Leading Edge Innovation: A South African Perspective

The SA Innovation League 2016

Innocentrixi n n o v a t i o n i n a c t i o n

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“Water is the driving force of all nature.” - Leonardo da Vinci

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Foreword

Innovation is a critical factor in the contemporary marketplace, and the influence and impact of in-novation in our local economy is unmistakable. Although we know this, it however doesn’t make it any easier to accomplish. Subsequently innovation has probably become the defining challenge for South African businesses. Our companies simply cannot afford to feel secure behind established brands, longstanding customer relationships, proprietary technology, and the like.

Although much of the pressure to innovate can be accounted to external forces (e.g. emergence of new and improved technologies, globalisation, social change, and financial markets penalising companies that fail to demonstrate an effective innovation strategy), the irony is that many South African companies actually resist something that is so vital to their futures. Too many companies appear to innovate only when in trouble or in response to a competitor’s move, whilst the only com-petitive advantage a business can really count on in an age of accelerating change, is the ability to continually reinvent itself before a change in its circumstances forces it to adapt. Innovation is about tomorrow, and South African business leaders need be more forward-looking instead of overly fixat-ing on only maximising the success of their current proven products and services. In addition, South African companies need to become more agile to significantly reduce the time from idea generation to product launch. The ability to do so, and to produce products and services the market will accept, increasingly requires that more departments and functional areas within the company get drawn into the innovation process. Companies must therefore tap into the creative power of their employees; ideas come from people, and innovation is a capability of the many.

My sense is that the winners in any industry in South Africa over the next five years will be those whose innovation prowess exceed that of the competition. It will be those go to much greater lengths to tap the creative potential embedded in employees. It will be those where people and ideas are at the heart of their management philosophy; instilling a desire to be innovative; creating the right organisational climate; and involving all employees and their knowledge about customers, competi-tors, and processes.

It is against this backdrop that the work of Innocentrix is so essential in helping companies entrench in-house innovation capabilities to create new paths for growth. Their exemplary commitment to promoting the innovation agenda in South Africa further finds expression through the “Leading Edge Innovation: A South African Perspective” report. It is an honour for Milpark Business School to be associated with such an important initiative and being part of the conversation around collaborative innovation in South Africa.

Now in its second year, the Innocentrix SA Innovation League study again sets an important agenda for dialogue in sharing innovation management best practise in the South African context. The report provides insightful findings observed through the lens of INSEADs IRM four-pillar model, namely, Leadership and Ambition, Organisation and Collaboration, Implementation and Measurement, Peo-ple and Culture.

Celebrating innovation excellence whilst exploring innovation management best practice within the South African context, the report adds significantly to the local body of knowledge, and promises to expand the insights of all stakeholders committed to driving innovation in our country.

Dr Cobus OosthuizenDean: Milpark Business School

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“Innovation is the specific in-strument of entrepreneurship. The act that endows resources with a new capacity to create

wealth.” - Peter Drucker

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Contents

1. Introduction: The SA Innovation League Summary 92. Results: The SA Innovation Landscape 113. Unpacking the Pillars 154. Innovation in Action: Local Case Studies 205. The Global Picture 236. Recommendations 257. Conclusion 268. Thank You’s! 269. Contributors to the Report 2610. About Innocentrix 2711. Appendices 2812. References 33

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Executive SummaryNo denying the importance of innovation

Emerging technologies and innovative new business models are transforming life, business and the global economy at unprecedented speeds. As digital technologies reshape the modern world, busi-nesses established in less fluid times are having to make increasingly complex and critical decisions against the ticking clock of change. A Boston Consulting Group (BCG) report in 2015 revealed that 79% of respondents saw innovation as a top three priority. The BCG figures reflect an earlier report in 2010 from McKinsey which identified that the majority of executives saw innovation as being criti-cal for their business; with 84% seeing innovation as being important to growth strategy. Interestingly that same survey revealed that just 6% of executives were satisfied with innovation performance.

The importance of innovation to business longevity and the potential it holds for the African continent has never been disputed. It is a message that Innocentrix, together with our partners across the globe, strive to enable. Collaboration and connectedness now brings a truly external perspective – essential for organisations to respond to.1 Companies by large understand this imperative and many invest in innovation in pursuit of a more agile, competitive organisation.

With the SA Innovation League, Innocentrix wants to bring this conversation to life and share best practises on innovation management from a South African perspective.

The SA Innovation League approach

The Innocentrix SA Innovation League study, now in its second year, was conducted by Innocentrix in collaboration with Milpark Business School. The original sample for the study was derived from the Africa Report (TAR)’s Top 500 companies in Africa ranking. Each year, The Africa Report chronicles the fortunes of the top 500 companies in Africa’s key business sectors. These rankings point to some of the important longer-term changes affecting African economies. Sampling also considers public sector organisations with a turnover of more than R500 million, as listed in the PFMA. This year we also incorporated the Africa Business Magazine’s list of top 250 South African based companies.

We adopted the methodology designed by one of the most comprehensive studies ever conducted on innovation. eLab, in collaboration with Logica, surveyed two hundred CxO level business leaders from blue-chip organisations and applied the Innovation Readiness Model (IRM) to determine why organisations are not reaping the appropriate benefits from innovation investment. It asks questions on internal and external collaboration, if and how organisations recognise innovation as key to es-tablishing or maintaining a competitive advantage, whether leadership styles, corporate culture and implementation strategies are working and whether the necessary resources are being made avail-able to ensure growth and sustainability. It boldly asks the question: “To what extent are organisa-tions applying leading edge thinking to the topic of collaborative innovation”.

Innovation in South Africa: What we found

Results show that although a marginal increase from the 2015 overall results are evident, local or-ganisations are still handicapped by low levels of ‘innovation readiness’. This means that they are lacking in many of the key elements required to create a successful platform for collaborative innova-tion and despite increasing investment in innovation, organisations are still not able to reap the full benefits thereof.

1 Are you innovation ready? Plotting your journey on the Innovation Readiness Model- INSEAD/Logica White Paper

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Effective innovation programmes are crucial to business

Many South African organisations excel at building innovative leadership and organisational cul-tures. They do however fall short as far as measurement of results and collaborative activities are concerned. Like in other countries, it is evident that organisations need to address cultural, leader-ship, technological and general process issues. According to the 2016 Innovation League results, this message is more pronounced in South Africa. Proficiency in collaborative innovation only comes from learning the ropes and by getting one’s hands dirty. Although great strides are being made, in general South African organisations need to do more to actively enable and manage innovation.

Celebrating innovation excellence and defining local best practise

We look forward to continue the conversation around collaborative innovation in South Africa and hope you will join us in contributing to the discussion. Working closely with both Milpark Business School and the Africa Report going forward, we envision an even more insightful SA Innovation League study in 2017. This initiative exists to celebrate innovation excellence while defining best practice for a common understanding of innovation management within the local context. We hope you experience this report as value adding and contributing to this overall goal.

Like water, innovative organisations are able to adapt

to changing circumstances.

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“Nothing is more powerful than an idea whose time has come.”

- Victor Hugo

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1. Introduction: The SA Innovation League Summary

With the introduction of the SA Innovation League, Innocentrix wanted the innovation discussion to turn more local, and to share best practises while staying abreast of global happenings. This was the inspiration for recognising innovation excellence and the resultant case studies that you will find in this report. It examines local innovation best practise, including collaboration output within and among organisations, how it drives innovation in today’s challenging economic environment and what companies are doing to position themselves to compete more effectively.

We firmly believe that when our top local organisations innovate well, it will have a definite impact on local economic growth and job creation.

Using the Africa Report’s Top 500 Companies in Africa ranking and down selecting to local organisa-tions, the PFMA to include public sector organisations and the Africa Business Magazine’s top 250 companies in South Africa list, we reach out to our top companies, looking for innovation excellence, leadership and learnings.

This report unpacks the results according to the four pillars of the INSEAD/Logica IRM study, juxta-poses the outcomes against international benchmarks and makes recommendations on next steps for organisations wanting to drive better results from innovation investment.

The four pillars of the IRM are widely regarded as the cornerstones of innovation sustainability, they are:

• Leadership and Ambition - the processes and strategies around innovation within the organisa-tion

• Organisation and Collaboration - collaboration, both within the organisation and with external partners

• Implementation and Measurement - how innovation strategies are implemented, how innova-tion impact is measured and what investment levels are, and

• People and Culture – referring to employees and how they participate in the innovation process

The respondent profile and methodology followed for the study are unpacked in more detail in the Appendices.

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2. Results: The SA Innovation Landscape

This year’s study continued to build on the findings of 2015, evidencing a general upward trend on all of the themes investigated.

Innovation Leadership and Ambition

Leadership support for innovation is crucial but good communication and the allocation of responsi-bility and resources makes the difference.

South African organisations lead innovation well as it remains our top capability. It is understood throughout organisations and enjoys support from CEO level and up. Effective communication still poses a challenge and innovation related priorities often lose out to other organisational demands. Leadership gets innovation, but in general it is time to walk the talk more diligently.

Organisation and Collaboration

We are making progress with collaboration but we need to do much better. Impact must be deeper and results need to be more visible.

A passive approach to collaboration is adopted as formal processes to enable efficient outcomes are lacking. Organisations partner with suppliers first, with a focus on developing business cases for new ideas. In the grand scheme of things this may not be very collaborative as the benefits from the resulting intellectual property would be an interesting topic for further investigation. The second choice for partnering was the use of consultants whose main contribution was business develop-ment while Universities were considered third. Organisations partner last with government. South Africa lags behind their international counterparts in terms of reaping the benefits of collaboration and organisational nimbleness. True, open collaboration seems some way off as partnering engage-ments still appear to be very tactical.

Implementation and Measurement

Ideas are in abundance but limited implementation delivers little value. Scarce resourcing and inad-equate budgeting risk innovation success. Effective implementation still poses the single greatest challenge for participating organisations. Given the reported importance of innovation, the long standing availability of supporting funds is reported as the most pressing problem while resource constraints and conflicting work demands makes things worse. Investment and returns are tracked but metrics are not well defined or clearly designed for optimal results. This paints a picture of organisations looking for some form of magic without allocating the necessary resources or making the required investment.

People and Culture

People are making the difference and they have the capability to do so. Organisations need to ac-knowledge this and capitalise on internal strengths.

A knowledgeable workforce, strong leadership and an open mind towards innovation are core strengths for organisations. A sincere willingness to change is a further positive but silo mentalities,

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unclear linkages between innovation and strategic company objectives, coupled with less than ad-equate opportunity to take ideas forward in a transparent and open manner are hampering progress. Training for employees are well supported.

The SA Innovation League 2016 winners

The SA Innovation League winners were announced during the Innovation Live 2016 conference hosted at Telkom/Business Connexion, and winners were separated by very little. Those who collab-orated well internally and externally fared better while many had particular strengths in certain areas.

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Overall Strengths and Weaknesses: 2015 vs 2016

In general, an increase in overall results were evident. South Africa’s overall innovation quotient im-proved from 1.54 in 2015 to 1.61 in 2016.

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Local organisations lag behind their international counterparts on all of the pillars investigated, with the Netherlands at the top of the IRM table.

Leadership and Ambition remains South Africa’s strongest pillar with Implementation and Measure-ment its aching Achilles heel. Best progress was made with the People and Culture pillar with a clear increase in score (1.50 in 2015 vs. 1.59 in 2016.)

The following were mentioned by organisations as innovation strengths and weaknesses, and are presented in no particular order.

Strengths of high scoring organisa-tions

Weaknesses of low scoring organi-sations

Strong leadership buy-in Not understanding innovation life-cycle depend-encies

Dedicated teams and a fearless approach Innovation is mostly seen as a nice to haveWorkable innovation management tools Organisational/employee apathyFinancial backing Irrelevant or wrong metricsDedicated facilities A short term focusClear KPI’s and execution methodologies Lack of structure and processesOpen communication Risk aversionCollaborative efforts Lack of funding and resourcesSwift decision-making Ineffective implementation processes

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3. Unpacking the Pillars

3.1 Leadership and Ambition

This pillar remains corporate South Africa’s greatest strength. The overall score achieved by partici-pants was 1.86, an increase from the 1.80 score achieved in 2015.

Leadership and ambition is a strong pillar internationally as well and ranks as overall second best capability. The aggregated global score for this pillar is 1.90.

It is clear that the imperative of innovation is understood as most agreed that leadership at all levels clearly demonstrate their commitment to innovation.

Top organisations are putting in place clear innovation strategies (77%), while open innovation meth-odologies are slowly but surely taking hold as 63% (as opposed to 60% in 2015) said they had well defined strategies in this regard.

Innovation also seems to be driven as a clear outcome by the majority of organisations who believe that overall strategic objectives are translated into innovation objectives.

Leading innovation is a clear strength for South African organisations and executives are demon-strating this intent by aligning innovation outcomes with overall organisational objectives and sup-porting tactical thinking with concrete strategies. Leadership intent alone however is not going to make innovation happen. Success lies in the execution of intent and while organisations are willing and able, it is clear from the results that much room is left for improvement. Weaknesses in execu-tion coupled with ad-hoc activities and misaligned interdependencies should become a leadership priority for action.

Leadership is creating opportunity for innovation but the proof of the pudding still lies in the eating, as evidence of intent yet needs to be translated into results.

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3.2 Organisation and Collaboration

Managing innovation activities in support of collaborative innovation was one of the weaknesses of the organisations surveyed. This pillars ranks second last in terms of performance. South Africa did however make progress in this regard as a score of 1.47 in 2015 increased to 1.55 in 2016. For glo-bal organisations the average was 1.92. Organisation and Collaboration is the strongest performing pillar for international organisations overall.

A closer look at the local picture reveals that half of the organisations surveyed has a separate de-partment responsible for facilitating innovation. This is slightly up from the previous year. In general, resources are made available for innovation related activities although many of these enabling struc-tures are ad-hoc and non-permanent.

Involvement of external partners in innovation was viewed as important by 68% of the respondents. According to Figure 5, local organisations involve external stakeholders mostly in the concept phase or for business case development and then in the process management and thought gathering phases of the innovation process. Innovation phases we partner on:

Collaborative innovation and co-creation is a clear weakness locally. When choosing innovation partners, organisations opt for suppliers first, then use consultants to drive outcomes. Teaming with

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research institutions or Universities is a third option while client involvement in the innovation pro-cess is considered second last. Processes are rarely in place to govern co-creation activities and it is mostly based on the needs or requirements expressed by those involved. The process is not as effective as it should be and outcomes could be more impactful in many instances.

Who we collaborate with most:

It is no longer possible to thrive in a world of isolation, where global inter-connectedness has started to redefine the way we live and work. New business models are disrupting the essence of traditional strategic thinking and collaborative innovation in its truest sense is needed to create the art of the possible.

Local organisations are becoming aware of this fact but in reality the future imperative is still heav-ily discounted against everyday operations and immediate targets. Collaboration happens, but it is ad-hoc, uncoordinated, under resourced and not optimised to drive repeatable value. Successful collaborative innovation requires resources and supportive infrastructure. Global players are demon-strating a more mature capability to capitalise on the power of collaborative innovation. As a country South Africa could benefit from its access to diversity, a strong knowledge base, and world class infrastructure. Local organisations currently discount this opportunity.

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3.3 Implementation and Measurement

The Implementation and Measurement pillar represents the weakest score overall in the Innovation League results. Slow progress is evident but the appropriate attention towards driving value from in-novation investment is still lacking. South Africa did however make inroads with this and scored 1.45 for implementation and measurement in 2016 as opposed to 1.40 in 2015.

In terms of a process for mobilising people for innovation, 24% of participants said that they have an actively incentivised process in place, however, of this percentage 40% stated that it is taking place in a passive manner. The results show that a well implemented process for sharing innovations, knowledge and experiences across the organisation was adopted by 39% and that team work in general was improving.

It is still however the little foxes that destroy the vineyard. An overwhelming majority agreed that or-ganisational innovation capabilities should be benchmarked (92%) while only 34% fully agreed that this was being done. Innovation management processes seems to be in place by the majority (69%) but of this number, only 32% tended to agree with the statement, indicating possible ineffectiveness. This result could also signal unformal and uncoordinated mobilisation processes and challenges with idea execution. Investment and return are tracked by most organisations but when asked to define the metrics used, no clear answers were given. The biggest challenge for local organisations remains budget as 56% disagreed that the budget allocated was in line with the organisation’s in-novation ambitions.

The value of innovation lies in its successful execution and a clear demonstration of ROI. Without implementation and the tracking of results, innovation will remain a stepchild, unable to unlock the potential of organisational growth and transformation.

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3.4 People and Culture

As a nation that internalises the principle of “Ubuntu”, South African organisations demonstrate a strong regard for its people. This pillar comes in as the second strongest capability for local organisa-tions. Although much still needs to be done at various levels, strong corporate values and a people orientation is visible within many organisations.

An overall score increase for this pillar from 1.59 in 2016 as opposed to 1.50 in 2015 was evident. The international score for the People and Culture pillar is 1.80, making it the international peer group’s second weakest pillar.

Most respondents (65%) agreed that employees understand the importance of innovation and their role and responsibility in becoming more innovative.

There was no doubt that employees and organisations are willing to change (82%), albeit not a con-vincing message, as many still only tended to agree (41%) with this statement.

Just over half of respondents (51%) agreed that the opportunity was given to move ideas forward but it seemed that more tangible interventions like reward and recognition was not supported well by most. It does seem that an appetite for failure is communicated and tolerated better than before (41% agreed) while employee training and development was high on the agenda of participants. A stronger balance is apparent between long and short term innovations, as only 28% of respondents did not agree that this was the case in their organisations.

A culture of innovation and innovation supportive values are of cardinal importance for overall suc-cess. Many local organisations are doing well to build this capability. It is still clear though that good communication, room for people to voice their opinions and appropriate skill development programmes, are in need of better attention.

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4. Innovation in Action: Local Case Studies

Pretoria Portland Cement (PPC): Innovation Is Oxygen at PPC

The Challenge

• Global change and a focus on the African growth imperative required a new way of working at PPC

• Collaboration & knowledge sharing needed to be entrenched and a move away from email and Xcel templates as means of managing innovation was necessary

• A pipeline for commercialisation needed to be established that was based on strategically aligned suggestions and fresh thinking

• A more collaborative ecosystem needed to be build • Innovation had to become an everyday activity for all staff

“Innovation is viewed as a tangible, effective and sustainable activity with the potential to deliver on key strategic objectives by leadership. It is one of the organisation’s five strategic pillars communicated as a contributor to the or-ganisation’s economic, organisational and individual success, and a key driver of business competitiveness and growth. It’s our world… we need to shape it or someone else will” – Alta Shoultz, PPC Innovation Manager.

The Response

From 2013-2014 PPC designed and innovation strategy, measured and improved leadership capa-bilities in terms of innovation, completed two technology scouting projects and completed numerous creativity and training workshops. Building on what already was in place, PPC then implemented a best-of-breed web-based idea management system in 2015 called PPC Innov8 – to encourage a bottom-up flow of ideas. Roll-out and communication activities were implemented and a transparent, effective innovation programme enjoyed first priority status.

Some insights from PPC: A 124 year old company needed to change. This could only be achieved by being serious about in-novation. First steps for PPC were: • Building an innovation culture with regular, planned interventions• Strategic investment and growth, underlined with a sizeable budget for innovation activities that

included ideation, experimentation and implementation• Building organisational capability in innovation as a strategic priority• Investing in a suitable Innovation Management System (IMS)

The Results

• R8 Million ROI in year 1• 990 registered users in year 1• 556 total ideas submitted and 23 ideas selected for implementation

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First National Bank (FNB): It’s about people and being connected

The Challenge

• Being in an industry that is experiencing global disruption coupled with economic challenges, FNB needed to respond with something different and impactful.

• They had to move from “Good to Great” by building enduring, rewarding relationships supported by people, innovation and efficiencies.

• Innovation DNA was needed to drive future growth.

“An innovative corporate mindset creates an innovative corporate personality. As an innovative organisation, you need to be willing to test things as there is no silver bullet. Innovation cannot be forced. It needs to first consider the or-ganisational capability. It is also not about just one programme as a standalone. Its more about how to enable and integrate it into the existing structures and mechanisms of the organisation to enact change” - Yolande Steyn, Head: In-novators Programme, FNB

The Response

As a kick-off point to embrace innovation within the organisation, FNB started an innovation reward programme for employees in 2004. Since then it evolved to include learning methodologies, the development of new business cases, a focus on ideation and creativity and exposing staff to great South African (and global) innovations. The programme in essence supports an idea incubation structure and then culminates in an innovation reward programme. It involves all employees.

Some insights from FNB: • Support your culture programme with a suitable technological platform to manage process in a

transparent manner• Include learning, knowledge sharing and training. FNB integrated a You Tube channel• Provide clear guidelines and an enabling environment across channels and businesses• Innovation champions are your voice and hands in building a sustainable culture, identify and

use them• Supporting infrastructure that includes implementation teams and experimentation is a must• Internal and external networks for collaboration drives more impactful outcomes• Leadership support, backed up with the necessary capital is the #No 1 consideration

The Results

• Up to date disbursed over R42.5 million to innovative employees. • Since 2004 FNB considered more than 10 000 ideas and implementation

has been across the board, from small to much larger scale interventions. • It was awarded most innovative brand in 2012, and the innovation awards

kept coming since then.

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Legal Aid South Africa: Collaboration Makes the Difference for Justice

The Challenge

• Overcoming a legal application mindset in service delivery presented a potential roadblock to innovation for SA Legal Aid

• Increasing impact while operating under regulatory and budget constraints needed a new way of thinking and a fresh approach

• Providing an active process for managing and mobilising everyone to come up with innovative ideas had to be found without access to the necessary funding

“We needed to make sure that we go beyond strategizing, and that we have a plan to think and act differently. An execution plan on how to turn our thinking into reality was imperative as this helped us to talk about innovation regularly. We had to get to a point where organisational culture valued knowledge shar-ing and the exchange of ideas in order to support innovation towards altruistic outcomes. Innovation was rooted in the shared belief that by working together, we can contribute to a fair world and a just society”. - Amanda Clark, HR Ex-ecutive, Legal Aid SA

The Response

The organisation firstly focused on deeply embedding innovation in its strategy and embraced it as an enabler to deliver on the mandate of Legal Aid SA. It was treated as a core competency required of all its leaders and effective internal as well external collaboration efforts were viewed the main mechanism to overcome challenges and budgetary constraints.

Some insights from Legal Aid SA: Incentivise paradigm changing organisational solutions and engage people in the processTrack innovation progress with metrics that includes process and infrastructure, governance and support, building a culture of innovation, visionary leadership and effective implementationManaging innovation processes through cross functional teams drives an innovation culture, facili-tates the breaking down of silo’s and create deeper impact. Effective teams also manage towards successful implementationCollaborate with external partners, share, learn and lead. External stakeholder teams bring a diverse perspective on a common goal that fosters innovation

The Results

• 47 innovation idea proposals, 6 ideas implemented, 6 in experimentation• Spearheaded the Johannesburg Declaration as part of its commitment to

uphold the rights of the poor and vulnerable across the world• Played a leading role in the United Nation’s adoption of the Principles and

Guidelines on Access to Legal Aid in Criminal Justice Systems

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5. The Global PictureEvery year there are a number of different surveys to examine the state of innovation across the globe. One such survey is from the World Economic Forum (WEF) which releases its Global Com-petitiveness Report on the state of the world’s economies. The WEF looks at data on areas as varied as the soundness of banks to the sophistication of businesses in each country. It then uses the data to compile a picture of the economy of almost every country on earth.

One of the measures the WEF looks at is innovation, which takes into account things like the quality of scientific research at universities, company spending on R&D, collaboration between universities and industry, patents, and the number of engineers and scientists in each country.

Some snapshots and insights that can be drawn from this report in relation to the country compari-sons that were covered for this year’s League report, are drawn out below. The UK has been going through a tech-driven boom, with world-leading fintech companies like Funding Circle and Transfer-Wise starting up in London. The WEF says that Britain is “still one of the most competitive economies in the world” but cautions that Brexit “is likely to have a negative impact on the United Kingdom’s competitiveness through goods and financial markets as well as market size and, potentially, innova-tion.” We will have to see if this has a negative effect on UK companies to be innovative.

In terms of the Innocentrix League results, Netherlands were this year’s champion and considering the WEF point of view, they scored especially high on the quality of their scientific research institu-tions (4th) and closeness of links between universities and the private sector (5th). Success stories of social innovation are particularly frequent in the Netherlands. There is much to learn from some of these activities for South Africa. These activities are happening locally, however the quality of the processes and the business integrity of the relationships still need to mature.

The companies surveyed in the Nordic or Scandinavian geography performed in line with last year’s result. However, when you observe this from the WEF’s perspective they felt them to be “well posi-tioned in terms of innovation,” particularly, “with their capacity to innovate supported by the excellent availability of scientists and engineers and a high degree of collaboration between universities and industry.” Governments across the region have well developed intervention models that support both university R&D, as well as corporate innovation projects.

Creating value through innovation is a global conversation. In today’s competitive world, both de-veloped and developing countries need to come up with joint innovative solutions to counter global challenges; and they need to do this while simultaneously addressing the pressing needs of their respective populations1. In this context South Africa needs to introspectively consider its capacity to take advantage of its strengths in innovation, directly shining a light on local firm’s innovation capa-bilities, the business and regulatory environment as well as local policy.

Economic forecasts predict that Sub-Saharan Africa will face an economic slowdown and as the economic slowdown occurs, it will be important for South Africa to preserve innovation momentum. Although taking a global perspective reveals that innovation is expected to drive revenue growth and brand perception across industries in the short term, challenges remain with clearly position-ing innovation as a strategic driver and building the capacity to harness it. More resources are now spent on innovation and related factors globally than at any other given point in human history and it is considered to be a major force for economic growth.

1 Global Innovation Index Report 2016

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According to KPMG’s recent Global CEO study entitled Now or Never, this conversation is undoubt-edly happening at board level. CEO’s have clearly turned to innovation in order to address the or-ganisational changes necessary to grow in the future. Yet, they also feel their organisations have work to do in embedding innovation into their everyday operations. This discussion now also high-lights crowdsourcing and formal innovation management, seen by many as the foundation on which a transformational culture can be built. Innovation programmes are designed to pursue objectives linked to culture building, increased employee engagement and the streamlining of processes. It is clear that the success and failure of an innovation programme often comes back to executive leader-ship and that without a “crowd” of engaged participants, it could be all for nothing2.

This transformation is hard work as the issues of customer loyalty, the impact of the global economy and lack of time to strategically plan for the future are some of the things keeping leaders across the world awake at night. Top organisations today are focusing on fostering a culture of innovation, they embed it in their businesses’ day to day operations and put it at the top of their personal agendas.

In order to benefit fully from this evolving central role of innovation, management must become more and more global. Furthermore, customer-driven innovation and collaboration with start-ups and small and medium-sized enterprises represent the largest potential, but also some difficult chal-lenges. Organisations that manage to do this well will be best prepared to capture the next wave of innovation.

Successful innovation strategies cannot afford ‘stop-and-go’ approaches. Apart from an obvious policy and leadership imperative, this trickles right down to organisational level - as it represents the country’s basis for GDP growth.

2 The state of crowdsourced innovation 2016 – Spigit

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6. RecommendationsInnovation occurs in an ecosystem where businesses, regulations, and social norms promote con-nectivity, creativity, entrepreneurship, collaboration, and the adoption of the latest technologies to generate new ideas and bring new products and business models to market. The importance of embracing innovation and its many facets has been highlighted throughout this year’s report.

Moving the ball forward for organisations will depend on their starting point and desires - and the pil-lars of the SA Innovation League gives guidance on where to focus. What to do first will vary across sectors and depend on the size and scope of the organisation, but a number of fundamentals will be ever present. We would always call out some top level takeaways for organisations to start with before investing in new shiny technology or expensive research initiatives.

Understand where you are: Before setting out on the journey a useful first step is to gauge where you are at and what your innovation capabilities are. The answer to that question can’t be found in management notes or in departmental meetings. Understanding the current state of innovation in your business means asking key questions around a number of areas including tools, culture and strategy. For the participants in this year’s report they would have got this picture from the use of the IRM, however there are a number of different models and frameworks around for organisations to use.

Set a destination: Having established where your organisation is today you can set a destination of travel and benchmark for the future. Innovation cannot be viewed in isolation. It must be at the forefront of, and aligned with, overall corporate goals and objectives. Leading global brands such as Apple, Google and Alibaba regularly communicate the importance of innovation. In order for this to happen, those setting and delivering the strategy must have a clear understanding of what innovation actually means in the overall context of their particular organisation.

Commit to the journey: Employees are more likely to prioritise and take innovation seriously if senior management is seen driving the conversation and activity on a regular basis. Full manage-ment sponsorship creates momentum. Research from Aon Hewitt shows that companies with strong financial results have high levels of engagement from senior managers. Without engaged senior leadership, companies will not be able to engage the hearts and minds of their employees. As it stands, it is commonplace that only limited pockets of employees identify board-level employees as taking the lead in driving innovation in the workplace.

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7. ConclusionAs a country, South Africa’s innovation readiness, and therefore its ability to apply leading edge thinking to the topic of collaborative innovation, is growing. Although steady progress is being made, we are still lagging behind our international counterparts on many levels. South Africa’s innovation abilities compare with the best in the world but in order to see results and a return on innovation investment we need to focus on the right things.

Success in challenging times will require courage and foresight to persistently create tomorrow. It requires work and commitment and a realisation that action is needed today.

South Africa‘s future is to a large degree linked to its organisations and the people within it. There’s a lot of work to do and considering our many political, economic and social challenges, a myriad of scenarios are possible. We have a massive role to play in Africa and opportunity abound, it will depend on us!

8. Thank You’s!A sincere thank you goes out to every organisation that participated in the SA Innovation League up to date, especially those who made available time to contribute to the case studies found in this re-port. Note that longer versions of these case studies are available on our website (www.innocentrix.co.za). We also thank our partners for the role they played in making this study a reality.

The SA Innovation League winners are the corporate leaders that sets the bar and we recognise you as top companies in SA, playing your part in creating the future and contributing towards national prosperity and innovation excellence in our country!

9. Contributors to the Report

Henra MayerCEO - Innocentrix

Richard CoplandGlobal Innovation Ambassador -

Innocentrix

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10. About InnocentrixInnocentrix works with leading organisations eager to win. With a focus on driving innovation results, we help our clients to get where they want to go.

With a strong network of international partnerships, we work closely with client teams to implement projects that discover and accelerate new avenues for growth. The objective: To help our clients entrench an in-house innovation capability by creating the art of the possible and implementing the ideas that matter!

Our mission is to take you from concept to commercialisation.

Solutions are designed with the aim to :• Disrupt – Envisioning and implementing ground-breaking projects and new avenues for revenue

generation• Accelerate – Designing roadmaps and supporting activities to create impact and get to market

faster, supported by various best of breed technologies• Transform – Training, energising, engaging and boosting internal innovation capabilities • Engage – Co-creation with client ecosystems and partners, using the latest technologies and

collaborative platforms available in the market, including Open Innovation methodologies

We do: • The Thinkubator™, an internationally acclaimed stakeholder engagement approach; • Client Innovation Programmes, which create the ‘art of the possible, focus on stakeholder and

ecosystem engagement and assists clients to move from idea to commercialisation;• Our House of Brands which makes Innocentrix the local go-to innovation company that offers

best of breed innovation technologies to the South African market, based on client specific needs and innovation maturity levels;

• Innovation Consulting and Advisory Services, ranging from strategic initiatives to culture and change management; and

• Innovation Union Events that fosters triple helix collaboration and the making of new connec-tions. Union events are typically described as an informal match-making platform in the form of a meet, greet, present and match.

• An Innovation Ecosystem of Choice that through engagement with SMME’s drive econom-ic growth and impactful collaboration. We entrench and support this engagement through our Thinkubator and Union event activities.

• The SA Innovation League and the Annual Innovation Live Conference, one of the most robust conferences for SA organisations who regard innovation as a strategic priority, with in-ternational speakers and SA industry leaders presenting local and international case studies evidencing innovation achievements and methodologies that have delivered value.

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11. AppendicesMethodologyAbout the SA Innovation League 2016

In an effort to showcase the country’s top innovation leaders and recognise South African innovation excellence, Innocentrix, in collaboration with Milpark Business School, carried out the SA Innovation League study in 2016, now in its second year.

It applies the Innovation Readiness Model (IRM) designed by INSEAD Business School in collabo-ration with Logica, and explores local organisations’ approach to innovation management. The re-search places innovation investment against returns. It states that many organisations have main-tained or increased innovation investment in a downturn, however, a lack of readiness or maturity in innovation management means this investment is effectively wasted. The League study therefore investigates innovation readiness levels to ensure that investment pays off. It examines if and how organisations recognise innovation as key to establishing or maintaining a competitive advantage, whether our leadership styles, corporate culture and implementation strategies are working and whether the necessary resources are being made available to ensure growth and sustainability.

Initial hypotheses were created around the general thesis concerning ‘Collaborative Innovation’ and then was broken down into three key areas: • Internal capabilities, the • External environment, and • Collaboration:

Internal capability• Internal, company-specific factors, such as ––creativity, degree of teamwork, intra-company

sharing of best practices – together, ‘culture’ management capability, process discipline, per-formance delivery – together ‘execution’

External environment• Scan: sense and filter signals from environmental shifts in competition, demography (ageing

population), geography (opening of markets), economy (financial crisis), technology and other triggers

• Partners: leverage external partner organisations and stakeholders who are relevant for the in-novation processes

Collaboration• The ability of an organisation to create ecosystems of collaboration within the organisation-linked

internal capabilities to the external environment

The 2016 study considered inputs from diverse industries, (10 in total). From the Top 10 South Af-rican companies listed in the Africa Report’s Top 500 companies in Africa ranking, 5 participated in this League Survey, including 4 out of the top 5 companies listed.

It should be borne in mind however, that the organisations who participated have in general, a keen interest in innovation and results therefore need to be interpreted considering a certain degree of positive bias from respondents.

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The Innovation Readiness Model: A unique contribution(Adapted from INSEAD: Logica White paper on the IRM)

The research conducted by INSEAD in collaboration with Logica has identified the ‘Innovation Read-iness Model’ (IRM) as a way to rank organisations’ ability to innovate successfully. The concept of a ‘readiness’ ranking can be understood as the measurement of the ability of an organisation to put into practice leading edge thinking around a particular topic, in this case, collaborative innovation.

Based upon an in-depth analysis of the survey data and interviews with senior executives from lead-ing organisations, the IRM has been designed to rest upon four pillars and four levels of capability achievement along each pillar. These four pillars form the four foundations on which successful col-laborative innovation can be built.

The four pillars are like the four legs of a chair. Relying on strong legs enable one to sit comfortably and also to stand on the chair and reach high. However, it is also important that the legs are of the same length – else the edges of the chair will be uneven and it will not provide a level foundation to build upon. Thus, we need a mechanism to measure the achievement of an organisation along each pillar of the IRM. The model is based on the well-established literature on software maturity models to propose four levels of achievement for organisations for each pillar.

The systematic study of product and process innovation has been documented over the last few decades. However, the definition of innovation has now evolved and encompasses a broad range of elements from novel marketing approaches to new organisational structures and business models. Innovation research can no longer be restricted to narrow product or process parameters that can be manipulated in laboratories or studied on the manufacturing floor. There is a need to include a range of actors (employees at all levels and in all functions, customers, representatives from the government and non-profit sectors, and so on) and issues (such as leadership, incentive design, communication, feedback and coaching) within innovative research. Given the range and diversity of these actors and issues, it is not surprising that the systematic study of collaborative innovation is still in its infancy.

Through the findings, INSEAD and Logica have identified a unique research model to capture the elements that are required for organisations to win at collaborative innovation. The IRM is a pio-neering effort to jointly address the four critical dimensions for identifying the overall readiness of an organisation to succeed in collaborative innovation: Leadership and ambition, Organisation and collaboration, People and culture and Implementation and measurement.

The Innovation Model Explained

The Innocentrix Innovation League approach and the resulting feedback to participating organi-sations presents every organisation with the opportunity to understand its own internal innovation context. Every participating organisation received feedback on their results based on the INSEAD Innovation Readiness Model (IRM). This presents an opportunity for growth in innovation capability and increased results that can provide the impetus to take organisations into the future.

We are looking forward to continually build out on this approach and methodology to ensure a con-stant relevant innovation instrument for local use.

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Approach and Methodology

The study was carried out using both a survey tool and follow-up interviews with a smaller number of organisations. It provided us with the opportunity to reach out to a large number of South Afri-can organisations and question them in a structured manner about their innovation processes and strategies, while the interviews (some of which we have shared in this report) served to collect more in-depth knowledge around a range of subjects.

For the survey, we used the internationally recognised Innovation Readiness Model (IRM), devel-oped by French business school INSEAD and Logica, a UK IT and management consultancy firm. The IRM has a unique way of benchmarking an organisation’s innovation readiness, and it has been used internationally as well as locally in South Africa, with great success.

Innovation readiness in this instance is defined as an organisation’s ability to apply leading edge thinking to the topic of collaborative innovation. It is in this context that the results should be interpreted.

Using an internationally comparable survey meant that we could rely on a well-tested tool, around which we could build conversations with organisations on their innovation processes and targets. It also provided participants with comparable scores, allowing them to benchmark their organisations not only against their national peers but also against the performance of their international counter-parts.

Unpacking the Four Pillars

In order to quantify an organisation’s innovation readiness (or ability to apply leading edge thinking to the topic of collaborative innovation) across the whole organisation, the IRM is built around four pillars – Leadership and Ambition; Organisation and Collaboration; Implementation and Measure-ment; and People and Culture.

Leadership and AmbitionThis pillar focuses on the processes and strategies around innovation, how managers and leaders within the organisation approach innovation and how the organisation communicates around innova-tion. Innovation does not filter from the boardroom to the shop-floor without effective leadership. This category includes the overall drive, vision and ambition of the organisation with regard to innova-tion, and how this is reflected in its leadership and strategy. Readiness along this first pillar requires excellent communication within the organisation and across its innovation ecosystem: top-down, bottom-up and horizontally, that is, across potential silos. It also demands a clear identification of leadership’s objectives and expectations across all levels of the organisation, and a strong alignment across its various areas of activity.

Organisation and CollaborationThe second pillar covers collaboration, both within the organisation and with external partners, and looks at how employees collaborate around innovation and what external resources are used. Most organisations recognise that collaboration both internally and with external partners is essential to flourish but these partnerships are not always managed in the most effective way. The changing na-ture of relationships between consumers and producers, or between suppliers and clients is often a source of confusion and controversy. This category includes the internal organisation, and how it is set up in order to contribute to an innovative climate, as well as the involvement of external partners in innovation initiatives. High levels of readiness along this pillar require the ability to adapt to chang-es in the innovation ecosystem. An ecosystem refers to a network of interdependent organisations,

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typically motivated to work with each other for commercial; academic or altruistic gains.

Implementation and MeasurementThis pillar explores how innovation strategies are implemented, how innovation impact is measured and indicates an organisation’s innovation investment levels. An inability to properly apply innovation practices, ill-adapted internal processes and poor measurement leave organisations unable to accu-rately assess the impact of innovation initiatives, and to take the practical steps required to improve their innovation readiness. Simply identifying and correctly capturing innovations are the first crucial steps in successful implementation. Large organisations often have many brilliant initiatives that are simply not shared or understood well enough to realise their full potential. Integration of innovation with day-to-day activities is essential for organisations to translate their innovation investment into business benefits.

People and Culture This section focuses on the employees and how they participate in the innovation process. Organi-sations are often failing to identify and harness the internal skills that are required for collaborative innovation to thrive. Putting teams together from varying backgrounds and disciplines, the ability to gear up to a new idea and take it rapidly to market, and the internal acceptance of failure and risk taking, are all important ingredients that will be reflected in both the structure and culture of an inno-vation-ready organisation. This category includes culture and human resources policies, relevant to the innovation capability of an organisation.

Measuring the innovation readiness level for each of these pillars shows where an organisation’s strength lies, as well as its weakness. If a lot of emphasis is placed on one pillar, the overall inno-vation readiness might still be low, as the spirit of innovation and other aspects such as innovation processes are not evident throughout the layers of the organisation. An organisation would thus benefit from looking to raise its innovation readiness across the four pillars, rather than to focus on just one segment.

The organisational innovation score is calculated through a grading process. Within the Innovation Readiness Model (IRM), for each of the four pillars, a ranking is awarded from level 1 (Least Ready) to level 4 (Most Ready) as defined below: • Level 1 (Ad-hoc) indicates that innovation activities are practiced to some extent but not in a

planned or consistent manner.• Level 2 (Localised) means that the innovation activities are planned and structured in a specific

function or activity but not necessarily consistently performed or spread throughout the organisa-tion.

• Level 3 (Generalised) indicates that innovation activities are consistently performed in a planned and repeatable manner across all relevant parts of the organisation and its associated innovation partners.

• Level 4 (Optimised) indicates that innovation activities are not only successfully generalised across the organisation but also subject to continuous learning to optimise the full potential of an organisation and its innovation ecosystem.

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Respondent Profile

The organisations surveyed had in excess of 2000 employees and more than 50% of the organisa-tions surveyed had a turnover of more than 40 million or more in 2015. The 2016 study considered inputs from diverse industries, (10 in total) and were best represented by public entities, followed by the financial industry, consumer services, industrials and basic materials.

From the Top 10 South African companies listed in the Africa Report’s Top 500 companies in Africa ranking, 5 participated in this League Survey, including 4 out of the top 5 companies listed.

Industry participation in the Innocentrix Innovation League:

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12. References• Imaginatik. (2016). The State of Global Innovation. • Innocentrix. (2015). Innocentrix Innovation League Report . • INSEAD. (n.d.). Are you Innovation Ready? INSEAD.• KPMG. (2016). Now or Never- Global CEO Outlook. • Michael Ringel, A. T. (2015). Innovation in 2015. Boston Consulting Group.• Soumitra Dutta, B. L.-V. (2016). The Global Innovation Index 2016 - Winning with Global Innova-

tion. Johnson Cornell University, WIPO.• Spigit. (2016). 2016 State of Crowdsourced Innovation. • (2016). The Global Competitiveness Report - World Economic Forum.

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Contact Us

Phone: +27 (0) 12 844 0083

E-mail: info@innocentrix.co.za

Web: www.innocentrix.co.za

Address: Suite M45 – M47 l The Innovation Centre l The Innovation Hub l 0087 l South Africa

Innocentrixi n n o v a t i o n i n a c t i o n

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Dave Mthembu

E-mail: dave.mthembu@gmail.com