge therefore is to allow each actor to understand their roles within this system and maximise their contribution by achieving effective interaction.

WHY NATIONAL INNOVATION SYSTEMS?

Some of the many reasons for this overwhelming need for such relationships include:

1.      The application of knowledge is the value expanding factor for all resources.
2.      Global competitiveness and mass scale production has placed a huge demand for greater productiveness.
3.      Economic activities have become increasingly knowledge-intensive.
4.      In today’s world, the determinants of success of enterprises, and of national economies as a whole, are  increasingly  more  dependent  on  their effectiveness  in  gathering  and  utilising knowledge  whether they be in the private sector, public  sector or academia. 
5.      Knowledge is domiciled in people, proprietary documents and institutional systems.
6.      The increasing cost of developing new products and services requires effective collaboration.

Given the relatively different paradigms that exists within the industry, government, research institution and the myriad of other concerns that relate to intellectual property management; actor-institutions that promote interaction within the national innovation system would have a great role to play in achieving a sustainable innovation system within the Nigerian industrial sectors.

As shown above, at the heart of the National Innovation System is the innovative firm which must find within the myriad of actors; processes and strategies that would result in the profitable development of new products and services. The role of the government would be to stimulate greater inputs across the participating actor-institutions and reduce barriers to interaction.

The Nigerian Science, Technology and Innovation Policy document that was released of late has these words as the statement of commitment from the president, Goodluck Ebele Jonathan.

”We are going to run our economy based on Science and Technology….because there is nowhere in this World now that you can move your economy without science and technology. For the next 4 years we will emphasize so much on S&T because we have no choice, without that we are just dreaming….”

The President is very much correct; towing the path of innovation is no longer the characteristic high sounding ideals of beady eyed researchers or is it restricted to corporate vision statements hung on the wall to massage the ego of executives and perhaps impress shareholders. Driving innovation in today’s global knowledge economy is basically a question of survival.

For many Nigerian industries, it could decide who would be here ten years from now.

References

1.      Drucker, P.F. (2003). The Discipline of Innovation. In Best of HBR, The Innovative Enterprise, Harvard Business Review, EBSCO Publishing.
2.      Federal Republic of Nigeria, (2011). Science, Technology and Innovation (STI) Policy, September, 2011.
3.      Okwonna, N. (2012). The Heart and Art of Innovation, Onel Media Services, Lagos, Nigeria
4.      Organisation for Economic Co-Operation And Development. 1996. National Innovation Systems, 1996.
5.      Rajan, Y. S. (2012). ‘Shaping the National Innovation System - The Indian Perspective.’ The Global Innovation Index 2012, Chapter 7, p. 131-141