Case studies

How successfully are South African businesses innovating?

How well have South African businesses innovated up to this point and where are the opportunities in the future?

Jon Cherry

Jul 29, 2020 • 5 min read

Right now - during this pandemic, and in the middle of an economic lockdown - every single South African business should be thinking, day-and-night, about innovation.

Now is not the time for fear.

Now is not the time to be shrinking.

Now is not the time to be relying on old-thinking.

Amidst my own curiosity and exploration into how well South African business has conducted its innovation efforts in the past - I have been carefully going over a fascinating report that offers a clear report card on how well South African business has innovated up to this point - as well as where the opportunities lie in the future.

In short - the results are actually hugely encouraging (in many ways).

More than two thirds (69.9%) of South African businesses were innovation-active. They took some scientific, technological, organisational, financial, or commercial steps, during 2014-2016, towards the implementation of an innovation.
Nearly all (96%) of the innovation-active businesses in the country also introduced an innovation to their firms or markets in 2014-2016.
Innovative South African businesses engaged in the four types of innovation measured in almost equal shares: product innovation (48.2%), organisational innovation (42.0%),marketing innovation (41.7%), and process innovation (34.6%).
The engineering and tech, manufacturing, and trade sectors reported the greatest concentrations of innovation in 2014-2016.

What is a worry however - is that although many South African businesses are committed to a practice of innovation, those innovations are not as yet yielding significant commercial successes.

Low proportions of returns on innovation investment accounted for turnover of innovative businesses in the 2014-2016 period, for a product that was new to the market (10.8%), new to the business (7.0%), or new to the world (1.8%). By contrast, 80.5% of innovative business turnover was generated by goods and services that were unchanged or marginally modified.
Very few businesses used one or more of the suite of intellectual property (IP) rights protection strategies to safeguard, or generate revenue, from their innovations. The most preferred strategies were trade secrets or confidentiality agreements (innovation-active businesses: 16.5%; non-innovation-active businesses: 4.7%) and trademark registration (innovation-active businesses: 12.4%; non-innovation-actives businesses: 3.9%). Only 14.8% of businesses reported increased IP revenue as a highly successful outcome of their innovation activity, while only 5.1% of innovation-active businesses granted a licence on any intellectual property resulting from an innovation.

'Key among these issues is that 80.5% of business turnover in 2016 (down from 85% in the 2005-2007 results), was generated from products that were marginally modified or unchanged, with the balance of turnover generated from products new to the market (10.8%), new to the business (7.0%), or new to the world (1.8%).

Put differently, at the end of a three-year period, only about 20% of total sales were brought about by new or improved goods or services (innovations), and less than 2.0% were accounted for by products considered by respondents as first-of-its-kind in the world.' - via

So what?

What then can be taken from the report to improve the financial yield from South African innovative strategies?

Faster | South African business clearly needs to pick up the pace at which it innovates. This comes does to company culture and developing the ability to be agile and confident in experimentation.

Collaborate | The research shows that the old South African 'laager-mentality' is still very much alive and well. Companies are still reluctant to partner up with others to leverage their efforts, thinking rather that they can do it all alone.

Thinking BIGGER | Many South African businesses are still very much ignoring the fact that we are a part of the global economy and that there is a massive export market out there that is begging to be serviced. So few of our innovations are destined for the export market, which really is a missed commercial opportunity.

Brand | If you look at 3M, Tesla, Uber - they focus their efforts on building compelling brands around their innovations. In South Africa we still tend to thing of a brand as 'pretty pictures' and something that's only important 'if budget allows'. What ends up happening is that we then sell commodities, compete on price and never really maximise the return on our innovation efforts. If innovation in South Africa is going to produce a financial return - this thinking needs to change.

The primary drivers of the South African economy up to this point have been mining and agriculture.

Both are nowhere near as lucrative as what they once were and as a result, the South African economy has stagnated over the last decade.

The need for radical innovation in all South Africa organisations is becoming increasingly critical for the future of our economy. There are signs of hope that we have the capability to unlock significant value from new ideas and innovations, but a different mindset is still required to really leverage the capabilities that we have.

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