The local manufacturing sector’s contribution to South Africa’s gross domestic product (GDP) has dropped by 33% over the last decade. This could partly be attributed to the gap between innovation in the sector and the commercialisation of products, says manage- ment and consulting firm BMGI senior consultant Dimitri Markoulides.
Of the Brazil, Russia, India, China and South Africa (Brics) economies, he describes South Africa’s growth rate as “worrying”, as manufacturing expansion could be a predictor of the future of a developing country. By contrast, competing manufacturing sectors of other Brics economies have declined by an average of 10% during the same period.
Markoulides points to research showing a positive correlation between manufacturing growth and GDP growth in developing countries. “Manufacturing drives growth in other sectors, as it attracts business-value activities; it is also the key driver for service-related growth and job creation,” he adds.
BMGI believes that innovation in South Africa often fails because it is not applied to the whole value chain. Instead, efforts tend to be focused on research, development and design, says Markoulides.
“Innovation is not just about the creation of new ideas. It is about discovering a market’s unmet needs and developing solutions that meet these needs and, in so doing, becoming a commercial success,” he adds.
Markoulides believes a general lack of competitiveness is the biggest challenge currently facing the sector, compounded by increasing energy and labour costs and a poor skills base.
He tells Engineering News that South Africa’s manufacturing sector needs to work at developing an adaptive skills base, which involves adapting an existing idea to current innovations.
He cites Thomas Edison’s success in commercialising the light bulb as a historical example of an adaptive innovation. “The success of the light bulb was not dependent on the idea alone, but on the development of the infrastructure supporting the product.”
Markoulides further explains that adaptive innovators can add value by supporting inventions through insourcing innovative technologies and solutions, creating manufacturing opportunities and developing the infrastructure that allows innovations to become commercial successes.
While developed economies tend to outsource opportunities to benefit from a cost advantage, emerging nations, such as Brazil, Russia, India and, most notably, China, have benefited from adaptive innovation through insourcing opportunities, thereby building capability and capacity.
Markoulides notes with concern, however, that South Africa does not enjoy the same success as its Brics counterparts, largely owing to a lack of adaptive innovation.
He believes the first step in reversing the decline of the local manufacturing sector is to identify innovation opportunities or unmet market needs. He defines an unmet market need as that which consumers did not realise they had needed, until they found a key use for it once it was launched onto the market – such as the light bulb or the Apple iPad.
“Initially defining the opportunity is key in driving innovation. Sometimes people ideate with no understanding of the exact gap in the market.”
Markoulides adds that, once industry stakeholders are able to define market needs, they need to identify the internal strengths of the sector and compare them with international requirements.
“I don’t believe that we’re integrating enough appropriate – and newer – technologies into the sector, which adds to our lack of competitiveness,” he says.
Markoulides further emphasises that individual companies and the sector as a whole should actively work towards building the manufacturing sector.
“Each organisation needs its own growth strategy through which it identifies a target market and a method of [using] resources to meet inno- vation opportunities in that target market.
“Meanwhile, the industry should also come together to negotiate better labour and energy costs to make it more viable for organisations to grow in the manufacturing sector.”
Markoulides adds that this will, in effect, lead to further employment, but stresses that the focus should not be on protecting jobs but on taking cognisance of existing opportunities.
“If we don’t gear ourselves for those opportunities, I don’t think we’re going to see growth in the manufacturing sector. We could be fighting to retain jobs, but that won’t help the sector in terms of opportunity growth.”
Markoulides maintains that South Africa’s policymakers should adapt existing policies to attract and encourage foreign investment.
“Our policymakers need to attract people who have the relevant technical skills, such as toolmakers and die makers, maintenance technicians and production engineers, to allow for skills transfer and training. They must also provide attractive tax and regulatory policies that will attract interest from potential international partners.”
Markoulides says existing policies are too focused on research and development (R&D) and he believes policymakers should be finding ways to implement that R&D locally by creating new products and services that could be used for export purposes.
Given South Africa’s abundance of relatively low-skilled labour, Markoulides believes that the country’s manufacturing sector should follow the example of its Brics counterparts and produce simpler products that are easier to manufacture at a competitive rate.
He adds that, with a proper growth strategy and an adaptive approach to thinking, an organi- sation’s technical capability and capacity will allow for the manufacture of more complex products in the future.
Therefore, BMGI offers a product that bridges the gap between innovation and commercialisation, assisting companies in achieving innovation across the entire value chain.
The company’s D4 model for innovation provides a framework that takes ideas through a systematic process of innovation to deliver a commercially viable entity. This includes matching the innovation opportunity to the company’s technical capability.
“The D4 model shows that one cannot simply ideate and expect a product. One has to work on creating a concept and developing that concept into a product. After that, the product needs to be tested to ensure that it meets the innovation opportunity or unmet need,” says Markoulides.