Making It #13 - Innovation

7/28/2019 Making It #13 - Innovation

1/48

MakingItIndustry for Development

Innovation

n ArnoldSchwarzeneg

nMontenegronJugaad: think

frugaln Ethiopias

soleRebels

Number13


2/48

NUMBER1lWe must let nature inspire Gunter Pauli presents analternative business model tis environmentally friendly asustainablelHot topic: Is itpossible to have prosperitywithout growth? Is greengrowth really possible?

NUMBER2lThe International EnergyAgencys Nobuo Tanaka looks atenergy transitions for industrylEnergy for all KandehYumkella and Leena Srivastavaon what needs to be done toimprove energy access

NUMBER3lChinas stunning economrise: interview with ministercommerce, Chen DeminglTowards a more productidebate Ha-Joon Chang cafor an acceptance thatindustrial policy can work

NUMBER4lStrengthening productivecapacity Cheick Sidi Diarraargues that the LDCs should and can produce more, andbetter quality, goodslPatriciaFrancis on climate change andtradelHot topic: The relevanceof entrepreneurship

NUMBER5lA window of opportunity forworld trade? Peter Sutherlandassesses the prospects for theconclusion of a multilateraltrade agreementlA path tomutual prosperity Xiao Ye ontrade between sub-SaharanAfrica and China

NUMBER6lFeeding a crowded world IFADs Kanayo Nwanze arguesthat smallholder farmers musthave opportunities to beentrepreneurslNestl CEOPaul Bulcke on Creating SharedValuelHot topic: Does energyefficiency lead to increasedenergy consumption?

NUMBER7lThe globalization paradox Dani RodriklUnfair share Thomas Pogge on affluentcountries responsibility forincreasing global povertylHot topic: Is nuclear powernecessary for a carbon-freefuture?

NUMBER8lClosing the gender gaps Michelle Bachelet onovercoming the barriers thaprevent women from seizineconomic opportunitieslEngineering eco-friendlysolutions Carolina Guerrahazardous waste in ColomblHot topic: Growth: the enthe world as we know it?

NUMBER9lJeremy Rifkin on the ThirdIndustrial RevolutionlMorgan Bazilian and KandehYumkella on the new economy:inclusive and sustainablelHot topic: Climate change,climate action

NUMBER10lKlaus M. Leisinger, chair ofthe Novartis Foundation forSustainable Development, onthe intersection betweenindustry and healthlD-RevsKrista Donaldson on designinghealth care equipment for thedeveloping worldlHot topic:Gas flaring

NUMBER11lMei Yi, president of AIESEC,on the keys to effective youthengagementlPerspectives onthe Arab SpringlSustainia the world of tomorrowlHot topic: The Girl Effect

NUMBER12lFernando Pimentel on doingbusiness in BrazillProfile ofChinas trail-blazing BroadGrouplDevaki Jain on thefeminists of the SouthlHot topic: Fracking

A quarterly magazine.Stimulating, criticaland constructive.A forum for discussionand exchange about theintersection of industryand development.


3/48

Makin

EditorialAccording to a leader published in The Economistin February 1999,innovation has become the industrial religion of the late 20th century.The leader continued, Business sees it as the key to increasing profits

and market share. Governments automatically reach for it when tryingto fix the economy.Since then, the relevance and importance of innovation has grown

still further. Over the past two decades, it has become clear that it has apivotal role in development. The build-up of innovation capacities hasplayed, and continues to play, a central role in the growth dynamics ofsuccessful developing countries.

There are other compelling reasons why the issue of technologicalinnovation demands attention. The world is in the midst of a seriouseconomic crisis, and technology can be a means of re-launching orrecreating economic activities worldwide. Major environmental

challenges, in particular, climate change and resource scarcity, requirewide-ranging changes in patterns of production and consumption.The global system is undergoing a profound transformation based oninformation technology and other fields such as biotechnology andnanotechnology.

All over the world, people are realizing that we should be morefrightened of sticking with old ideas than embracing new ones.

Illustration:www.CartoonStock.com

This really is an innovative approach,but Im afraid we cant consider it.

Its never been done before.


4/48

MakingIt4

GLOBAL FORUM6 Letters8Arnold Schwarzeneggeron thecoalition of forces which believesthat climate change and greeneconomic development can betackled at the sub-national level10 Hot topic At the intersectionof technology and developmentTwo perspectives on the potentialof information communicationtechnologies to develop changeand change development

16 Business matters news and trends

FEATURES

18 The what, why and how ofinnovation policy UNIDOsFrank L. Bartels considers thebasics of innovation policy fordeveloping countries20Taking a leap Wim Naudand Adam Szirmai on innovationand entrepreneurship indeveloping countries

KEYNOTE FEATURE24 More with less: resource scarcityas a catalyst for green industrialdevelopment Peder Holk Nielsen,President and CEO of Novozymes,one of the worlds leadingindustrial biotechnologycompanies

MakingItIndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat ofthe United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area orof its authorities, or concerning thedelimitation of its frontiers or boundaries, orits economic system or degree ofdevelopment. Designations such asdeveloped, industrialized anddeveloping are intended for statisticalconvenience and do not necessarily express a

judgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names orcommercial products does not constitute anendorsement by UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), includingthose who are UNIDO members of staff, andshould not be considered as reflecting the

views or bearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

Contents

Editor: Charles [email protected] committee:Jean Haas-Makumbi, SarwarHobohm (chair), Kazuki Kitaoka,Matilda Muweme, Cormac OReillyand Jo Roetzer-SweetlandCover illustration: Matt HerringDesign: Smith+Bell, UK www.smithplusbell.comThanks for assistance toMira KapfingerPrinted by ImprimerieCentrale, Luxembourg,

on PEFC-certified paper http://www.ic.luTo view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesofMaking It, please send an emailwith your name and address [email protected] It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre,P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0,Fax: (+43-1) 26926-69E-mail: [email protected] 13, 1st quarter 2013Copyright The United NationsIndustrial Development OrganizationNo part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

40


5/48

Makin

30 Usejugaadto innovate faster,cheaper and better Navi Radjou,Jaideep Prabhu and Simone Ahujasay think frugal, be flexible andgenerate breakthroughs34 Meeting global challengesthrough innovation WIPODirector General, Francis Gurry,

outlines the role that a balancedintellectual property system playsin incentivizing investment innew technologies36 Country feature: Montenego A look at South-east Europeseconomic standout, includingan interview with PresidentFilipVujanovi40 Good business soleRebels, the

innovative footwear manufacturer,sells its range of artisan shoesmade from recycled materials in55 countries and is now one ofEthiopias thriving businesses

POLICY BRIEF42Green economies forsustainable resource use44Could shifting the location ofproduction bring GHG benefits?

46Endpiece Edward Barbierhighlights the spatial povertytraps found in rural areas in thedeveloping world

20

16

30


6/48

LETTERS

MakingIt6

DisseminatingideasI find Making Itmagazine a veryuseful source of information ondevelopment issues. For manyyears, industrial policies have

been a taboo in mainstreamdevelopment blogs andnewspapers. While there aremany scientific researchdocuments on industrialization,it is hard to find them in afriendlier format and I thinkthis magazine addresses thisniche.

Also, it approaches gender andenvironmental issues within thecontext of industrialization.Many development advocatesoften think the former two areasare not linked to (or are evenopposed to) industrialization!

In other words, I think thismagazine is a great way todisseminate ideas that canimprove todays developmentnarrative.lBeatriz Calzada, MAInternational and DevelopmentEconomics, Hochschule frTechnik und Wirtschaft Berlin,by email

Thanks @makingitmag forsharing your magazine with us!Great topics!l@HUBOttawa, a co-workingcommunity uniquely optimizedfor innovators, artists,professionals and entrepreneursto collectively create positiveimpact, by Twitter

North-SouthSome important issues wereraised in the keynote article onSouth-South cooperation(Making Itissue 12). I agree withJayati Ghosh when she says thatmany recent South-South tradeand investment agreements(and the resulting processes)have been similar in

unfortunate ways to North-South ones due to corporateinterests. But how useful is it todivide the global economy intothe North and South at all?If we look at foreign directinvestment, whole swathes ofthe world receive very little.A recent United Nations report,World Investment Report

(UNCTAD 2012), shows thatdeveloping countries received45% of foreign investmentflows in 2011, but this wasdistributed highly unevenly.Thirty per cent of it went to oneof the emerging countries,China, yet the whole of theAfrican continent received only6.2% a mere 2.8% of the worldtotal. In economic terms, itseems absurd to include both

China and Africa in the South,particularly as the largestcorporations in the world arediving into every sector of theChinese economy. Usingmeasures for individual nationstates also masks the widelydiffering regional dynamics ofchange in production acrossthe whole world. The mostpowerful country in the Northby a mile, the United States, hasa new phenomenon: ruralsourcing. Companies havefound they can get away withpaying 25 to 50% less in wagesin small rural towns than in bigcities a corporate interestthat should be abhorred, Northor South.lJames Robertson, Edinburgh,UK, by email

YoungentrepreneursI like your series about youngentrepreneurs (I think thereare many more youths whocould realize their potential,Making Itissue 11). Please can

you provide updates lettingknow how they have got onyou first wrote about themI think it would be great to if their businesses have thrior, if not, what challenges thhave faced. I am particularlinterested in the Tunisian wturbine company. When is product going to make a mimpact?lKelly Manson, websitecomment

A differentprosperityThank you for the article byChandran Nair (No escapithe numbers, Making Itiss10), where he wrote, Asianpolitical leaders must rejecWestern consumption-drivmodel of economic growthits place, they must createeconomies where resourceis constrained via a true priof environmental externaliThis is very much aconversation that the Westneeds also to have. For the m

The Global Forum section ofMaking Itis a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication in Making Itshould be marked For publication, and sent either by email to:[email protected] or by post to: The Editor,Making It,Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria.(Letters/emails may be edited for reasons of space).

GLOBAL FORUM


7/48

Makin

part, the majority of those inthe West (both recent andgenerational) have been largelyat the mercy of growthismvia immigration-to-ruinpolicies, which use the lure ofprosperity to drive inequalityboth domestically andglobally.

It is good to see Japanspopulation declining and as it

does, their quality of lifeimproving they have lowerunemployment than the USand Europe, and their ratio ofGDP to GPD per capitasuggests a reasonable spreadof income in stark contrast toEurope and the USA. Theycertainly have hurdles, forinstance the contention ofresources with China, but

Japan is certainly turningconventional Westerneconomics on its head. Andfurthermore, the US is turningconventional Westerneconomics on its head with thegrowing realization thatpopulation growth anddevelopment are costs and thateconomies only really recoverwhen population growth slows,

stabilizes or even declines notthat there is much scope forrecovery now. As ChandranNair suggests, a differenteconomic model with adifferent view of prosperity isneeded e.g. food/water andbasic energy security,environmental health, etc.lMatt Moran, websitecomment

Good news forBangladeshThe information in the articleon Viyellatex (Good business,Making Itissue 10) is very goodnews for us and for Bangladesh.I think Echotex Ltd, ChandraPolli Bidyut, Kaliakoir, Gazipur,is another example of a factory

that is trying to be fully eco-friendly and trying to conformto government andenvironmental rules andregulations. Already this factoryhas received some nationalawards in recognition of itscontribution in saving theenvironment through ethicalbusiness practice. This factory istrying to disperse zero discharge

waste from its effluent treatmentplant (ETP) using a biologicaltreatment and it is re-using hugeamounts of water and heat to saveenergy and the environment.lAbu Bakar Siddique, websitecomment

SubscriptionAlthough I read your magazine

online, I much prefer to readprinted copies. Is it possible tobuy a subscription?lKeith Burkinshaw, New York,by email

Editors reply: A subscription tothe print version ofMaking Itisfree of charge. Just send yourname and mailing address [email protected]

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.

ADVERTISEMENT


8/48

MakingIt8

GLOBAL FORUM

Humanity is facing inextricable challengesdue to climate change, and action needs to

be taken at all levels to drastically reducegreenhouse gas (GHG) emissions. Thegreen economy concept can be thought ofas an alternative vision for sustainablegrowth and development, consistent withthe need to reduce GHG emissionsglobally.

The ideal pipeline of clean energy projectsis not currently happening, even thoughintergovernmental bodies, nationalgovernments, sub-national governments,non-governmental organizations,academics, technology providers, and publicand private financial partners share the same

vision and want concrete action. This is dueto a number of factors:

lNational and sub-national politicianslack awareness of the long-term politicatechnical and financial solutions for asustainable, safe and clean economy;lProject developers do not know how tidentify, design and communicate the riinformation to project investors;l Investors are not sure how low-carboninvestments fit into their existinginvestment instruments and portfolios.

The R20 is a non-profit organization t

together with the United Nations, I founin 2010. Its goal is to address these factorsub-national level to help build an effectgreen deal flow. This is made possible byconnecting regions, technology and finato build sustainable low-carbon projectsThe R20 plays the role of a global facilita

between public and private stakeholderinvolved in sustainable development.

The R20 mission is to provide guidanand accompany sub-national governmeduring the long and complex transitionthe green economy. The R20 is an imparand independent organization, playing intermediary role on behalf of private anpublic entities interested in taking concsteps to developing green economicactivities and projects.

Global facilitatorThe R20 network today forms a worldwicoalition of partners and members willito share their expertise and to mobilizethemselves in order to push in the samedirection. This coalition intervenes ondemand from sub-national authorities,help states, provinces or regions aroundworld to develop, implement, andcommunicate low-carbon and climateresilient projects, policies, and bestpractices.

Bottom-up approachIn order to shift to a greener economy, thcommitment of everyone is needed. Inparticular, sub-national authorities have

Implementing thesustainable energy future

Photo:MikhailEvstafyev

Arnold Schwarzeneggeron the coalition of forces whichbelieves that climate change and green economic

development can be tackled at the sub-national level.


9/48

Makin

GLOBAL FORUM

important role to play, as there are manyopportunities in their hands. The vastmajority of sub-national governmentsaround the world have proven their will toimprove the quality of life of their citizensand contribute to a sustainable globaleconomy. They know well the needs andopportunities available within their ownterritories. However, despite their politicalweight, sub-nationals may lack experience in

building projects and having them financed,

which can greatly restrain their capacity tobring about the change they seek.

The R20 bottom-up approach enableslocal governments to implement amultitude of projects that can only bemanaged at sub-national level. Sub-national priority areas include: cleanpublic transport, energy efficiency

building permits, LED street lighting,wind farming, micro-hydro, solar PVand waste-to-energy projects. Suchprojects are in the hands of mayorsand/or presidents of districts, regions andprovinces. Moreover, recent researchpublished by the UNDP shows that 75% of thepotential solutions to a low-carbon economylie with the sub-national governments.

Focus on projectsThe R20 is focused on concrete and practicalsolutions; the main goal is to implement real,sustainable projects helping mitigation andadaptation to global warming. In order tofulfill its mission, the R20 is building apipeline of sustainable, bankable projectsaround the world. The R20 strongly believesthat it is time to scale-up from a

philanthropic, social, corporate responsibilitymarket to a more mature and regular market.

Following its business model, the R20 hasidentified and contacted numerouspotential investors, both public and private,and through discussions and questionnaires,the R20 has identified the specific needs andexpectations of these investors.

This process forms the basis of the R20Green Finance Network, which allows theR20 to accurately select, for a given project, a

potential matching investor. The R20 iscontinuously updating this network.

During 2012, in less than 12 months, theR20 applied this unique business modeland managed to identify and presentaround one billion dollars worth ofsustainable and bankable sub-nationalprojects to potential investors, with a firstcommitment of US$150m private equityfrom a private investor. R20 thusdemonstrated that building a suitablepublic environment for investment withpublic pre-investment funding can leveragemuch larger private investment. Theambition of the R20, with larger partnerssuch as UNIDO, is now to replicate andscale up in order to meet the UNsustainable energy for all targets.lFor more info on R20 Regions of ClimateAction, check www.regions20.org

As Governor of California from 2003 to 2010, environmental action manARNOLD SCHWARZENEGGER made the state a world leader in renewable energyand combating climate change. He implemented a number of ground-breakingsustainability policies, including the landmark Global Warming Solutions Act of2006, the Hydrogen Highway Network and the Million Solar Roofs initiative.In 2010, together with other sub-national leaders, he created the R20 Regions ofClimate Action organization.

National governments Sub-national government

Policymakers Capacity builders

Engineers Best practicetechnology holders Service providers Academics

Public Investors National Sub-national Sovereign funds Bilateral funds Multilateral funds

Private Investors Banks Pension funds Private equities Hedge funds

Finance

Regions Technology

Carbon reduction

certificates Energy savingscertificates Ecological audits Social audits

SustainableFinance

R20


10/48

HOT TOPIC

MakingIt10

GLOBAL FORUM

Two perspectives on the potential of information communicationtechnologies to develop change and change development

Mobile technologies are opening newchannels of communication betweenpeople and governments, potentiallyoffering greater access to publicinformation and basic services to all. Noother technology has been in the hands ofso many people in so many countries insuch a short period of time. In fact, globally,more people now have access to a mobiledevice than to justice or legal services.Recent estimates indicate that informationcommunication technologies (ICTs) couldbe accessible to everyone by 2015 and bringinternationally agreed development targetsever closer to achievement. Indeed, we arewitnessing a new wave of democratization

of access to innovative ICT channels,propelled by state-of-the-art technologiesand diminishing barriers to entry.

In a global population of nearly sevenbillion people, the total number of mobilephone subscriptions globally is anastonishing 5.4 billion and counting.Given that individual subscribers may havemultiple and/or inactive SIM cards, theactual number of individual mobilesubscribers worldwide is estimated ataround 3.9 billion. Latest figures indicatethat mobile phone penetration rates standat almost 45% in low-income countries and76% in lower-middle-income countries.Given that entire villages in poor and/or

rural communities will often share onetwo cell phones, it is also estimated thato 90% of people in some poor countrihave at least minimal access to a cell phFurthermore, close to 80 million mobilsubscribers, most of them in developincountries, have no access to the electricgrid and yet use a mobile phone.

That is in part because mobiletechnologies offer portable, real-time,communication and information accespeople who previously had little to noaccess to affordable communicationchannels. Mobiles have relatively lowphysical infrastructure requirements acan reach remote areas in a more cost-effective fashion than other ICTs such athe Internet or fixed phone lines. In somplaces, mobile devices are simply the onoption available. And mobile phonesrequire only basic literacy, making thebarriers to entry much lower than withother modern ICTs.

Yet, mobile services for people at thebottom of the pyramid remain high: thprice basket for mobile services can amto 15.75% of monthly average per capitaincome in countries with low humandevelopment (compared with 4.86% in

Mobile technologies

and empowerment

At the intersection oftechnology and development

Ral Zambrano andRuhiya Kristine Seward look at thepotential of mobile technologies to improve developmentoutputs and outcomes at the country level.


11/48

Makin

GLOBAL FORUM

In fact, globally, more peoplenow have access to a mobiledevice than to justice or legalservices.

Sahal Gure Mohamed, 62, texts on his mobilephone while waiting in line at dawn to register atIfo refugee camp in Dadaab, Kenya, in August2011. Mohamed fled to Dadaab from Beledhawo,Somalia. Just over 10% of new arrivals and nearly

20% of long-term residents surveyed said theyaccess information through cell phones.

medium human development contexts).And coverage in remote or marginalizedareas is often nonexistent. There areindications that at least ten percent of theglobal population and 40% of people inleast developed countries are not coveredby a mobile network, entrenchingdivisions between populations in urbancentres and poorer populations in theperiphery.

However, mobile phone subscriptions inthe developing world are rapidlyoutpacing those in the developed worldand costs are coming down. Moreover,public investment and public-privatepartnerships are becoming essential tools

for extending connectivity, services andinformation.

As a result, mobile technologies arestarting to have an indelible impact onhuman development, enhancingdemocratic governance and otherdevelopment areas such as health,education, agriculture, employment, crisisprevention and the environment. Forinstance, studies have suggested that

increased mobile ownership is linked tohigher economic growth. It is also likely tohave twice as large an impact on economicgrowth in developing countries as indeveloped ones because the starting pointof infrastructure in poorer countries is somuch lower in terms of landlines andbroadband access.

Leapfrogging of traditional infrastructurerequirements such as landlines is possiblein low-income countries as mobiletechnologies have lower investment costs.Other benefits include increased telecom-based tax revenues, greater employmentopportunities, and overall increasedproductivity, not to mention a thriving


12/48

HOT TOPIC

GLOBAL FORUM

telecom industry that attracts foreigndirect investment.

Within governance, mobile technologies

can offer new means for empoweringcitizens and stakeholders by opening andenhancing democratic processes andmechanisms. M-governance initiativesthat expand access to information and

communications channels are creatingnew venues for peoples participation andgiving new voice to those who have

historically been marginalized. What wasonce in the domain of official or largeprivate, corporate media channels is nowin the hands of anyone with a mobile or anInternet connection flatteninginformation and broadening thedistribution of that information. This inturn can support wider stakeholder

mobilization within a much shorterperiod of time, as witnessed during the

so-called Arab spring of 2011 and otherpolitical mobilizations happeningaround the world today.

The simplicity of new mobile platformsrequiring only a basic mobile phone with

SMS capacity has allowed their adoption allover the world from South Africa, to India,to Mexico to monitor elections, trackviolence and crime, provide logisticalsupport in natural disasters, and overseeinventories. The portability and ubiquity ofmobile phones have helped them becomean important tool for civil society, enabling

local mobilization and networking amonggeographically dispersed people.

Mobile technologies are alsostrengthening the demand side ofgovernance by providing people withcritical tools to engage with publicinstitutions and demand more and betterservices. This fosters broader transparency

and social accountability. Enhancingservice delivery and reform within

important governing institutions frompublic administrations to parliaments tosystems of justice generates new

possibilities for open government.Mobile technologies can reducebureaucratic holdups for average citizensand streamline work for civil servants.They enable citizens to bypassintermediaries who may take money forfacilitating transactions, making servicedelivery more efficient and transparent.

Significantly for poor people and ruraldevelopment, mobile technologies canhelp reduce information gaps andrestrictions inherent in marketplaceswhere consumers and producers havelittle means of comparing commodityprices between distant markets. Micro-entrepreneurs, for instance, can access

market information from remotelocations, increasing the speed of trade

and reducing travel expenditures.Mobiles also offer greater independen

for women by opening new channels of

information and affording greaterpersonal privacy. They can also offerwomen greater security, not only asemergency tools, but also to report andmonitor violence against women. And,where once women may have needed mrelatives to act as intermediaries, mobilplatforms now provide them the chanc

make decisions for their economic wellbeing by and for themselves, which in tucan facilitate female entrepreneurship.

Mobile applications are also being usto combat poverty by expanding servicedelivery possibilities in health care,agriculture, employment and education

In the health sector, there have been mapioneering mobile initiatives improvinconnectivity and information

MakingIt12

of the worldshouseholdsare connectedto the interneDEVELOPING COUNTRIE

41%

376million

373million

78%CONNECTED

28% NOTCONNECTED

28%CONNECTED

72% NOTCONNECTED

2013

DEVELOPED COUNTRIES:

Source: ICT Facts and Figures, the International Telecommunication Union (ITU)


13/48

Makin

GLOBAL FORUM

transmission in areas that are hard toaccess. As emergency response tools,mobile technologies have helped establishnetworks of communication betweencitizens, organizations and governmentagencies in times of crises. They are alsobeing used to educate and keep citizensand vulnerable stakeholders abreast ofenvironmental and energy-related issues,including weather patterns, climate changeand responsible environmental

stewardship.By themselves, mobile phones will

neither pull people out of poverty, norpropel democratic governance. Insteadthey are catalytic tools for enhancing andbroadening development programming ifdeployed strategically. They open newchannels for connecting the poor toservices, new ways for citizens to have theirvoices heard, and new opportunities forcivic engagement in larger governanceprocesses.

At the same time, to reach historicallyunder-served communities, policies needto be in place to help realize thedevelopment potential of this medium.It is important that policies support bothbroad access to information and servicedistribution, so that mobile services willreach difficult-to-access (and most timesun-lucrative) rural areas. It is alsoimportant not to overlook literacychallenges and infrastructure limitations.Yet, even within the constraints, mobiletechnologies are offering marginalizedpeople new ways to leverage theirresources to enter the marketplace anddemand public services.

Ten years ago, I was preparing for my firstever piece of work in mobile technology,two years of work which would lead to thedevelopment of an innovativeconservation service in 2003 wildlive! and the release of one of the earliestreports on the application of mobiletechnology in conservation anddevelopment. A lot has happened sincethen, not least an explosion in interest,buzz, excitement and, yes, hype and asense that mobile can be the saviour of,well, everything.

Back then, youd likely be able to fiteveryone working in mobile-for-development (M4D) into a small cafe.Today youd need at least a footballstadium. M4D and its big brother,ICT4D have become big business. Notthat I needed more proof of mobilesstatus at developments top table, inDecember 2012 I attended VodafonesMobile for Good Summit in London. Itwas a high-profile affair, and an extremelyupbeat one at that. Yet I left with mixedfeelings about where M4D is heading.

My five takeaways after a day of talks,debates and demonstrations were:

1. Everyone is still excited by thepotentialof mobile.

2. The same projects surface over andover again as proof mobile works.

3. Mobile is still largely seen as asolution, not a tool.

4. Its up to the developed world to getmobile working for the poor.

5. The top-down mindset is alive andwell.

Suffice to say, all of these conclusionstroubled me as I sat on the train home.

Ive been thinking for some time aboutthe future of M4D and how far weve gotover the past ten years or so. Ive writtenfrequently about the opportunities mobiletechnology offers the developmentcommunity, and my fears that we may endup missing a golden opportunity. Ive longbeen a champion of platforms, andunderstanding how we might build toolsfor problem owners to take and deploy ontheir own terms. Yes, we should providelocal entrepreneurs and grassroots non-profits with tools and where appropriateand requested, expertise but weshouldnt develop solutions to problemswe dont understand, we shouldnt takeownership of a problem that isnt ours andwe certainly shouldnt build thingsthousands of miles away and then jumpon a plane in search of a home for them.

But this is still, on the whole, whatseems to be happening. And this, Imbeginning to believe, is rapidly becomingICT4Ds inconvenient truth.

An inconvenient truth?Ken Banks argues that the future of informationcommunication technologies for development lies with therise of homegrown solutions to development problems.

RAL ZAMBRANO and RUHIYA KRISTINESEWARD, the Democratic GovernanceGroup at the United Nations DevelopmentProgrammes Bureau for DevelopmentPolicy. The above is the executive summaryofMobile Technologies and Empowerment:Enhancing Human Development throughParticipation and Innovation.


14/48

HOT TOPIC

MakingIt14

GLOBAL FORUM

A fulfilled future for ICT4D (of whichM4D is an increasingly dominant part) isnot the one I see playing out today. Itsfuture is not in the hands of westerncorporates or international non-governmental organizations (NGOs)meeting in high-profile gatherings, andits not in our education establishments

who keep busy training computerscientists and business graduates in theWest to fix the problems of others.

The whole development agenda isshifting, and my prediction for the futuresees a major disconnect between what wethink needs to be done, and what thoseclosest to the problems think needs to bedone. Call it disruptive development, ifyou like. As I told The Guardiannewspaperin a December 2012 interview, The rise ofhomegrown solutions to developmentproblems will be most crucial in future.That means African software developersincreasingly designing and developingsolutions to African problems, many ofwhich have previously been tackled byoutsiders. This, I think, will be the biggestchange in how development is done.

Im not the only person to be saying this.Many good friends working at theintersection of African development andtechnology have been doing the same forsome time. The real change, and the bigdifference, is that itsfinally happening.A message which was previously given inhope, a message that was previously givenout of an inherent belief that there was abetter, more respectful and appropriateway of doing things, is now becomingreality. ICT4D is changing, and thebalance of power is changing with it.

FrontlineSMS is a free open sourcesoftware that I developed and which hasbeen used by developing country NGOs todistribute and collect information via text

messages. It has always spoken to anapproach Ive long believed in, one whusers are empowered to develop solutito their own problems if they so wish.There are many reasons whyFrontlineSMS continues to work thedecision of the new management teamshift software development to Nairobi one of the more recent ones. Butfundamentally its about what theplatform does (and doesnt do) that rearesonates with innovators, entreprenenon-profits and problem owners acrosthe developing world. As a recentnewspaper article put it, As open-sourtechnology for mobile platforms,innovations like FrontlineSMS areessentially a blank canvas for grassrootorganizations to apply to any localcontext.

That local context is becomingincreasingly vibrant as university studacross Africa graduate with computerscience and business managementdegrees; as innovation hubs spring upacross the continent meeting a growininsatiable demand for places to meet,

Theres no shortage of donormoney out there for projectsthat seek to implement thelatest and greatest provenWestern innovations in adevelopment context.


15/48

Makin

GLOBAL FORUM

of because those very skills and resourceswere not available. Well, now they are.

The ICT4D community educationestablishments, donors and technologistsamong them need to collectivelyrecognize that it needs to adjust to thisnew reality, and work with technologists,entrepreneurs and grassroots non-profitsacross the developing world to acceleratewhat has become an inevitable shift. Or itcan continue as it is, and becomeincreasingly irrelevant. Innovate or diedoesnt just apply to the technologiesplied by the ICT4D community. It appliesto the ICT4D community itself.

KEN BANKS, founder of kiwanja.net andFrontlineSMS, devotes himself to the applicationof mobile technology for positive social andenvironmental change in the developing world.He has worked at the intersection of technology,anthropology, conservation and developmentfor the past 20 years and, during that time, haslived and worked across the African continent.His latest project, Means of Exchange, helpsreconnect communities with local business,local resources and each other.

work and network with like-mindedproblem solvers and entrepreneurs; andas investors launch funds that showtheyre starting to take young African techstartups seriously.

This activity hasnt escaped big business.Google, IBM, Microsoft, Nokia, HewlettPackard and Samsung have been openingoffices across the continent, snapping upmuch of the talent in the process(ironically often at the expense and to

the despair of locally-based NGOs). Butwhile technology businesses take note anddevelop local capacity that enables themto develop more appropriate localsolutions, the broader developmentcommunity seems trapped in an oldermindset of technology transfer.

Technology transfer, of course, is bigbusiness theres no shortage of donormoney out there for projects that seek toimplement the latest and greatest provenWestern innovations in a developmentcontext, and there are countless tens ofthousands of jobs that keep the wholemachine running. A lot has to change ifthe development community is to face upto all its new realities, yet its looking morelikely that the destiny of the discipline liesin the hands of the very people itoriginally set out to help.

So, if the future of ICT4D is notuniversity students, NGOs or businessgraduates devising solutions in labs andhubs thousands of miles away from theirintended users, what is it?

Im not usually one for makingpredictions but it is my ten yearanniversary in mobile, so heres a biggie.

Development is changing, powered byaccessible and affordable liberatingtechnologies and an emerging army ofdetermined, local talent. A local talent thatis gradually acquiring the skills, resourcesand support it needs to take backownership of many of its problems problems it never took original ownership

Development is changing,powered by accessible andaffordable liberatingtechnologies and anemerging army ofdetermined, local talent.


16/48

MakingIt16

nAccording to the 2013Sustainability Leaders survey,produced jointly by GlobeScanand SustainAbility, the privatesector outperforms only the

worlds national governmentswhen it comes to effectivelyaddressing sustainabilitychallenges. That is to say, theyare second to last.

Interface and Walmart roundout the top four, with 10additional companies areclustered roughly with similarankings: (in descending ordGE, Marks & Spencer, Puma,Nike, Coca-Cola, Natura, IBMGoogle, Nestl and NovoNordisk.

Nearly all of these

sustainability leaders areheadquartered in the GlobalNorth. Companies from theemerging economies of BrazRussia, India and China, are f

Photo:DeutscheWelleGlobalIdeas

trends

BUSINESS MATTERS

Still, a handful of companies and one in particular arehighly regarded. Unilevercontinued its reign as the top-ranked company and actually

increased its score, according tothe survey, which is based on theresponses of 1,170 qualifiedsustainability experts polled inearly 2013. Companies are

named on a top-of-mind basis that is, they are asked to nameleadership companies but arentgiven a list from which tochoose.

Another top-tier companywas Patagonia, whichcatapulted to the No. 2 positionon back of strong gains in lastyear, according to the study.

Medelln, Colombia, has beendeclared the worlds mostinnovative city. An online contestwas organized by Citibank andthe Marketing ServicesDepartment of the Wall StreetJournalMagazine together withthe Urban Land Institute. Voterswere asked to vote for a list of 200cities, and a first round of votingbrought the list down to 25.Another round of votingproduced three finalists: NewYork City, Tel Aviv and Medelln.

Announcing the winner inearly March 2013, the Urban LandInstitute (ULI) noted, Few citieshave transformed the way thatMedelln, Colombias secondlargest city, has in the past 20years. Medellns homicide ratehas plunged, nearly 80% from1991 to 2010. The city built publiclibraries, parks and schools inpoor, hillside neighbourhoods,and constructed a series oftransportation links from thereto its commercial and industrialcenters. The links include ametro cable-car system andescalators up steep hills, reducingcommutation times, spurringprivate investment, andpromoting social equity as well asenvironmental sustainability.

ULI continued, A change in

Innovative city of the yearthe institutional fabric of the citymay be as important as thetangible infrastructure projects.The local government, along withbusinesses, communityorganizations, and universitiesworked together to fight violenceand to modernize Medelln.Transportation projects arefinanced through public-privatepartnerships; engineering firmshave designed public buildingsfor free; and, in 2006, nine of thecitys largest firms funded ascience museum. In addition,Medelln is one of the largestcities to successfully implementparticipatory budgeting, whichallows citizens to define prioritiesand allocate a portion of themunicipal budget. Communityorganizations, health centres andyouth groups have formed,empowering citizens to declareownership of theirneighbourhoods.

Many of Medellns suburbs line thesteep slopes of the Aburr Valley,making the city an urban plannersnightmare. For many of the citysresidents, the journey to the centre oftown was a long and arduous one,involving crowded diesel buses andshared taxis, negotiating narrow, hillyroads. Then, Medellins authoritiescame up with an innovative solution:six cable-cars that link the outskirts tothe city centre.


17/48

Makin

the most part notable by theirabsence. Only Braziliancosmetics manufacturer,Natura,ranks among the top 15companies.

nGEs third annual GlobalInnovation Barometer hasfound that while businessexecutives continue to value

innovation as a strategic priority,one in three report concernsover their ability to maintain acompetitive edge in a faster-paced, more globalized and

resource-constrainedenvironment.

This emerging InnovationVertigo an uneasiness with thechanging dynamics of todaysbusiness landscape anduncertainty over the best pathforward is challenging leadersto think differently about howthey will achieve growth. Many

executives, however, seem to beembracing this complexity byexploring new and sometimesunexpected opportunities toinnovate.

Innovators must be resilientor risk being left behind, saidGEs Beth Comstock. Changehas become constant and we seeleaders responding by bettingbig on more unconventionalapproaches to innovation tounlock growth. At GE, we areexploring different markets,partnership structures and

business models all in thepursuit of uncovering new waysto better serve our customersand meet the worlds biggestchallenges head on.

The Barometer wasconducted by an independresearch and consulting fiexplore how business leadaround the world view driand barriers to innovationhow those perceptionsinfluence strategy. GEexpanded the study this yesurveying more than 3,000

senior business executives25 countries, all with direcinvolvement in theircompanies innovation strand decision-making.

A Pan-African science educationinitiative is supporting students inan effort to boost post-graduatedegrees and reverse brain drain.The Regional Initiative in Scienceand Education (Rise) supportspromising science andengineering students pursuingadvanced degrees in sub-SaharanAfrica. The programme hopes to

boost higher-education inengineering and science across thecontinent mainly through aseries of international networksthat connect universities, students,civil society and industry.

Arlen Hastings, executivedirector of the Science InitiativeGroup, which launched Rise, said,The rationale behind theprogramme was that there aremany pockets of excellencearound Africa, but there arent thatmany African universities, outsideof South Africa, that have thecapacity to provide comprehensivePhD programmes in science andengineering. However, if you takeelements, pieces from each of a

bunch, you can put together apretty strong education.

Rise has five subject-basednetworks covering material andengineering science, naturalproducts, biochemistry and

informatics, water resourcethe western Indian Ocean r

which provide students w

expertise from all over AfriRises PhD candidates arerequired to have at least twoadvisers. One must be fromanother university in the n

The Science Initiative Gthe Institute for Advanced in Princeton, New Jersey, Ufirst started acceptingapplications for Rise in 200under a US$3.3m grant froCarnegie Corporation. By the initiative had selected ithree grantees from a poolproposals. Four years latersupporting 63 Masters andPhD students.

But creating academics isame as retaining them, so also focuses on training gralocally. Joseph Borode, acoordinator for Rises matescience and engineering nesays that before Rise the beoption was often to send stuabroad for training, but manever came home, meaningsays, that the investment instudy abroad had no returreverse the brain-drain, Rincentivizes students to statheir home countries by busupportive research commopening connections and pthe way to faculty positionsHastings says.

Rising to the

challenge


18/48

MakingIt18

Innovation has always played the decisive rolein countries economic and social develop-ment: it is the principal source of economicgrowth, it provides the basis for improvingproductivity, it is the foundation of competi-tiveness and it improves welfare. Today, withthe world in the midst of a serious economiccrisis, the application of newer vintages oftechnology can be the means to re-launch,recreate and reinvigorate economic activities

worldwide. At the same time, major environ-mental challenges require wide-rangingchanges in patterns of production and con-sumption, and these can only be achieved bythe application of innovative solutions.

Innovation is fundamentally the task of theprivate sector and entrepreneurs, but historyhas shown us that at times of major transfor-mations and crises, the role of governmentshas always been crucial. It is only governmentsthat can assume the risks involved in thelaunching of large-scale programmes that helprenew infrastructure, and it is only govern-

ments that can facilitate nationwide learningprocesses for innovative initiatives. Only gov-ernments can legitimately impose require-ments relevant to the educational, researchand other knowledge sources which areneeded to cope with deep and rapid techno-logical change. And, in most instances, it isonly governments that can fund the adapta-tion of these requirements.

As more and more countries start to for-mulate policies designed to support innova-tion, the experiences and existing good policypractices of dynamic economies, especiallythose in the developing world, can provide im-portant lessons. One of these lessons is that ef-fective and efficient approaches are based onan understanding that innovation policy mustcoherently address the overall innovation cli-mate. This goes far beyond traditional scienceand technology policy, and involves many gov-ernment departments in a whole of govern-ment approach.

Government actionGovernment action can usefully focus on a fewgeneric functions. In the first instance, thismeans supporting innovators by providing thenecessary technical, commercial and otherservices. Services of strategic relevance for in-novation policy include basic industrial serv-ices like promotion, marketing, andinternationalization; technology extensionservices; metrology, standards, testing, andquality control; innovation in organization andmanagement; and information and commu-nications.

Governments can also reduce (or better

still) remove, obstacles to innovation. Thismeans combating anti-competitive and mo-nopolistic practices, suppressing bureaucratichurdles and adapting the regulatory frame-work to support the search for and diffusion ofnovelty. This action requires the mobilizationof many areas of government, including taxes,customs, procurement and standards. It hasthe additional benefit of allowing sunset busi-nesses to fade away, thereby releasing re-sources.

Intervening to strengthen the research anddevelopment (R&D) base is another govern-ment function, but one that many developingcountries have found to be prohibitively ex-pensive. The bulk of the worlds R&D effort hastraditionally taken place in the OECD coun-tries, although recently emerging economiessuch as Brazil, China, India and Russia havebecome significant investors in R&D.

More generally, the quality of the educa-tional system can help form a receptive andcreative population. Support for the comple-mentary competencies needed for innovation,such as engineering, design and business,should be provided, while soft skills, such asproblem-solving, communication and team-work, are also important. Governments in de-veloping countries should understand that forinnovation to develop, young people need tolearn additional skills relating to functionalliteracy and the ability to think outside thebox.

For each of these functions, economicallyadvanced, as well as less advanced, countriesoffer good practices that can be adopted and

adapted through local lenses to local cotions and contexts. Depending on a countechnological competence and the qualitits business environment, any one govment will need to choose its goals and strgies. After focusing on the prime movethose entities that drive the innovation

makes a difference in the marketplace creating innovation endowments, suctechnology centres, science parks or expzones, a government will need to build crimasses of innovative and entrepreneurialtiatives. This can be done by promotingdustrial clusters, actively attracting foredirect investment (FDI) and possibly even ating new cities.

Innovation systemsGovernment innovation policies are incringly focusing on innovation systems, a ccept which stresses that it is not only inpsuch as research expenditures, and outpsuch as patents, that are important. Equcrucial is the interaction between the acthat are needed in order to turn an idea inprocess, product or service for the markeother words, the flow of technology and inmation among people, enterprises and intutions is the key to an innovative proces

The study of national innovation systdirects attention to the linkages or web ofteraction within the overall innovation sysand an understanding of these systemshelp policymakers develop approaches forhancing innovative performance in todknowledge-based economies.

One recent example of such a study carried out by the United Nations IndusDevelopment Organization (UNIDO), looked at Ghanas National System of Inntion. The 18-month-long survey, concludelate 2012, was conducted in conjunction wGhanas Ministry of Trade and Industry

Frank L. Bartels considersthe basics of innovation policyfor developing countries

Innovation policy:why, what and how


19/48

Makin

calibrated nor configured to successfully over-come the barriers to, and constraints on, in-novation. The major implications are thatthere are few or no externalities from thepublic goods of funding research institutions.Furthermore, business enterprises have littleaccess to external sources of ideation, andknowledge-based institutions outlets to mar-kets through intermediation and commer-cialization are highly restricted. Based on thesefindings, the report makes a number of rec-ommendations in relation to policies to en-hance the countrys innovative performance.

In conclusion, accelerating sustainable de-velopment requires new industrialization ap-proaches that exploit knowledge and

innovation. Such policy approaches repthe crucial elements of any economysto enhance its competitiveness and ecogrowth. The national system of inno(NSI) represents the strength and qusystematically organized interactions bgovernments, knowledge-based institindustry and financial arbitrageurs (thtities, such as banks or brokerage firmengage in the practice of taking advana price difference between two or morkets). The NSIs characteristics, and thcies that shape them, are the cdeterminants of efficiency and effectin the application of science, technoloinnovation.

FRANK L. BARTELS is Senior Advisor tothe Deputy to the Director General ofthe United Nations IndustrialDevelopment Organization (UNIDO),

and was previously UNIDORepresentative to Ghana and Togo, andChief of UNIDOs Strategic Researchand Regional Analyses Unit.

key national stakeholders, the KwameNkrumah University of Science and Technol-ogy (KNUST), and the Science and TechnologyPolicy Research Institute (STEPRI).

The subsequent report, Ghana NationalSystem of Innovation (GNSI) Measurement,

Analysis and Policy Recommendations, surveys

and depicts, for the benefit of policymakers,the essential and systemic features of the in-novation landscape in Ghana.

The report contained the following con-clusions:l The Ghana National System of Innovation(GNSI) suffers from low concentrations of or-ganizational capital, which prevent system-wide combinations of skills and assets fromdelivering significant productivity increasesbased on science, technology, engineering,mathematics and information technology.l The quality of market demand is character-ized by a few islands of sophistication in a seaof simplicity. This situation dissuades themanufacturing and service sectors from inno-vating in order to offer products of enhancedquality and value.l The organizational constraints within theGNSI and their bearing on the actors within itare unusually high. These constraints, mainlyrelating to managerial rigidities and invest-ment risks, combine to thwart adaptive behav-iour and prevent actors from responding tomarket signals.l The application of fiscal and monetaryschemes falls short of fully supporting the riskappetite of innovators and businesses in theearly stages of ideation (the creative process ofgenerating, developing and communicatingnew ideas), invention and start-up.

The gist of the report points to the GNSIbeing fragile, with an asymmetric distributionof actor linkages and with low-density rela-tionships between the actors. The policy in-struments that are available are neither


20/48

MakingIt20

Photo:www.s

hutterstock.com/PeterReijners


21/48

Makin

Innovation is the driving force in development; withouvative entrepreneurs we would not have most of the toservices that provide many of us with a prosperity today exceeds that of ancient emperors. From birth controlinternet, innovation has fundamentally changed theDespite this, most of the work on understanding the proinnovation and its relationship to public policy has beeducted in economies at more advanced stages of develoSeveral authors have even downplayed the importance ovation for developing countries. In a similar fashion thbeen a resurgence of interest in the role of entrepreneurinnovation, employment creation and economic growth

How does innovation impact ondevelopment? How, and under whatconditions, do entrepreneurs indeveloping countries innovate?And what can be done to supportinnovation by entrepreneurs indeveloping countries? Wim Naudand Adam Szirmai investigate.

Innovation andentrepreneurship indeveloping countriT

akingaleap


22/48

MakingIt22

in this literature the primary focus is onthe advanced economies.

Together with Micheline Goedhuys, weedited a book, Entrepreneurship, Innovation andEconomic Development, published in 2011 byOxford University Press, which deals withthese relatively neglected issues, and arguedfor a better understanding of the roles thatentrepreneurs can play in innovation even inthe poorest countries. The book focuses in

particular on the entrepreneurshipinnova-tion nexus in the context of development. Inthis article, we share some of the findingsfrom the book.

Defining innovationThe Oxford Handbook of Innovationdescribesinnovation as the putting into practice of in-ventions. In a narrow sense, innovation refersto product and process innovations, or tech-nological innovation. In a broader sense, in-novation is the development of new products,new processes, new sources of supply, as well

as the creation and exploitation of new mar-kets and the development of new ways to or-ganize business.

Different types and degrees of innovationmay take place across different stages of de-velopment. Many entrepreneurship scholarsin the West believe (largely mistakenly in ourview) that innovation is not really importantfor economic growth and development in lessdeveloped (so-called factor-driven)economies. We believe that these types ofbroad-brush generalizations about the natureof economic growth understate and underes-timate the importance of innovation in ear-lier stages of development. One reason is thatone should distinguish between incrementalinnovations and more radical innovations,and between innovation that is new to a coun-try or firm and innovation that is new to theworld. The former type of innovation is imi-tation, where developing country entrepre-neurs adopt new products or processes fromthe rest of the world. Such innovation can playan important role in technological upgradingand increasing the utilization and the efficientallocation of production factors. Chinas de-velopment achievement is an example of this despite being classified by some Westerneconomists as being in the factor or efficiencystages of growth, it is outperforming manyrich countries in terms of innovation morepatents were for instance filed in China in2011 than in the USA.

Another reason is that several developingcountries have indeed experienced rapid eco-nomic catch-up in a sense, leapfrogging de-

velopment. They were able to absorb and cre-atively adapt international technologicalknowledge and thus to achieve acceleratedgrowth. Such adoption of existing technolo-gies goes beyond mere imitation it is an ex-ample of creative and innovative behaviourand examples are provided in our book. AliceAmsden argues that privately owned, domes-tic firms in East Asia were better at adoptingand absorbing technologies from advanced

economies than foreign-owned firms. ErikStam and Andr van Stel highlight how adop-tion of foreign technology provides entrepre-neurs with a potential to create new marketsand contribute to structural change and self-discovery.

Entrepreneurship and firmsEntrepreneurship refers to the discovery andexploitation of opportunities. It plays a po-tentially important role in development, in-cluding in cost discovery, gap filling,accumulation of human and physical capital,input completion, reallocation of resourcesfrom less productive to more productive re-sources, and supporting the process of struc-tural change. In this book we focus inparticularl on incentives, policies and institu-tions that liberate the productive potential ofentrepreneurship in development. Here,three strands of work on entrepreneurshipare distinguished. The first strand defines en-trepreneurship as a creative, dynamic charac-teristic of actors, be it the managers, owners ofsmall enterprises, or heads of departments. Inthis strand there is hardly any distinction be-tween entrepreneurship and innovation. Thesecond strand of literature focuses on firmbehaviour. Here we can make a clear distinc-tion between innovative and non-innovativefirms. The third strand of literature focuseson a subset of firms, namely owner-operatedfirms. Owner-operated firms are usuallysmall and medium-sized but can also includelarge firms. In this strand we can also make

the analytically desirable distinction betwinnovative and less innovative entrepreneship.

An important question throughoutbook asks who are the innovative actors developing country context. Are these ladomestic firms, subsidiaries of multinatials, owner operated small and medium terprises or micro enterprises? Alice Amspoints out that large private-owned en

prises are much more flexible and innovathan the subsidiaries of foreign-owned fiand that the importance of privately owenterprises in East Asia explains the enomic success of this region, as comparethe foreign-dominated economies of LAmerica.

Other authors in our book emphasizeimportance of small and medium-sized terprises. They account for a very substanpart of employment in developing countacross the globe. Most small scale entrepneurs however are survival entrepreneurs

are hampered by weak infrastructure, lacfinance and lack of capabilities. The systof innovation are often not providing the incentives for entrepreneurs to become minnovative. However, in our book, Jaap Voeet al. provide an encouraging example ofnovative behaviour amongst clusters of haicraft enterprises in Vietnamese villawhich are transforming themselves thronew products or more advanced producttechniques.

Policy implicationsPromoting innovation by entrepreneacross the stages of development thereseems justified. But how? Answering question first necessitates raising the qution, why do entrepreneurs innovate? answer is they are driven by profit motiAdam Smith realized that although entrepneurs act in pursuit of their own profits, tmay generate benefits to the broader socin the process, and that there is a link betwthe degree to which the entrepreneur engage in innovation and the size of market. Markets can thus be seen as imptant drivers of growth and development.

In the poorest developing countries, mkets unfortunately fail to fulfil this drivrole. Developing country markets are ofsmall, fragmented and imperfect, due to of infrastructure, low per capita incomes, mguided policies and institutional constraiThe political stability, predictability transparency, peace and other institutioprerequisites for the functioning of mar

Several developingcountries have indeedexperienced rapideconomic catch-up in a sense leapfroggingdevelopment.


23/48

Makin

are often absent. With fragmented, small anduncertain markets there is often insufficientincentive for entrepreneurs to innovate.Where markets are restricted because of bar-riers to trade (either natural barriers such aslack of infrastructure or man-made barriers)it is difficult for innovations to spread.Through the ages, international trade has ex-posed traders and merchants to new ideas,and technologies. This is one of the reasons

why trade functions as an engine of growth.Where markets are restricted by inappropri-ate regulations or strangled by predatory gov-ernments or monopolies, there is noincentive for entrepreneurs to introduce in-novations that are new to the firm. And whereinappropriate property rights and contractenforcement makes any returns on innova-tive activity risky, there will be little incentivefor entrepreneurs to invest in innovations,new to the domestic market or new to theworld.

While broadening the market may be one

of the necessary conditions for innovation, itwill often not be sufficient. The reason is thatinnovation is increasingly knowledge andskill-intensive. Because of the positive exter-nalities inherent in investment in knowledge,technological advance and human capital,public policy has been increasingly recog-nized as having an important complementaryrole to play in fostering entrepreneurial in-novation. Innovation requires not only highlyknowledgeable, experienced, and skilled en-trepreneurs, but also highly skilled labour.Thus, educational policies and capability-building are important public policies.

Without the latter, well-meaning donorand development organization policies mayfail to stimulate innovation. For instance,trade liberalization is often prescribed forsmall developing countries as a developmentstrategy, assuming that knowledge will auto-matically and without friction flow to thesecountries, not taking into account the needfor absorptive capacity. Donors often promotecompetition through private sector develop-ment programmes, not realizing that with toomuch competition, there may be little oppor-tunity for entrepreneurs to recoup invest-ments in innovative activities, particularly ifdomestic financial markets are underdevel-oped and entrepreneurs have to finance in-novation out of profits. Thus, in the absenceof careful government interventions and poli-cies, the operation of markets may result inunderinvestment in knowledge and innova-tion. Nowadays, innovation policy and na-tional innovation systems have become a

standard part of the economic growth dis-course in both advanced and developingeconomies.

The interplay between market develop-ment, systems of innovation and governmentscience, technology and innovation policies isan important theme of this book. For in-stance, Sunil Mani shows that in India theemergence of private institutions and initia-tives to complement government support

programmes for innovation, as well as an in-creased availability of skilled labour, were es-sential for the fast growth of the countrys ICTsector.

Many developing country governmentshave in recent years attempted to overcomesome of the weaknesses in the institutionalenvironments by supporting business incu-bators. Semih Akomak provides a discussionof incubators as tool for innovation in devel-oping countries. He proposes eight dimen-sions of a good incubator policy, includingclarity of mission and purpose; clear selection,

entry and exit criteria; managerial capacityand incubator management skills; engage-

ment in constant monitoring and perform-ance evaluation of participating firms;strategic selection of services; minimizationof start up costs and red tape; a focus on in-tangible services rather than tangible servicessuch as office space or infrastructure; promo-tion of networking as a deliberate strategy;and lastly, financial sustainability.

Finally, there is the puzzle of how many en-trepreneurs succeeded in innovating in oftendeeply adverse environments, characterizedby overregulation, high cost of doing busi-ness, weak enforcement of property rights,poor capital markets and underdevelopedmarkets. India is a case in point, as discussedby Suma Athreye. In India it seems, adversitypromoted creativity. She finds that the verysuccess of the software industry was a source

of subsequent improvement in the tional environment not brought agovernment taking the lead, but bytional entrepreneurship. As she putimpetus for institutional reform come from government, international tions or their advisors, but primarily fbusiness sector itself.

There are three general lessons frbook. First, the impact of innovationportant across countries and institutiotexts. Entrepreneurs in developing co

provide innovations that are imporfirm and country growth. Innovation an important role in catch-up and growglobal economy. This is so, first and fothrough the varied innovations of locapreneurs, but also through the role opreneurs in advanced countriesinnovations are generated and applied veloping country context.

Second, large and small firms equally innovative, but in different waysbook there is a strong emphasis on smmedium enterprises, as these predomdeveloping (and many advanced) countwhich also face particular constraints tvation. Often such small firms contrgrowth, but not optimally, since they novativeness. Here, characteristics of trepreneur (education, age, expenetworks), the region (location), and th(technological intensity) were identifieimportant determinants of innovation

Third, the policy and institutional ement is an important determinant opreneurs innovative behaviour. Governeed to support innovation directly anrectly. This can take many forms reform of the environment for doing bto providing venture capital, to tappimigrant workers and diasporas, provtechnical and managerial educationstructure, and stateprivate sector pships. Sometimes, even an aenvironment can spur innovative behand entrepreneurs may become the drpolicy and institutional change.

WIM NAUD is Dean Director, Research Dirand Professor of Development Economics aEntrepreneurship at Maastricht School ofManagement and also Professorial Fellow atMaastricht School of Governance, UniversityMaastricht and at UNU-MERIT. Previously,he was Senior Research Fellow at UNU-WIDin Helsinki.ADAM SZIRMAI is Professorial Fellow atUNUMERIT and Professor of DevelopmentEconomics at the Maastricht Graduate Schoof Governance, University of Maastricht.

Sometimes, even anadverse environment canspur innovative behaviour,and entrepreneurs may

become the drivers of

policy and institutionalchange.


24/48

MakingIt24

Peder Holk Nielsen,the CEO of Novozymes,a Denmark-basedbiotechnology company,explains how bio-based

products are improvingmanufacturingprocesses and savingresources and costs.

Moreresource scarcity as a catalystfor green industrial development

with less:

KEYNOTE


25/48

Makin

PEDER HOLK NIELSENtook office as President and CEO ofNovozymes on 1 April 2013. Up until his appointment as CEO, heserved as Executive Vice President and Head of Enzyme Businessfrom 2007-2013. During his 28-year career at Novozymes andNovo Industri/Novo Nordisk, Nielsen has played a central role inthe development of Novozymes in its current form. On takingoffice as CEO, he said, Our success rests on our ability to bringnew innovation to our customers, and our ability to find new ways

biotechnology can help them improve their products and makemore with less. A key focus for me will be to make sure we bringthese innovations to the market even faster than we do today.


26/48

MakingIt26

Industries all over the world face an uphillbattle in meeting the material needs of a risingglobal population at a time when naturalresources are dwindling. To respond, industriesmust rethink the way they produce their goods.By sourcing raw materials from sustainablesources, minimizing water and energy use, andreplacing harsh chemicals with biologicallyderived alternatives, they must put sustainabilityat the heart of their and the worlds growth.

Bio-based products are already making this

transition possible. They are greening valuechains in diverse industries such as textiles, paper,food and detergents, helping boost agricultural

yields, and making biofuels from trash acommercially viable alternative to gasoline.They are reducing energy and resource costsfor businesses, and raising living standards ofmillions of consumers, especially in emergingmarkets, without stretching natural resourcesto breaking point.

Inspired by natureBiotechnology has long had an impact on humansociety. Legend has it that ancient herders inCentral Asia accidentally discovered cheese bycarrying milk in bags made from calves stomachs,which contain the coagulating enzyme rennin.Baking, brewing and alcohol production are otherexamples of enzyme processes known sinceprehistoric times. Despite their fierce reputation,the Vikings are believed to have comforted theirinfants by giving them pacifiers made of a piece of

bread wrapped in cloth. The enzyme amylase,found in human saliva, broke down the bread

releasing sugars which kept the child happy.

Perhaps it is fitting that Novozymes, aDenmark-based biotechnology companyfounded in 2000, but with roots dating back tthe 1920s, is inspired by nature and is today tworlds biggest producer of industrial enzym

Enzymes are basically proteins that helpspeed up biochemical reactions in all livingorganisms. Among many other uses, enzymeconvert food in our stomachs into energy, tufallen leaves into compost, help soften leathand increase the clarity of apple juice. As the

have one unique function, and cause no sideeffects, enzymes are ideal tools for use in cleaindustrial production.

Novozymes scientists have sought micro-organisms, and the enzymes they produce, indiverse natural habitats. They have dredgedArctic lakes for enzymes that survive extremecold, which makes them suitable for use inlaundry detergents effective in cold water.Conversely, they have tapped geothermalsprings to find micro-organisms resistant tohigh temperatures, and therefore optimal foruse in baking. Our researchers have discoverenzymes that function in harsh environmentsuch as places lacking oxygen, or in highly-alkaline soil, and then optimized them for usin industrial processes mimicking theseconditions.

Today, Novozymes supplies enzymes to ov40 industries, where they are used to turnagricultural waste into biofuel, replace oil-bachemicals in detergents, and keep bread freshlonger, among others. We see these solutionssteps on the way to attaining a bio-basedeconomy, which is built on a sustainable, low

carbon approach to energy and production.


27/48

Makin

Innovating with industryInnovation is the cornerstone of the bio-basedeconomy, and lies at the heart of Novozymes

business. Research and development (R&D)forms the backbone of our company, absorbingmore than 20% of its global workforce, and13-14% of its revenues. We have built up aunique industrial biotechnology platform,including microbiology, protein engineering,

bioinformatics, assaying and fermentation

technology, which helps us undertakeinnovation in step with market needs and inclose collaboration with customers. Earlycustomer involvement in product developmentallows us to quickly find out if a proposedproduct will perform as intended, whether itsatisfies customer needs at relevant cost, andwhat, if any, are its competitor technologies.

Given our commitment to embedsustainability throughout our value chain, weuse Life Cycle Assessment (LCA) to understand

better the future potential of our R&D

pipeline. LCA is a method of measuring theenvironmental footprint of a product, processor service from design and manufacturethrough to use and disposal. The idea is togain an understanding of what in our pipelinecould reduce environmental impact in theindustrial area in which it is deployed. Thesesustainability considerations are included inthe process which determines whether aparticular product finally comes to market.Typically, Novozymes brings 6-8 new bio-innovations to market per year, and holdssome 7,000 granted or pending patents in

total.

Cleaner textiles, detergentand plasticsWe recognize that our customers buy our proto improve manufacturing processes and savresources and costs, which in turn improves tsustainability. A vivid illustration of how this comes from the textile and fashion industry.Some nine million tonnes of knitwear typicused for making t-shirts are produced annuconsuming vast amounts of water and energy

This has a profound impact on water securitynot least in China, which is the worlds largesttextile producer.

A Novozymes LCA shows that, by moving afrom traditional chemicals and adoptingenzymatic solutions, textile manufacturers sa70-90,000 litres of water and around one tonncarbon dioxide (CO2) emissions per tonne ofknitwear. Were these solutions applied in thetextile industry globally, there would be potensavings of 630 billion litres water and nine mtonnes of CO2 annually. That equals drinking

water for 24 million Chinese living in rural arand taking two million cars off the road.By replacing chemicals with enzymes,

manufacturers can reduce the consumption owater, energy and chemicals in many stages oftextile processing. For instance, the enzyme, plyase, acts in a targeted way to degrade pectin aremove wax from raw cotton. This enables thetextile scouring process to take place at lowertemperatures, and reduces the number of rins

baths needed. In the 1980s, Novozymes enzymreplaced the pumice stones traditionally usedmaking the wildly popular stonewashed jeansleading to huge savings of water while improv


28/48

MakingIt28

the lifespan of the fabric. Moreover, as enzymesdeactivate into tiny pieces of protein andcarbohydrate that function as food for beneficialmicro-organisms, and later degrade into harmlesscompounds, they greatly reduce the environmentalimpact of effluent from textile mills.

Big gains are also witnessed in the detergentindustry where enzymes make it cheaper and moreeffective to do laundry. Enzymes such as protease,lipase and amylase improve stain removal even whenclothes are washed at 30 degrees Celsius, down from

typical wash temperatures of 60 degrees, therebycutting energy and chemical use. That translates intolower electricity bills and fewer CO2 emissions forconsumers.

In 2012 alone, we helped customers reduce theirCO2 emissions by an estimated 48 million tons corresponding to CO2 emissions from 12 large,coal-fired power plants by the application of our

various biosolutions. It is our ambition to enable a75 million ton reduction in CO2 emissions in 2015.

And there are still more gains to be had. Last year,Novozymes developed a micro-organism a fungus that enables production of malic acid fromrenewable raw materials instead of oil. Malic acid hassignificant potential as a building block in thechemical industry. It belongs to a group of acidswhich can be converted into 1.4-butanediol, a

veritable Swiss Army knife of the industry, and whichcan be further converted into numerous chemicals,including plastics, polymers and resins for use ineverything from printing inks to cleaning agents.

In producing biochemicals, renewable rawmaterials such as starch from corn or cellulosic

biomass from agricultural waste are converted intosugars, which are, in turn, transformed into chemical

building blocks by specifically-designed micro-

organisms. These biochemicals provide analternative to oil-derived chemicals, helping adissues of energy security, price stability and COemissions. Analysts and researchers estimate t

biochemicals could contribute as much as 17%global chemical market by 2025.

Investing in partnershipsTo fully realize the potential of the bio-basedeconomy, innovation must be scalable, addresmarket challenges, meet consumer needs and

ideally, involve stakeholders across business asocial value chains and across the globe.

For instance, hundreds of millions of womethe developing world have no choice but to feefamilies with meals cooked on stoves fired withfuels like charcoal, which is produced in ways tlead to deforestation. Pollutants from the cooksmoke linger in their small, poorly-ventilated hcausing an estimated two million deaths annuwell as underweight births, cancer, respiratorydisease, and increased rates of infant mortalityMoreover, nearly a third of Africas seven millio

square kilometers of forest have already been bfor charcoal, causing biodiversity loss and a hurelease of greenhouse gases, while making areamore susceptible to flooding or drought.

These elements have combined to create aperfect storm of environmental and healthproblems in Mozambique. But there now exiclean, bio-based and sustainable solution to mthe rising demands for food and cooking fuelthat countrys rapidly-expanding urban areas

In 2010, Novozymes initiated the CleanStaMozambique (CSM) programme, which has sconvinced thousands of smallholder farmers

Mozambiques Sofala province to move away


29/48

Makin

slash-and-burn agriculture and charcoalproduction. Instead, they cultivate a range of cropsand trees that improve their food security,rejuvenate soil through crop rotation, and sell anysurplus crops to the CleanStar Mozambique(CSM) company.

In turn, CSM operates a local food and ethanolcooking-fuel production facility and produces arange of food products, as well as a clean, cheap,renewable and safe ethanol-based cooking fuelmade from cassava, a crop which is widely

cultivated in the area. These products, as well asclean-burning ethanol cooking stoves, are thensold in local, urban markets.

Novozymes brings to CSM its financial andbusiness development support, as well as enzymesolutions used in food, agriculture and bioenergyindustries. Other project partners provideexpertise in agroforestry, engineering, ethanolcooking stove manufacture and carbon finance.

Today, CSM has over 5,000 cooking stove andfuel customers, and has engaged more than 1,200smallholder farmers. It is on track to meet andimprove on its goal of 4,000 hectares of avoidedforest destruction per year in 2014. CSMs firstcooking fuel plant, also in Sofala province, istargeting sales of 20 million litres per year in2014, to serve 80,000 households.

Novozymes believes the CSM model isreplicable and scalable in many parts of thedeveloping world, including in over 40 majorcities in sub-Saharan Africa, where the urban poorrely on increasingly expensive charcoal. Themodel will improve market access for localfarmers, build sustainable and restorative bio-

based markets, deliver clean and affordable energy,

and help curb global greenhouse gas emissions.

Leading industryby exampleWhile promoting sustainable solutions toindustry and society, we are determined also make Novozymes value chain more sustainaWe source all electricity for our operations inDenmark from CO2-neutral wind power, andhave improved energy efficiency 38% and waefficiency 32% in 2012, as compared with 200Furthermore, the companys production faci

in Kalundborg, Denmark, is part of the worldfirst functioning industrial symbiosis, whereresidual product originating from one enterin an industrial cluster, including energy,

biotechnology and pharmaceutical companibecomes the raw material of another enterprResidual products traded include steam, dusgases, heat, slurry or other waste that can betransported physically between the enterprisOrganic waste from Novozymes facility isdistributed to local farms for use as fertilizer

Recently, our desire to put sustainability a

clean solutions at the heart of industry led ujoin UNIDOs Green Industry Platform. Weenthusiastically share its ambition of promocleaner production and scaling up theavailability of existing technologies that areproven to work.

Biotechnology and the bio-based economcan dramatically reduce resource consumpand waste, improve energy security and fostgreen growth, at a time when climate changaction and global economic recovery are topthe agenda. Industry must seize the chancebe a part of this brave, new and sustainable

future.n


30/48

MakingIt30Illustration:www.vectorstock.com/Bonathos


31/48

Makin

Jugaadinnovators dont view customers asmerely passive users of their products andservices. Recognizing the diversity of cus-tomer needs, they invent new solutions fromthe ground up by working closely with mar-ginal groups to identify their unique needs.They then engage local communities andpartners to set up a grassroots value chain tolocally build, deliver and support their solu-

tions making these solutions, in turn, af-fordable, accessible and sustainable.

For instance, to effectively serve the sixhundred million unbanked Indians, Yes Bankis constantly experimenting with new tech-nology-powered inclusive business modelsthat tap a vast network of partners. The YesMoney service is one such initiative. As partof this initiative, the bank has teamed up with

various payment platform companies vidhaa Infoserve and Oxigen Servicesoffer payment services through abohundred thousand mom-and-popstores in urban and rural areas. Yes Bahelped these companies to deploy a sized domestic remittance module, alfor example, migrant workers in cities money to their families in far-flung vil

Jugaadis a Hindi word that roughly translates as overcoming harsh constraints by improvisan effective solution using limited resources.Navi Radjou, Jaideep Prabhu andSimone Aseejugaad(and its equivalents) as a powerful approach to innovation that is most active in theemerging markets of Asia, Africa and Latin America. It has the benefits of being frugal, enablinnovators to do more with less. It is flexible, supporting improvisation and iteration. And it inclusive, bringing in the knowledge of diverse swathes of customers and employees alike, waddressing the needs of previously marginalized consumers.

Useto innovate faster,

cheaper and bette

JUGAAD


32/48

MakingIt32

through the National Electronic FundTransfer system. Compared to money orderremittance services (offered by India Post, agovernment undertaking), Yes Money is aboutfive times cheaper and five times faster. YesMoney also offers a cost-effective alternativeto Western Union. Moreover, the majority ofthe fees collected are passed back to the pay-

ment platform companies and the retailers creating value for all partners in the YesMoney ecosystem.

Like Yes Bank, Zone V is positioning itsproducts as tools for economic empowermentrather than for passive consumption. Zone Vsphones can therefore enable blind women inrural India to manage not only the financesof their households but also those of theirneighbours and the village council. In thisway, the individual phone becomes a vehiclefor driving socio-economic growth in anentire community. To make all this happen,Zone V will rely on a host of partners. It hasoutsourced its design and manufacturing tocontract engineers and manufacturers, andrelies on non-government organizations likeSightsavers to distribute its phones in emerg-ing markets like India especially in ruralareas. More important, Zone V will create aplatform for third-party software developersto develop inclusi

Making It #13 - Innovation

Documents

Transcript of Making It #13 - Innovation