'Being Cautious Is to Stop Moving': How Innovation and Entrepreneurship Can Bring Societal ChangePublished: July 14, 2010 in Knowledge@Wharton
New technologies and a growing capacity for innovation are playing fundamental roles in the search for answers to the current economic situation. At the Wharton Global Alumni Forum in Madrid, three executives from Spain's high-tech sector and two entrepreneurs in Africa's growing technology sector took part in a panel session titled, "Technology and Innovation: Panaceas or Chimeras?" The session was moderated by Alberto Durán, founder and CEO of Rio de Janeiro-based Mundivox Communications.
To set the stage for discussion, Durán noted during the panel and in a later discussion that, while technology and innovation will help create the basis for societal growth, it is demographics that has "completely changed the economics of the way we live, and is creating both immense opportunities as well as immense challenges." As an example, he pointed to the 85 million plastic water bottles that are thrown away every day. "The pile of bottles in the middle of the Pacific is twice the size of Texas, yet we don't talk about that," he stated. "Political will is needed to address these issues. Today we can create amazing financial instruments to fund real estate, telecom and other industries. Why don't those instruments exist to fund new technologies for plastic? Someone has to come in and say, 'Look, we need to do this.' It is political will that will make this happen."
Durán also noted the challenges that the global economy will face over the coming decades because of population growth. While 50% of people today live in big cities and 50% in rural areas, over the next 30 to 40 years, 75% will live in cities, and 25% in rural areas, along with a world population that "is growing exponentially," not in Europe but in the rest of the world, including the U.S., he stated.
Panelist María Garaña, president of Microsoft Spain, suggested that the debate today should focus on practical applications of technology in corporations and on the ways that technology can help improve corporate productivity and competitiveness. "The people who get the most out of technology aren't the ones who invest the most money in it, but the ones who use it to become more productive. Occasionally, it is enough to take advantage of the tools in technologies you already have at your disposal." She suggested "abandoning technological messages and additional technical terminology in favor of making information system tools relevant for companies and people."
In Spain, Garaña noted, "half a million people work in the high-tech sector. Yet the penetration rate of customer relationship management (CRM) information systems is barely 23%. Options such as CRM, virtualization [technology] and mobile technology have enabled companies to reduce their costs by as much as 30%."
Garaña mentioned two trends that are affecting the way new technologies are being adopted by corporations. "The first trend is 'cloud computing.' It is not about new technology but about a new way of consuming it that adds flexibility to the business." The second trend is consumerization, a word that incorporates the possibility of achieving the same objectives by using different mechanisms at any hour and in any place. "It is not easy.... The technology in the major consumer sectors is developing more rapidly than companies are adopting it."
Opportunity and Responsibility
Panelist Antonio Zufiria, IBM's president for Spain, Portugal, Greece and Israel, agreed that the crisis precipitated the need for innovative technology as well the need to apply new discoveries to change existing conditions. "Now is the time when we have to increase the level of efficiency and sustainability in our society," he noted. The world "is full of inefficiencies. A hundred years ago, there were only 15 cities [in the world] that had more than one million people. Now, that number has multiplied 20-fold. Yet the world is much better connected [via communications technology], and there is a greater capacity for analysis that permits us to improve our cities."
Along those lines, IBM has devised a project called Smarter Cities, whose goal is to make European cities more efficient through technology. This year, the project will devote half of its budget to research and development. In Denmark, for example, IBM is developing a system that will enable ordinary citizens to access health services over the Internet, the way they access banking online. In Stockholm, highway tolls already rise and fall as a function of traffic volumes, and thanks to the use of technology, traffic jams have gone down by 25%. This benefit has had a domino effect by reducing gases that have a greenhouse effect. "And in New York, they have reduced crimes by 20% thanks to a mathematical algorithm that permits [authorities] to predict criminal activity," Zufiria said. "In energy, transportation, security, health, public services ... inefficiencies exist and, as a result, there are business opportunities in many social systems."
The economic crisis has only "accelerated the need to employ technology," Zufiria added. "A recession is an opportunity in the sense that it enables people to measure the success of their initiatives and carry them out. Is this the right time to invest in innovation? At IBM, we are convinced that it is, more than ever. Nowadays, being cautious is to stop moving, and when you stay quiet, you're dead."
Panelist Regino Moranchel, chief executive of Indra, the Spanish information systems company, agreed with Zufiria that technology companies have an "obligation" to redefine the way that people share information. Moranchel took stock of the last 80 years in the history of multinationals. "Today, information is accessible in real time and it is easy to share. It is our obligation to redefine the way we use and share information to create value."
Like Gara ña, Moranchel left aside technical discussions to focus on the value that technology can contribute to businesses. "Actually, innovating is easy if you know the problem that must be solved, [and you also know] how it can be solved and who can help manage the process," he said. "We believe in [the sort of] innovation that is focused on our customers, so we can try to understand them, learn about their needs and, that way, anticipate what our competitors will be doing."
Moranchel also insisted on the "crucial" value of talent within any organization. "You will always have more talent outside than inside an organization, so collaboration and motivation are important for getting the maximum return from your team. Unfortunately, there aren't any simple rules to follow." Gara ña pointed out that new technologies have reached many companies through their own employees who are accustomed to using every sort of technology on a daily basis in their personal lives, and who eventually demand that those tools be used in the workplace as well.
Entrepreneurship in Africa
Two other panelists in the session were Eric Kacou, general manager of OTF Group, a Rwanda-based supplier of services for strategic management and competitiveness services, and Eva Muraya, co-founder and chief executive of Kenya-based Nairobi Color Creations Group. Both executives illustrate the ways in which entrepreneurship is taking off in Africa. "There are more and more successful case histories of African entrepreneurs," said Muraya.
"Panacea or chimera?" asked Kacou, reflecting the panel's title. "The answer to that question can be found in a unique sort of entrepreneur. Wherever you look, it's the entrepreneurs who are capable of turning innovation into a panacea." Describing the current situation in Africa, Kacou noted that at least "38 countries have been involved in [military] conflicts over the past 50 years. With the [current economic] crisis, the difficulties involved in doing business [in Africa] have been accentuated. The situation has had an impact on prices, financial markets, exchange rates and debt.... The only solution begins with a change in mentality." According to Kacou and Moranchel, a significant shortage of confidence exists now as well as a certain skepticism among various governments about the role of entrepreneurship.
At the same time, with regard to Rwanda, Kacou attributes the appearance of a new class of African entrepreneurs to a revolution in the economic assistance policies of the government. "If there are success stories, it is because the government has believed in entrepreneurs. Exports [from Rwanda] have multiplied five-fold over the past 10 years. It is not about copying others or sticking with what other countries are doing, but about creating new things." As an example, he cited a Kenyan company called Safaricom (www.safaricom.co.ke), which provides communications software that enables sales transactions to occur over mobile phones."Now the people of Kenya can carry their bank in their pocket. There are no transaction costs because everything is done with wireless."
"Billions of people are living in Africa, and many of them are very young," noted Muraya. "Even so, the [GDP] growth rate is not high enough. A lot more needs to be done because technology moves ahead rapidly." Muraya recalled recent developments in her country. "In 2007, fraud was discovered in the manual system for recounting votes in elections that, unfortunately, wound up pitting some people against others. That led to deaths and serious reversals for many local businesses. But thanks to the introduction of a system of electronic voting for the next elections in 2012, nothing like that is going to happen again."
Muraya offered her own recipe for succeeding as an entrepreneur. "You need to have a capacity to adapt, while at the same time maintaining your passion and focusing on the concept behind your business. Entrepreneurs also need the right partner who shares their vision and energy." Microfinancing has played a crucial role and microloans in particular are "very sensitive to the special conditions of peoples who are located at the base of the pyramid" in Africa and other regions in developing countries, Muraya noted. The microfinancing models have benefitted women more than they have benefitted men, since women are more likely to repay their loans and are more focused on achieving their entrepreneurial goals, Muraya said.
Zufiria noted that "with the arrival of information technologies, locally available talent is playing a more important role" in Africa, as well as China and Brazil. "Manual labor is no longer so important; the capacity for innovation has taken its place. There is only one solution, which is technology, but you need the courage and talent to make it useful." Added Kacou: "When we figure out how to provide services that are really useful for society, we will get out of this cycle, and we will be able to develop programs that are capable of overcoming every barrier."
Garaña, who has worked for 15 years in Latin America, joined the debate about the role that developing countries play during a recession. She noted that a recession offers these countries a unique opportunity because their growth has been limited historically by what could be called a "psychological crisis." "This is not a global crisis," suggested Zufiria, "but one that involves the countries of the 'First World' -- the industrialized nations. Regions such as Africa have a good future ahead of them," and they have not been as affected by the global recession.
"If we return to the essence of the meaning of the word 'innovation,' we will find the answer in our own capacity to undertake new business activities," stated Garaña. "If there is something positive that can be gotten out of this economic crisis, it is the capacity to reflect about things, to get back to talking about the basics. For many companies, innovation has stopped being considered a business expense; it has become a necessary gearshift for productivity."