Mechanical Technology — August 2013
35
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Manufacturing technology and plant automation
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I
n contrast to the drop in GDP
contributions from manufacturing
in South Africa, manufacturing in
other BRIC economies has declined
on average by only 10% in the same pe-
riod. “South Africa’s figures are worrying
because manufacturing growth is the
predictor for developing economies,”
says Markoulides. “Furthermore, manu-
facturing attracts high business value
activities, is the driver for service-related
growth and, vitally, is the key driver for
job creation.”
BMGI has found that innovation in
South Africa fails because it does not
take place across the whole value chain.
Instead, efforts tend to be focused main-
ly on research, development and design.
“Innovation needs to take place across
the entire value chain for effective
commercialisation to take place. This
includes business model regeneration
and productisation,” Markoulides adds.
For BMGI, innovation is not just
about the creation of new ideas to add
value for customers and producers. It
is about discovering a market’s unmet
needs, developing solutions that meet
these needs and, in so doing, become
commercial successes.
Sometimes, this means innovation
through adaptation – taking an exist-
ing idea and adapting it into a current
system. Thomas Edison, for example,
epitomised adaptive innovation – by
persevering through thousands of at-
tempts and continually adapting his
design, until he succeeded at commer-
cialising the light bulb.
“The success of the light bulb was
not dependent on the idea of the light
bulb alone, but on the development
of the infrastructure supporting the
product,” argues Markoulides. “This
included the dynamo for producing
constant electric current, safety fuses,
insulating materials, the light socket
and the on and off switch.”
Adaptive innovators can add value
because they support inventions by
insourcing innovative technologies
and solutions, creating manufactur-
ing opportunities and developing the
infrastructure that allows innovations
to become commercial successes.
Adaptive innovation has resulted in
the successful commercialisation of
numerous products, including flat panel
displays, advanced batteries, machine
tools, precision bearings, optoelectron-
ics, solar energy and wind turbines, and
medical devices.
Most recently, Russia, Brazil, India
and – most notably – China have ben-
efited from adaptive innovation. While
developed economies tend to outsource
opportunities where they can benefit
from a cost advantage, developing na-
tions such as the aforementioned tend
to insource opportunities and, in the
process, build capability and capacity.
South Africa, however, is not enjoy-
ing similar success to the rest of the
BRICS nations. Markoulides attributes
this largely to “a lack of adaptive in-
novation, especially in the country’s
manufacturing sector”.
South Africa’s method of produc-
ing catalytic converters is a prime
example of this failure to innovate
across the whole value chain. After
securing a R2,16-billion contract for
the manufacture of catalytic converters
in 2001 – which involved high value
and beneficiation of locally-produced
raw materials, including stainless steel,
platinum and rhodium – catalytic con-
verters became South Africa’s biggest
automotive component export segment
after 10 years. This equated to an esti-
mated 44% of all components exported
in 2009, a total of 17,3-million units,
with earnings of R22,1-billion, and the
creation of 4 319 jobs.
However, low margins and poor
profit meant the industry was still
dependent on government funding for
its survival – even in 2011. “The root
cause of this was a lack of adaptation,”
believes Markoulides. “The industry fo-
cused mainly on manufacturing simple
components. This strategy can work,
provided you are able to reduce costs to
remain competitive as supply increases
with time. If reducing costs isn’t a core
strength, then one needs to manufac-
ture more complex value-added compo-
nents to maintain margins.”
According to Markoulides, the indus-
try also failed to increase its competitive
advantage, despite its local supply of
raw materials. This was a critical lapse
because a lack of competitiveness –
resulting from a lack of integration of
new technologies – can undermine an
industry’s survival.
How can we make SA manufacturing
competitive? “South Africa’s manufac-
turing industry as a whole tends not
to develop its domestic capabilities in
turning inventions into high quality, cost
competitive products. This means com-
petitiveness suffers long-term,” he adds.
Markoulides believes that, given
South Africa’s abundance of rela-
tively low skilled labour, the country’s
manufacturing sector should follow the
example of its BRIC counterparts, and
produce products that are simpler and
easier to manufacture at a competitive
rate. With a proper strategy and an
adaptive thinking approach, with time,
the organisations technical capabil-
ity and capacity will allow for more
complexity.
In the face of this, BMGI’s D4 model
for innovation is a strategy that assists
companies to achieve the level of inno-
vation across the entire value chain and
ensures successful commercialisation
of ideas. The D4 methodology provides
a framework that takes ideas through
a systematic process of innovation to
deliver a commercially viable entity.
This includes matching the innovation
opportunity to the company’s technical
capability.
Manufacturing apart, BMGI also be-
lieves that South African policymakers
should be drafting policies that attract
and encourage foreign interest. “Our
innovation policy needs to be reviewed
to allow for adaptive innovation,”
Markoulides concludes. “This can be
achieved if government supports break-
throughs in important manufacturing
or system technologies that will make
use of locally based resources with high
modularity.”
q
Innovation in South Africa’s manufacturing sector is not resulting in effective commercialisation and can, in
part, explain the drop in the sector’s contribution to GDP by over 33% in the last decade. This is the view of
Dimitri Markoulides, senior consultant for management and operations consulting firm, BMGI.
SA needs to translate innovation into GDP
