By: Lisandro Sosa
According to the last INSEAD Global Innovation Index 2009-2010, all South American countries are ranked below the 40th position. To improve the innovation situation in the region there are three main focus areas to be addressed: encouraging a culture of collaboration and the use of social media, encouraging intrapreneurs, and to introduce Management 2.0. Other key issues are Internet penetration and the Enterprise 2.0 concept.
Innovation in South America is a pending issue. When we analyze the last INSEAD Global Innovation Index 2009 – 2010, the best ranked South American countries are Chile (42), Uruguay (53), Brazil (68) and Argentina (75).
Different country groups
- First group: integrated by Chile (ranked 42), Uruguay (53), Brazil (68) and Argentina (75) is made up of innovation leaders even if comparatively very distant from the North American group yet. Brazil (the “B” in BRIC) has always been a Case Study; a country with great growth expectation and regional leadership.
- Second group: integrated by Peru (88) and Colombia (90). This group is composed by countries which have had a relatively minor growth when we compare previous results.
- Third group: Guyana (113), Venezuela (124), Ecuador (126), Paraguay (127) and Bolivia (129) make up the last group even when globally compared.
Strategies to include South America in the innovation map
The innovation environment has integrated various new tools contributing to its growth and development in the last few years. Internet penetration, via connections and social media, is the greatest advancement to human communication in the world both within and outside organizations. Collaboration, culture organization and encouragement of innovation strategies will be essential in this strategic analysis.
There are other variables that could be included in this analysis (i.e. government policies, to name just one example) but innovation in South America will grow from the bottom up. Innovation will grow when common people and organizations become aware of the importance innovation plays in their lives.
So, three main items are calling for improvement to foster innovation development in South America:
- Encouraging entrepreneurs and organizations to participate in Crowdsourcing and Open Innovation events
- Encouraging intrapreneurship
- Introducing Management 2.0 in organizations
Encouraging entrepreneurs and organizations to participate in Crowdsourcing and Open Innovation events
To illustrate this question through an example, in July 2010 General Electric launched the largest brainstorming event called ¨Challenge Ecomagination¨ (1), a $200 million innovation experiment where businesses, entrepreneurs, innovators and students shared their very best ideas. It was considered a real example of open innovation and crowdsourcing as well as an excellent opportunity to show new products and services to the whole world.
After almost two months from the moment this ¨Challenge¨ started, let us take a look at some of the results:
- + 2,090 ideas
- + 83,600 votes
- + 39,600 comments
- + 35,700 users
Even when the Challenge has really been a success South American participation was represented by just 70 ideas (3.33% of the total).
Encouraging entrepreneurs and organizations to participate in this kind of events is of foremost importance to access the world of collaboration. This is the way the world works nowadays.
According to the basic definition of the word, an ¨intrapreneur¨ is an entrepreneur within an organization. But, which is the situation with intrapreneurship in South America? Why is intrapreneurship key?
Intrapreneurship is an essential ingredient of innovation. During the last 100 years, employees have been working with industrial era parameters; therefore the results of their work have lacked creativity and energy and used human potential in a limited way.
Though now, in this era of knowledge the time is ripe for ¨intrapreneurship¨. In today’s competitive arena, firms have to exploit existing technologies while at the same time exploring new concepts in order to remain competitive with the passing of time. In our present knowledge-based economy, employees’ minds are the biggest asset companies may own.
Intrapreneurial jobs are not easier than entrepreneurial ones. Intrapreneurs have an additional task: getting skills to work jointly with other team participants. This is easier said than done because of the need to find key players complementing each other’s competences.
The point is the relationship between intrapreneurship and innovation levels. Five (5) innovation levels have been defined:
- Level 1: this level represents quantitative improvement by the modification of one parameter or optimization. 85% inventions are generated at this level.
- Level 2: it qualitatively improves either a product or process within a given market at present. This level generates 12% of investments. (Incremental innovation)
- Level 3: this represents the extension of either an already existing product or a process to a new market (new technological niche or new area of application). This level generates just 2% of inventions. (Radical innovation).
- Level 4: this is a radical change of a function of an already existing principle. 0.9% of inventions get generated at this level. (Disruptive innovation)
- Level 5: at this level we find the discovery of a new principle expanding the frontiers of science. This level generates 0.1% of investments. (a new principle).
Most innovations are generated at level 1 and it is at this point that intrapreneuship begins to play an important role.
99% of inventions are generated at levels 1 to 3; innovations at these levels allow for important cost reductions and job optimization in companies. It is not necessary for the Research & Development department to be involved in this kind of innovations. As an Intrapreneurship tool some “social media” software could be useful for idea collection. These strategies encourage Human Capital to participate in innovation.
Introduce Management 2.0 in organizations
South American organizations are not working at the ideal environment for innovation and collaboration strategies as yet.
Common characteristics of South American organizations are:
- High work pressure, especially at managerial or decision levels.
- The main goal aims to high organizational efficiency, usually with little consideration given to human resources necessities.
- Inexistent empowerment and job autonomy.
- Not prepared to add Generation Y employees as yet.
Based in Geert Hofstede’s index (2), there is particularly one characteristic to explain management in South America: the Power Distance Index (PDI).
The “Power Distance Index” helps to explain how communication operates within the organization and the way authority is respected in a certain culture.
In countries with high PDI, communication is inefficient and not satisfactory. Many communication problems are encountered when attempting to express ideas to a superior hierarchy.
In countries with low PDI, leaders are more casual and humble, making communication between hierarchies more accessible.
Here we can see the world PDI map:
Reference: higher PDI = darker ones. Grey = without data (3)
Observing this map of South America, the common situation in all countries is their high PDI.
A previous article entitled “Power Distance Index and Enterprise 2.0” explains the relationship between this index and organizations (4).
The organizational characteristics of countries with high PDI are:
- High organigrams
- Great differences in hierarchy levels salaries.
- Team work inefficiency
- Centralized decision making
Consequently, this is not the ideal environment for intrapreneurship and Enterprise 2.0. Companies would then need to undergo a gradual transformation to be able to adapt to newer trends, a lengthy but not impossible process to make.
As a complement of this analysis, the good points or advantages encountered in South America are as follows:
Brazil, a Case Study
Brazil, (the “B” in the BRIC group – Brazil, Russia, India and China) has always been a Case Study. Its economy grows at an annualized rate of 5% and has a lot of innovative characteristics as: the biggest entrepreneurial population in the world, innovative strategies for deep-sea oil exploration, tropical agriculture, regional aircraft manufacture and universities for improving their competence level, among others.
South America is a young region with great possibilities for innovation growth and development. As it happens with most social changes, even when they may be slow they may represent much improvement for creativity, human capital and population potential, which hopefully will be reflected in the next INSEAD Global Innovation Index ranking for the region.
By Lisandro Sousa
About the Author
Lisandro Sosa holds a Business Administration degree and a PostGraduate degree in Strategic Management and Administration. He is an active member of IT Sciences Superior Council in Buenos Aires Province, Argentina. Lisandro is also an Internet Solutions Partner (ISP) of BrightIdea, Inc. market leader of innovation management software from San Francisco, USA. He founded SQL Consultora, company that provides IT, innovation and consulting services to Latin American companies since 1997, with headquarters in Bahia Blanca, Argentina. He team with partners in Chile and Brazil, who help in reach and expand SQLConsultora throughout Latin America.
Liosandro has published several articles in Spanish about innovation management and business organization.