Constraints in emerging markets seen as opportunity for innovation

Problems in emerging markets are now being seen as opportunities for innovation and investment, more than impediments, writes Patrick Atuanya

The constraints experienced by some emerging countries (e.g. lower purchasing power, energy challenges, lack of infrastructures), could turn out to be a strong drivers of innovation, says the GE in its Global Innovation Barometer, a research output by multinational firm.

Emerging markets, which have been termed thus as a result of the immaturity of their societal and market institutions when compared with those in other developed, are notorious for business climates that still stifle businesses, and more importantly, private sector innovation.

The GE Innovation Barometer, in its assessment of the innovation environment of the 32 countries it surveyed, showed that African countries, specifically Nigeria, Kenya, and Algeria fared the worst in fostering an environment which was supportive of innovation.

Its assessment of the innovativeness of the Nigerian environment stood at a score of 5 percent. Kenya achieved a score of 4 percent, while Algeria scored 2 percent. This compares with an 88 percent score in USA, 84 percent in Germany, and 82 percent in Japan, the world leaders. Other emerging countries like India scored an innovation environment score of 46 percent; Russia came in with a score of 37 percent; Brazil 37 percent; South Africa 25 percent; Malaysia 23 percent, and Mexico 14 percent.

Although it might take a longer time for emerging markets to build up a reputation of innovation, especially in the technology scene, 57 percent of Nigerian respondents surveyed believe that a new industrial revolution is upon us. This new industrial revolution is a reverberation of the innovation taking place on the global scene, led by the “Internet of Things”.

“We are currently in a new Industrial Revolution at the meeting of hardware and software, a historical shift into the age of advanced manufacturing and industrial internet”, says GE in the report. Industrial internet is about machines communicating with machines, which in turn communicate with other machines that analyze and optimize data in order to perform better.

“Over half of Nigerian executives (57%) say they have never heard of big data before and 5% say that big data is more of a buzz word than a reality – in line with the global average (6%). 24 percent of executives in Nigeria report that their company is either totally or quite prepared to make the most out of big data – in line with the global average of 25%. 37 percent say they have not increased their ability to analyse large and complex amounts of data over the last year and won’t (compared to 29% global average)”, said the report.

Although hugely significant constraints still remain, constraints are seen as opportunities to innovate. As the study revealed, 74 percent of surveyed executives believe that such constraints create innovation opportunities for companies willing to invest in overcoming them, while the rest 26 percent believe that such constraints make it impossible to innovate in such environments.

Other constraints, According to GE, or ‘innovation killers’ as it calls them, in an order of the frequency of responses from respondents include: the incapacity to scale up an already successful innovation to a wider or international market; the difficulty to come up with a radical and disruptive idea; the difficulty to define an effective business model to support new ideas and make them profitable; lack of sufficient investment and support; and lack of talent and inadequate skillset.

Main priorities emerging countries should focus on, according to the report, to efficiently support innovation include: fighting bureaucracy and red tape for companies willing to access funds and incentives allocated to innovation; ensuring that business confidentiality and trade secrets are adequately protected; better aligning students curricula with the needs of businesses; facilitating research cooperation with other countries; actively promoting partnerships between the public and private sectors; and ensuring that public procurement leads the early adoption of major innovations

Thirty nine percent of Nigerian executives perceive smaller businesses such as SMEs and start-ups as driving innovation in Nigeria – in line with the global average (41%). They are followed by multinationals (30%), above the global average (19%), according to the report.

Nigerian executives highlight several priorities that their companies need to master to innovate successfully. The necessity of understanding customers and anticipating market evolutions comes in as a clear priority being mentioned by 88% of executives in Nigeria. The second crucial ability is to attract and retain the most talented and skilled individuals (82%), an ability growing in importance for executives in the country.

The appreciation of predictive analytics in Nigeria is quite high with 60 percent of executives saying that to use analytics and predictive knowledge is a crucial ability compared with 53 percent globally.

as it calls them, in an order of the frequency of responses from respondents include: the incapacity to scale up an already successful innovation to a wider or international market; the difficulty to come up with a radical and disruptive idea; the difficulty to define an effective business model to support new ideas and make them profitable; lack of sufficient investment and support; and lack of talent and inadequate skillset.