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Innovation the key to prosperity

02 November 2018Discovery

Innovation usually has the aim to disrupt markets and industries. When thinking of innovation, it may not always be a completely new product or service. There are various types of innovation, and each of them has a very specific purpose and effect.

 

Market-creating innovation probably has the greatest potential to disrupt markets and grow the economy. This was the view of Professor Clayton Christensen and Research Fellow, Efosa Ojomo, on the role of disruptive innovation at the 9th Discovery Leadership Summit on Thursday at the Sandton Convention Centre.

Affordability and accessibility – key to innovation that drives growth

“Innovation always comes before development that has the potential to create prosperity. This prosperity does not come from resources, but is rooted in market-creating innovation. Taking a product that is often, at the outset, only available to a selected and affluent market, such as the first car, personal computer and cellphones, and making it affordable and accessible for every person, changes the world. This is the main characteristic of market-creating innovation – it is affordable and accessible to the majority of people.” says Professor Christensen.

Prosperous countries know the power of market-leading innovation

“When we looked at the United States, Europe and Japan, market-creating innovation was a standard catalyst for growth in the economy and in prosperity of people. There are many great examples all around us of such market-creating innovation,” added Ojomo. Using the example of Singer, he continued to explain how, before the introduction of the sewing machine, it was rare for Americans to have many different outfits. However, following the development of the sewing machine, the affordability and shortened time to make clothes, created a great, new demand. This meant that more machines had to be manufactured. People had to be trained to make them, sell them, and distribute them, and in doing so, creating thousands of jobs.

A market-creating innovation is, therefore, a chain of actions that lead to growth in new industries and jobs. It broadens consumption and even has the potential to help other businesses do better, says Professor Christensen. Here he cited the example of a refrigerator company in India that found a way to build refrigerators at a more affordable price so that it was also possible for street vendors to afford them and keep their beverages cold. Looking at the needs of people, and giving them affordable access to an innovation that meets their needs, increases consumption – another benefit of market-creating innovation.

Another type of innovation is sustaining innovation, which Professor Christensen says usually means making good products even better. “However, this type of innovation creates very little net growth. For example, when you look at cars, each model is better. But, you may not be able to sustainably sell the older models,” he says. Efficiency innovation, he continued, can create jobs and has the main purpose to drive down the cost of manufacturing a product to create free cash flow for a business.

Creating prosperity In Africa

For Africa to grow and create prosperity, Ojomo gave the audience the advice to change the thinking around development and to “remember the power of the pull”. Referring here specifically to not simply pushing solutions at problems, but pulling solutions in, to sustain the prosperity. A market-creating innovation is often just such a solution. Ending their session, Professor Christensen said he remains driven by a personal goal to help individuals become better. He also challenged every person in the audience to take on the responsibility of developing people and helping them realise their potential.

Quick Polls

QUESTION

Between 1918 and 2014, 32% of all of Lloyds of London’s insured losses were caused by flooding. With Climate change becoming a growing issue, is this a growing concern for insurers?

ANSWER

Yes, we have seen a significant increase in flood related losses
No, there will always be flood related losses. We are prepared for this.