SA needs more innovation

Local companies should be providing products best suited for the African market, but are instead concentrating on First-World products, and the only way for these companies to gain the competitive edge is to grow by innovation.

South African business is, by and large, not innovative enough, says Professor Andy Andrews, director of the Blue Ocean Strategy Institute and visiting professor at IESE Business School in Barcelona. ‚”There are a billion people in Africa who are looking for products which we could be providing, but we are stuck in the rut of delivering the kind of First-World products not necessarily suitable for our the unique African market.‚”

Speaking at the Institute of Directors in Southern Africa (IoDSA), Professor Andrews argued that the only way for companies to maintain high margins and competitive advantage was to grow by innovation.

‚”It’s a disgrace that companies accept the mediocre,‚” Professor Andrews says.

The real trouble, he argues, is the ‚”toxic orthodoxy‚” which prevents companies from looking at their businesses with fresh eyes. Legendary investor Warren Buffett sums up the challenge of innovation neatly: ‚”The chains of habit are too light to be felt until they are too heavy to be broken.‚” Professor Andrews adds, ‚”You have to be able to see the world through new eyes, and be prepared to be out of sight of the proverbial shore for a while.‚”

An example of the type of innovative thinking necessary for companies to move from average to excellent is Cirque du Soleil. It looked at the circus business with fresh eyes and innovated by understanding what audiences actually wanted, eliminating the traditional elements that were not required and simply added costs (like animal acts) and adding new elements that were lacking in the existing mix. As a result, although the revenues of the circus industry have remained static, Cirque du Soleil’s share of the total has grown steadily.

Ansie Ramalho, Chief Executive of the IoDSA points out that the example of Cirque du Soleil as well as many others like Unilever is an illustration of corporate governance at work to enhance business rather than being a mere compliance obstacle. Says Ramalho: “Viewing business strategy through the lens of long-term sustainability and impact on stakeholders, as recommended in King III, opens up new opportunities for businesses and leads to innovation.””

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