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Friday, 24 November 2017

Industrializing Sudan: A Viewpoint 2

(Dr. Mohamed Elsayed Abdelmomen, UNIDO Country Representative, Sudan) - The Grandmaster of Innovation: The whole of it is like chess, the economy!

The chessboard is the country, or the region or even the international market. Although the difference could be in the number of players, squares, and pieces; but there is always a king to be promoted and protected, and a queen, rooks, knights, bishops, and pawns surrounding His Highness-the king. The economy with its various industry sectors could be seen as chess, with the king being the precious and value-adding resource, the combinations and factors of production that bring growth in GDP, employment and social order among many other benefits in along list. The basic rule of the economic game as chess is that all countries can play at a moment; each has the potential, an equal chance of success and a golden opportunity of winning the game, a checkmate!

In the context of our preposition (economy as chess); we will keep two assumptions invalid/exogenous in order to allow for fair rivalry among the players/economies. First, 'Geography is Destiny' is an invalid assumption; and second, 'Banana Republic' is another invalid assumption. Our model of argument in this essay is grounded on believe that each country can achieve a fair share of the global economy by playing fairly and using its gifted capabilities intelligently. These gifted capabilities which are acquirable, severely needed today more than ever before. The game of economic growth/development is constantly changing, therefore the strategic capabilities for competency in the game should also change, and this is inevitable.

The interesting game of economic development and growth as chess was very dynamic ever-since the industrial revolution, or probably since the antiquity of economic thoughts and practice. There were periods in this game when the pace of change was slow or at normal speeds. Some intervals of change were evolutionary, others were revolutionary. But today, the story is different! The world order has changed and continues to change. Economic power is moving frequently from one zone to another with opportunities discovered at one end and challenges posed at another. The game is becoming exciting and each and every economy/organization wants to checkmate the opponent. But let us first see the nature of our world today, and how it influences the economic development and growth rapidly.

Today we live in the age of uncertainty! The major themes of steering through this age of uncertainty are complexity and change. We are living in an increasingly complex world, full of interconnections in global market, technology and communications. Actions in one part of the market can have unexpected consequences in another part of it. The pace of change has accelerated, becoming a continuous process, epidemic and unpredictable. Have we actually moved from an industrial economy to a knowledge economy derived by the digital technologies? Or do we still believe that the knowledge economy is just a determinant factor that drives industries, trade and commerce?

This new age of uncertainty has powerful implications for all countries and organizations, and no one is an exception. Planning becomes problematic if one cannot predict the future. Commercial opportunities remain but competition is for some countries and organizations as much about survival as growth. It is the ability to create new sources of opportunities quickly, again and again, that is providing to be only sustainable source of real competitive advantage. And in search of new competitive advantages, countries and organizations must continue to manage existing businesses affectedly while also hoping for new breakthrough. Essential systems and believes have been challenged in this age: such the linear model of planning, shouldering failure on lack of resources, centralized control; all these are things of the past, they are some of the major impediments that make economies and companies unable to cope with rapid changes in the age of uncertainty.

Our main question here is what and who is the key element that can competently drive economies and organizations to destinations of success in the realm of constant challenges of the new age of uncertainty? The direct answers to this question are: for the 'what’ part of the question?' the answer is innovation; and for the 'who’ part of the question?' the answer is entrepreneur. But let us explore why we assume this very critical role to innovation and entrepreneur.

First of all and given the growing concerns on the human agent called ‘entrepreneur’ and his/her role in bringing innovation that affects the situation in time, geography and space. We thought, it is important to unveil the ambiguity around who is the entrepreneur, what role he/she plays, at what level of importance and to what extent this role impacted the socioeconomic realities of our life?

Let us first figure out who is the entrepreneur! It is true that in the history of intellectual thoughts there was ambiguity on the term entrepreneur. The word entrepreneur has worn many faces and played many roles throughout its intellectual history. Many scholars attributed their characterization to what they believe the entrepreneur is; from Richard Cantilon, to Adam Smith and Joseph Schumpeter, and the list goes on. These characterizations were gathered around the themes of portraying the entrepreneur as: risk and uncertainty bearer, supplier of financial capital, an innovator, a decision maker, an industrial leader, an organizer of economic resources, an employer of factors of production, an arbitrageur and an allocator of resources among alternative uses. Given all these views about the entrepreneur; it is clear that there has been and continue to be considerable dispute over the actual nature of the entrepreneur.

In this link, and regardless of the traits, characteristics and the behavior associated with the entrepreneur. Let us agree with the school of thought which believes that the most common characterization of the entrepreneur is an innovator – this association is made popular by the scholarly article of Joseph A. Schumpeter (Austrian economist) who is known as ‘the father of innovation’. It is also equally important to explore what exactly qualified J. A. Schumpeter to be granted this fantastic title/nickname: 'the father of innovation”. In fact it is his very seminal contribution to the theories of economic development embodied in what he called the ‘process of creative destruction’ which ultimately built on continuous innovation and rejection of the status quo.

Schumpeter argued that real-world economic life is better explained from the explicitly dynamic and evolutionary perspective rather than from the static and equilibrium one.  He viewed the market process as a dynamic process driven by creative destruction. Schumpeter linked the market process of creative destruction - which he associated with “new combinations” and therefore economic development and progress - to innovation and distinguished the entrepreneur as the prime innovator. The strategic stimulus to economic development in Schumpeter’s analysis is innovation defined as a new product, a new production process or method, a new market, a new source of supply, or a new form of organization, or a combination of any of these.

Schumpeter sees an entrepreneur as an innovator who destroys the current structure in an attempt to bring new combinations. In his views, an innovation will push more economic actors to respond to this new opportunity either by attempting to imitate the innovation or producing complements to this innovation, thereby pushing economic growth upwards until a new equilibrium is reached, and in the process either idle and existing factors of production are activated or reallocated. Through entrepreneurial motivations, innovation in technology will flourish and thereby support the development of high return economic activities which bring growth; and this innovation may even be undertaken on an individual, organizations or even countries scale.

The entrepreneur, according to Schumpeter, is the dynamic figure in the economy that sets continuously higher standards of economic growth through new innovation or combining existing innovations. Schumpeter’s entrepreneur is a figure who chooses to ‘creatively destruct’, that is to say, he/she initiates a disruptive change and then chooses to confront it. So, in this sense the entrepreneur is a driver of opportunities, and the grandmaster of innovation. Most of the innovative and sophisticated technological products we see today are direct results of entrepreneurial creative destructions in the sense of the Schumpetetrian model.

Innovation in itself is the sum of inventions plus the commercialization of them which might be of technological, service or managerial nature. From a macro perspective, the entrepreneur innovativeness is perceived in his/her willingness and capacity to create a paradigm shift in science and technology and/or market structure in an industry. From a micro perspective, innovativeness is the willingness and the capacity of entrepreneurs to influence the firm's existing marketing resources, technological resources, skills, knowledge, capabilities, or strategy. Without oversimplification of the concept, innovation takes forms, from simple, incremental development of what is already there to radical development of totally new options. We simply argue that companies and economies could be consider innovative the moment they reject 'bias to status quo' and embrace 'bias against status quo'. Innovation is not only technological breakthroughs, simple modifications in the way a business is run that can bring value, is regarded as innovation.
Innovation is crucial to the economic vitality, not only of individual firms but also groups of firms, localities and regions, nations and trading blocks of nations. Innovation is a crucial factor affecting the ability of firms and countries both to adapt themselves to new constraints and to take advantage of new business opportunities and create new business concepts. That is to say innovation is an important factor for leading businesses and economies towards competitiveness and improved performance. One study on strategies of successful mid-sized companies concluded that these businesses achieved their first major success with either a unique product or distinctive way of doing business. On average 25% of sales in their successful companies came from products which were not offered in the previous five years. The Global Entrepreneurship Monitor (GEM), in one of its survey reported that entrepreneurs account for two-thirds of innovations. Entrepreneurs act as change agents and translate new discoveries and inventions into new products and services. Entrepreneurs seek new possibilities and make new combinations. Entrepreneurs are the drivers of change.

From what we explained above, it clear that innovation is the king in the chess game that involved economies and organizations. Innovation is the king that needs to be protected and advanced by the master of the game (the entrepreneur), the grandmaster of innovation. If we explore the nature of innovation and its underlying processes, it appears that the whole game is mastered by the entrepreneur because the entrepreneur controls innovation, and innovation is central in the game. In their best seller book "The Innovator's DNA", Jeff Dyer (et al) portrays the basic element that makes innovators different. They concluded that it is the discovery skills, with cognitive skills of associating and the behavioral skills of questioning, observing, networking and experimenting, which constitute what they call the innovator's DNA, or the code of generating innovative business ideas. Given the importance of innovation processes, and the great value we see in understanding these processes for advancing disruptive innovation. We promise the reader that the next article will be dedicated to the innovation DNA, and will explain and bring examples to demonstrate the fact that innovation is not genetic, it is mainly behavioral. This type of discussion will allow us unleash the potential of innovation in a country like Sudan, and very particularly in the industrial sector. Innovation in the industrial sector actually positioned economies and companies at first-movers fronts, enhance diversification, expand the manufacturing base, promote exports, and support economic growth convergence. All these are some important empirical regularities, that recent research on patterns of economic growth and development has highlighted and they become such stylized facts in industrial development.

The role of UNIDO is critical in helping countries to achieve noble goals through industrialization and fostering innovation. Within its mandate which is reflected in the SDGs (Agenda 2030) that calls for 'resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation'; UNIDO has a major role in helping needy countries in many relevant fronts to achieve SDG-9. Innovation contributes in achieving inclusive and sustainable industrialization; also innovation helps in enhancing smart and resilient infrastructure and sustainable cities that provide jobs and growth. Innovation in this context, with stewardship in environmental issues - while also benefiting all - such innovation, is strongly needed in the age of sustainable development. UNIDO is supporting many initiatives across the globe that contributes in achieving this and Sudan is one of these countries benefiting from this support.

In conclusion, we believe that without advantageous framework, in which he/she can pursue the activities of innovation and leadership, the entrepreneur will fail to carry out the necessary functions as grandmaster of innovation. In Sudan, with encouraging policies in place and enforced regulatory frameworks, the entrepreneur will be motivated to come-up with groundbreaking innovations, upgrade the global competitiveness of countries and engage in socially responsible business models. It is then, new generations of entrepreneurs in Sudan will be able to pursue opportunities, normalized search for disruptive innovations, and fairly play the game of economic growth and development; ‘checkmate’!
UNIDO is the specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability. The mission of the United Nations Industrial Development Organization (UNIDO) is to promote and accelerate inclusive and sustainable industrial development (ISID) in developing countries and economies in transition. UNIDO’s mandate is fully recognized in SDG-9, which calls for: “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”.


The designations employed and the presentation of material in this article do not imply the expression of any opinion whatsoever on the part of the Secretariat of the united Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as “industrialized”, “poor”, “developed” or “developing” are intended for statistical convenience and do not necessarily express a judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products does not imply endorsement by UNIDO. Although great care has been taken to maintain the accuracy of information herein, neither UNIDO nor its Member States assume any responsibility for consequences which may arise from the use of the material. The information and views set out in this article are those of the writer and do not necessarily reflect the official opinion of UNIDO. Not UNIDO, nor any person acting on their behalf, may be held responsible for the use which may be made of the information contained therein.