Global Innovation Outlook

Action Oriented

As we prepare the results from the Security and Society focus area, and gear up for the Water and Oceans focus area in September, it’s a good time to catch up on some news from GIOs past.

We have some exciting news to share with the GIO community coming out of Africa: IBM opened an African Innovation Centre in Johannesburg, South Africa. The project is a direct result of the Global Innovation Outlook sessions on economic enablement in Africa, held in 2007. It’s an advanced computing facility that will nurture IT skills and help encourage entrepreneurialism in the area. And it’s the first of its kind anywhere in Africa.

Here’s what Mrs. Phumzile Mlambo-Ngcuka, the Deputy President of the Republic of South Africa, had to say about the new center: “We are highly energized by IBM’s investment because it directly responds to our call for increased private sector investment into sustainable initiatives that advance priority technical skills.”

This is a message that the GIO heard loud and clear, from the moment we set foot in Nairobi, until the day we left Cape Town months later. Everywhere we went, students and adults alike were calling for more private sector engagement in education and skills development. Here is a link to the first blog we wrote about this need back in June of 2007. I can’t help but think that the simple plea of young Athman Fadhili, then an MBA student at the University of Nairobi, for the private sector to collaborate with African universities, led to this innovation center.

That’s not all it led to. Makocha Minds, the mentoring program that was literally started up days after the GIO met with students in Nairobi, has now reached critical mass. It has more than 250 mentors working with students from 24 different African universities. The mentors come from IBM, Coca-Cola, Cisco, FedEx and Symantec.

Sometimes the notion of collaborative innovation for the benefit of society can be met with withering cynicism. And sometimes it feels like the GIO is fighting an uphill battle. But sometimes we get to see positive change happen right before our eyes. This is a perfect example of that, and more than enough fuel to feed the innovative fire.

Africa: A New Beginning

On Tuesday, the Global Innovation Outlook held an event in New York called Africa: Open for Business. The all-day affair was meant to present the findings from the GIO deep dive sessions on Africa. We invited many of our GIO friends from Africa and around the world. We brought together hundreds of IBM clients and ecosystem partners. And many of IBM’s highest ranking executives were there to both participate and observe the proceedings.

In some ways, it was the culmination of more than a year’s worth of work. There were talks on what the GIO had learned about the economic future of Africa. There were panels on the development of skills in Africa, and the new reality of this great continent. There were presentations by some truly inspiring “local heros.” And there were many teary goodbyes to our friends from overseas. To some of us, it felt like an ending.

But in other ways, it was merely the beginning of what is sure to be a most intriguing new chapter in Africa’s history. At the event, IBM announced a series of commitments to Africa, including $120 million over the next 18 months. It announced partnerships with businesses (Cisco, FedEx, Siemens), NGOs (CARE International) and governments (to be determined.) And there was an unmistakable sense that the momentum that has been generated inside of IBM would spread rapidly to other international businesses. See the list of initiatives that IBM is embarking upon below.

To that end, the GIO has developed a kind of blueprint for innovation and economic progress in Africa. The report is called, simply, Africa: A Global Innovation Outlook Report. Inside it, you will find specific examples and suggestions as to how any business, be it African, American, or Asian, can compete in the global economy by doing business in Africa. It is available in PDF or hard copy here. And best of all, it’s free. I highly recommend you read it.

I’m also including some links to videos that we produced from the Africa: Open for Business event. This will give you an opportunity to meet some of the GIO participants, and hear their thoughts on different subjects concerning economic development in Africa. As you watch them, think about what you as an individual, or your organization, could or should be doing to enable and profit from the economic growth in Africa. And don’t hesitate to contact the GIO team to explore opportunities to work with IBM in that regard.

Video Links to GIO Forum: Africa: Open for Business

Nick Donofrio's opening remarks
Ginni Rommetty's presentation of GIO findings
Panel on Africa's New Reality
Panel on Skills in Africa
Local Hero: Gbenga Odujinrin, CEO, Telnet
Local Hero: Priscilla Motlhako, CEO, Africa Khusini Capital
Local Hero: Jessica Jackley Flannery, Co-founder, Kiva.org

GIO Africa Initiatives:

Makocha Minds – A mentoring program for African students in need of help honing their skills in IT-related fields. Makocha, which means “teacher” in Swahili, will put 250 IBM Fellows and Distinguished Engineers to work counseling African students from 18 different universities. There are already 100 pairings in place, interactions are in progress, and several mentors are taking personal trips over the holidays to meet with their students face-to-face.  Inspired by the commitment made by our technical leaders, other companies, including Cisco, Federal Express, Coca-Cola and Siemens, have signed on as partners and will also provide mentors. 

Africa Financial Grid – Microfinancing is extremely expensive to administer, and those costs are passed on to borrowers in the form of high interest rates. In an effort to reduce those costs and improve access to finance in Africa, IBM is partnering with CARE International to provide a full end-to-end transaction processing infrastructure that will significantly reduce the cost of providing microfinance to small and medium businesses and individual entrepreneurs throughout the continent.

Blue Gene – To infuse some much-needed computing power into Africa, IBM is donating a $1.5 million Blue Gene/P supercomputing system to the Meraka Institute’s CHPC facility in South Africa, for installation early next year. The system will be the most powerful computer on the continent, and open to use by any African research institution that has a qualifying computational challenge that helps the socio-economic growth of the region.

African innovation policy program – Similar to earlier efforts in Vietnam, India, and the U.S., IBM will work with a select number of governments and private organizations in Africa to establish more effective innovation development programs.  The first three countries will be announced early next year. 

Part of what the GIO does is energize IBM about a specific market or opportunity the company may not have been paying enough attention to. But no topic has ever had as profound an effect on this 370,000 employee company as Africa. The enthusiasm has spread like wildfire throughout the company. And when a company that’s this large, and has this many ecosystem partners, gets excited about something, it can make a big difference. A global difference. 

The Infrastructure Opportunity

When it comes to propelling Africa into a more prominent role in the global economy, few things are more important than its ability to use the latest communications and networking technologies to reduce the costs of transacting with the rest of the world. Perhaps that’s why whenever the economic development of Africa is being discussed, the conversation invariably turns to infrastructure.

The Economist has done a nice job of statistically summarizing the current Internet infrastructure challenges (or opportunity, depending on your perspective) in Africa.

The Digital Gap
Oct 18th 2007 | NAIROBI
From The Economist print edition
More than a click to put Africa online
When it comes to computing power, the gap between Africa and the broadband world is still a Grand Canyon. Only 4% of Africans have access to the internet. They pay the most in the world, around $250-300 a month, for the slowest connection speeds. E-commerce barely exists. Nigeria's 140m-odd people have but a few hundred decently trafficked websites in their domain. Blogging is a vibrant but peripheral activity.

If sub-Saharan Africa were scaled according to its available internet connectivity, it would be about the size of Ireland. Of its 48 countries, the 28 in central and eastern Africa are connected to the web by only the flimsiest of satellite technology. Apart from the occasional internet hook-up at a diamond mine or UN camp, whole regions of Congo and Sudan, sub-Saharan Africa's two largest countries, have no connection at all. Even countries like Uganda, which are go-ahead about the internet, start from a very low base. Research by Microsoft found only one in 200 Ugandans regularly uses e-mail.

The number is higher in west Africa, where the more robust SAT-3 undersea cable provides for higher speeds and lower costs. The Eastern Africa Submarine Cable System, better known as EASSY, which runs 9,900km (6,152 miles) along the Indian Ocean floor from South Africa to Sudan, is meant to speed up connections in east and central Africa in the next few years but is not yet operating.

African users must also cope with obsolete systems, irregular electricity and a stultifying lack of local content. Interfaces are being written in a number of African languages, but even the clearest instructions in Wolof or Yoruba as to how to use Windows presume a fair degree of literacy. Then there is the high graphical content of the rich world's web: videos and social networking are unworkable in the snail-slow dial-up offered in most African internet cafés.

For more on this, click here.

It may seem a hopeless situation, but it is far from it. Those with knowledge of Africa’s burgeoning wireless industry know the magnitude of opportunity this represents. And when these infrastructure challenges are met, look out. When Africa’s creativity and entrepreneurial talents are unleashed on the wider world, the economic change could be seismic.

In other news, the GIO team is in the process of compiling the many insights from the deep dives held in Nairobi, Dakar, Cape Town, Paris, Lisbon, Atlanta and Beijing. The Africa report will be made available at the GIO web site in early December.

Wireless World

In reading the excellent piece on mobility in Africa in this week’s Business Week, you can’t help but get the feeling that the mobile platform is the economic spark the continent has long awaited.

We saw this first hand throughout our deep dives in Africa, and wrote about some of the fascinating mobile applications back in June. For the first time in a long time (ever?), Africans are not only rapidly adopting a so-called “first world” technology, but they are developing it, improving on it, and capitalizing on it. We have heard dozens of stories of local merchants and rural farmers using mobile phones to simply connect with buyers and sellers, improving market efficiencies and fattening bottom lines. For more on this, go to www.ibm.com, click on the Africa story, and select “The Mobile Imperative.”

But the impact of mobile phones has other, broader and more far-reaching positive effects as well. As the story in Business Week points out, Africa’s basic infrastructure is so lacking in some places, it can grind the wheels of commerce to a halt. Roads that are frequently impassable; huge swaths of land that are without electricity; painfully slow internet service. The growth of the mobile phone business, however, is starting to address some of these problems.

Now that wireless providers have learned that the rural poor is a market worth courting (there are more than 100 million mobile phone subscribers throughout Africa), there is reason to begin investing in infrastructure. To do mobile communications, you need fiber, electricity, and roads. Industry is taking the first steps towards addressing these needs.

In addition, communication, in any form, spurs commerce. Without it, you cannot have efficient markets. Now, for the first time, Africans are rapidly sharing information (sometimes in its simplest forms) and conducting business in a more sophisticated way. The result is higher margins for businesses, and better prices for consumers. It’s hard to see a loser in any of it.

Columbia University professor says plainly that mobile phones are the most important technology when it comes to transforming developing nations. Not $100 laptops. Not refurbished PCs that would take years to master. Mobile phones. Simple, affordable, easy-to-use mobile phones.

Just Doing It

Nobody likes meetings. And certainly the group that the Global Innovation Outlook assembled in Cape Town for our final deep dive on the economic enablement of Africa recognized this fact. They knew that these deep dive meetings will be successful only if they serve as a means to an end, only if there is a consequence, an action. These were not people who enjoyed sitting in a room, pondering the issues. They wanted to get things done.

“I don’t think the world needs another think tank,” said Amanda West, vice president of global innovation at Reuters. “What we need to be is a do tank.”

This sentiment resonated around the room immediately. The group included representatives from South African energy giants PetroSA and ESKOM, microfinance and private equity enablers Kiva.org and AfriCap, two groups designed to foster and support women-owned businesses, logistics and shipping company Safmarine, three of the finest universities in the world (Makerere, Instituto de Empresa, and the Royal Academy of Engineering), Siemens South Africa, Reuters, and the U.S. Embassy here in South Africa. We also welcomed a young entrepreneur from the Maasai tribe in Kenya, who runs a safari business in the Maasai Mara game reserve.

Some of them were new to the process. Others had been with us in previous deep dives. But they were all there because they share a simple belief that Africa has the potential to develop and grow in a way that is positive for both the continent itself, and the rest of the world.

It was clear from the outset that change was the mandate for this meeting. One diver said “I don’t think we should embark on this thing unless our intention is to seriously disrupt.” Another said, “I’m a strong believer in taking the first steps.” And Nick Donofrio, the executive vice president of innovation at IBM, reminded the group that “if nothing changes, nothing changes.” Finally, one dive implored us to be like Nike, and “just do it.”

And then we did.

We spent the entire afternoon in breakout groups with specific assignments. The tasks were difficult and daunting. The process was frustrating and uncomfortable. And the time was too short. But few could argue with the results. Here is a quick look at the three projects the GIO crafted during this workshop and will be working on in the coming months:

Skills Audit – Africa has more than 900 million people, but there are massive shortages of skilled labor. More importantly, if Africa is to emerge as a leader in the global economy, it will need to do more than just fill the skills gaps that exist, but also begin planning for future demand. One group proposed a comprehensive “Skills Diagnostics” exercise that would provide a template for how to bring together the private sector, government, academia and the NGO community to conduct regional studies that gauge the demand for different skills. That information could then be shared throughout Africa, creating a detailed skills map. The information would be hugely valuable, and could be used by governments to forecast future skills needs, and develop economic strategies accordingly.

Africa Grid – Microfinance has been a Godsend for thousands of individuals and small business owners throughout Africa. But it is expensive and inefficient. Loan officers on motorbikes need to travel for days to collect loans. And the interest rates are still too high. So one breakout group proposed an in-market initiative (for profit) that would act as an electronic broker of these microfinance transactions. The microfinance institutions could use the service to find potential customers, and vice versa. Along the way, data could be collected and aggregated on various borrowers, creating much-needed risk histories, which would then act as a new form of collateral for increasing loan amounts. 

The Legal Informal Economy – Early on in our Africa deep dive session in Kenya, we began discussing the role of the informal economies of Africa. These off-the-books businesses are pervasive, sometimes employing more than half the population in some nations. But there is a need to legitimize these businesses, both for the tax revenue they would provide, and the benefits citizens obtain through registering themselves as such. This group decided that the barriers for most informal businesses to enter the formal economy are too high: taxes can sometimes be as high as 45 percent. So they proposed a new level of legitimacy: the registered, but untaxed business. They called it the “Legal Informal” economy. There would be incentives for these businesses to register, including small business assistance, access to new forms of capital for growth, technology infrastructure, and business training. After a time, they might grow to a level where they could then become formal businesses, employing more people, and paying taxes.

These issues are all incredibly complex, so please forgive the lack of details in these proposals. But these ideas represent real action towards change. People volunteered their organizations for participatory roles. Companies made commitments. Names were named. And in the end, momentum won out over inertia.

Africa, Gender, and Equity

Our next guest blogger is Joanne Thomas Yaccato, the founder and president of the Toronto-based Thomas Yaccato Group, a consultancy that specializes in helping companies create authentic products, services and business strategies that attract the attention and loyalty of women consumers. She attended our Atlanta deep dive, and has some strong thoughts on the topic of women in Africa, and the way the media portrays them. Feel free to comment and get some conversation going on this important topic.

I was recently interviewed for a Canadian newspaper about my work helping companies create an internal, wide-angle gender lens so they can better reach and keep women as customers. The specific focus of this piece was my latest endeavor with banks in Africa who are now waking up to the enormous economic influence of women. When the article came out I sat in my kitchen, jaw dropped, stunned to read yet another media account that missed the mark.

Believe me; I was painstaking in my care to describe the work. The International Finance Corporation (IFC), the private sector arm of the World Bank Group, created the Gender Entrepreneurship Markets initiative in December 2004. The goal was to address economic inefficiencies and social inequities that happen when aspiring businesswomen aren’t able to realize their full potential because of gender barriers. I explained to the reporter that African women enthusiastically participate in entrepreneurship. In Nigeria alone, women comprise an estimated 50 percent of the economically active population. Yet they remain seriously under represented in the formal banking system. One of the first banks to join the GEM program was one of Nigeria’s largest, Access Bank Plc. Of Access Bank’s entire small and medium enterprise portfolio, only 5 percent of lending went to women-owned businesses. However the default rate in the women’s section of their portfolio is 0 percent, compared to 8.3 percent for their loan portfolio as a whole. This is a pretty typical global scenario.

The reporter was particularly fascinated to learn that even though African women are a powerful economic engine, the vast majority believe that companies do not treat them with respect. The Nigerian focus groups we conducted revealed that banks, some of the biggest offenders, demonstrate an over-reliance on husbands to validate women’s businesses. The women shared that there is dishonesty as it relates to the chances of loans and what it takes to get one. Opaque processes such as refusing to explain products, policies and procedures create an even stronger sense of their powerlessness.

The central point of my lengthy discussion with the reporter was that if a bank (or any company, for that matter), was to successfully reach women, they would need to be convinced that the company was serious. I cited IFC’s program of policy reform, investment, and advisory services that addressed this by providing pioneering local financial institutions with $40 million in financing and hands-on support from global industry leaders in the area of gender and business. My company was chosen to create the internal cultural shift necessary within banks to make this program successful.

I also spoke about GEM’s mandate to try and create a more stable middle class by targeting women professionals and business owners, people like Muni Shonibare. Shonibare owns a successful 150 employee furniture company in Nigeria with considerable growth potential. Her clients include Shell, Texaco, the Abuja Hilton, and others. With demand for her products high, she has considerable potential to increase earnings and create more jobs in the local economy. But something has always blocked her way. Male bankers in Lagos simply did not want to finance a woman-owned business with ambitious expansion plans. She could not speak the language of finance well enough to convince them. But with support from GEM, Access Bank gave Muni an $800,000 five-year loan (not exactly chump change) for her long-term capital expansion plans.

This was a good news story in every sense. But even though I stressed there were an enormous number of Muni Shonibares all over Africa, the journalist fell into the trap of the classic North American stereotype of  “African woman”. The photo that accompanied the piece was the cliched colourfully-clad market women showing their wares. This incongruence confused me considering the story was about women professionals – lawyers, doctors and dentists - and business owners. There was “victim” all over the story. Half the piece was dedicated to “women’s life and death struggle with poverty”, “ramshackled villages”, and “buses with no doors.” My goal in this interview was to attempt to break down that tired belief that all African women live this appalling reality. But the journalistic lure of the conventional African drama was too great. The integrity of the article was damaged beyond repair.   

For companies to put women at the center of its business they need to change the very lens or filter they use to see the world. This is where that wide angle gender lens comes in. The Royal Bank Financial Group got this in spades. Having recognized the economic potential of women, they came to us to create a plan. We conducted market research so they knew what women’s consumer and entrepreneurial issues were. All of their internal and external communications were audited through a gender lens. We undertook a 5-year training program to change the internal culture and educate the front line. One year into this, the bank witnessed a 10-point jump in marketshare (and this in an industry that dukes it out over a one or two point increase) and a staggering 29 percent increase in customer satisfaction levels of women with their account managers, the largest one year increase in bank history. But the unexpected benefit to the bank was this – focusing on what women want in a consumer relationship raises the bar for everybody. If you make something “women-friendly, you make it every-body-friendly”.

My advice to any company going into Africa is to heed the story of Royal Bank. Like Access Bank is currently finding out, women will come and more importantly stay as customers and tell all of their friends.

Is Microfinance a Bad Thing?

It’s time for some guest blogging, and our first participant is Elmira Bayrasli, the Director of Corporate Partnerships & Outreach at Endeavor, a New York-based non-profit supporting high-impact entrepreneurship in emerging markets. Before joining Endeavor, Elmira was the Chief Spokesperson at the OSCE Mission to Bosnia and Herzegovina.  From 1997-2000 she was a Presidential Appointee in Secretary of State Madeleine Albright’s office.

Elmira was a participant in our Atlanta deep dive last month, and in it she engaged in a stunning discussion about the negative effects of microfinance. Here are her thoughts on that discussion.

Bono was booed recently at a conference on Africa, says Nicholas Kristof in a recent column in The New York Times.  “Several Africans scolded him for demanding more foreign aid, saying that’s not what Africa needs,” he writes. 
 
Exactly.  Africa has tremendously talented minds. What the continent doesn’t have is fair access to opportunity, which prevents those minds from innovating and improving their quality of life.  Aid has been a necessary measure in Africa.  But as disease, famine and war become more widespread throughout the continent, it can not continue to be Africa’s only option. 

At last month’s GIO deep dive in Atlanta, I was certainly energized by the many voices who spoke about the need for Africans to get away from aid dependence by supporting entrepreneurship.  But I was blown away by the chorus who demanded that it was imperative for Africans to get beyond microcredit and microfinance. 

Microfinance has enabled families throughout Africa, and beyond, to gain control of their own income.  But these small loans haven’t “made poverty a museum piece,” as the Nobel Laureate Muhammad Yunus envisioned.  These small enterprises yield 3-4 jobs at the most, and are rarely sustainable.  Developing economies need to create sustainable businesses that will expand jobs and inject wealth into the community. 

The Atlanta Deep Dive posed the question: “Why does innovation matter?”  Innovation generates ideas, which creates new businesses, which leads to jobs.  The real question should be, “How do we let innovation flourish?  How do we allow bright minds to create new ideas and solutions that will address the issues of poverty, conflict and inequality?” 

Innovation really matters because it leads to transformation.  And this is what Africans need – individuals who will think big and put ideas into action that will lead to change. 

Today, Africans are running businesses that produce world-class coffee and handicrafts and offer globally-competitive services.  They’re using both traditional and technical means to make it happen, and have the potential to scale their endeavors.  The obstacles they face, however, are enormous.  Rather than aid, these entrepreneurs need mentors, access to networks and role models to get them to the next level. 

There is no lack of entrepreneurial role models in the United States.  From Steve Jobs to Bill Gates, young people throughout America find inspiration from their example.  Young people throughout the world should “dream of being inventors,” as Thomas Friedman points out.  It is vital that whether in Africa or Alabama, children grow up in a society which empowers and enables them to think big and believe in themselves. 

That’s why innovation matters. 

Shooting the Messenger

When it comes to Africa, the media, as always, is a convenient scapegoat.

It’s awfully easy to blame Africa’s struggle to attract foreign investment on the steady stream of bad news coming out of the African continent. Undeniably, Western opinion of Africa as a risky place to do business is powerfully shaped by magazine images of flies on faces, newspaper stories about 4,000 percent inflation, and Hollywood films about Africa’s darkest times (Last King of Scotland, Hotel Rwanda, Blood Diamond, etc.) But the issue is more complicated than that. 

Everyone knows these stories do the continent a grave disservice. And many of our deep dive participants have lamented this so-called “CNN Effect,” or the image problem that 24-hour news channels create for Africa. “The brand of Africa is not a good brand,” said Patrick Muthui, the CEO of Virtual Services at RMB Private Bank in South Africa, at our Lisbon deep dive. “But in it are great stories of success.”

Mr. Muthui’s point is valid. There are many success stories coming out of Africa today, some of which we have experienced first hand throughout the GIO process. But the majority of the world cannot go to Africa to see these successes for themselves. And so they get their information from the media, which, despite all the talk of its demise, remains a powerfully influential force.

Combating the CNN effect is not easy. The stories they report on are real. And they are worthy of reporting. Corruption, genocide, and economic strife are stories of both human interest and global economic consequence. To not report on them would be considered morally irresponsible journalism.

The trick is how you can begin to inject some of the more positive stories into the tightly-packed 24-hour news cycle, or squeeze a few business success stories onto the prized real estate of the Wall Street Journal.

Hubert Danso, vice chairman of the African Investment Advisory Group at NEPAD, spent years shopping positive business stories around to the international media types. He got nothing but lip service. So he finally decided that if he wanted the stories of Africa’s burgeoning economic prowess and entrepreneurial spirit to reach the world, he was going to have to tell those stories himself. Danso is now the managing editor of Africa Investor magazine. It’s as slick as anything you’d pick up on a New York newsstand, has top-notch research, and relentlessly covers business issues in and around the continent. If you want to get the other side of the business climate story in Africa, it’s a must-read.

Other deep dive participants have broached the idea of a news portal that focuses exclusively on positive stories coming out of Africa. While the journalist in me bristles at the notion of such an explicitly agenda-driven news outlet, a closer look at the reasoning behind such a portal allays my concerns.

When you look at why international media focus on the disaster and disarray in Africa, it comes down to a few things. One, it is sensational stuff, no question. But also, it’s readily available. There are mouthpieces that are willing to offer up headline-grabbing quotes. Non-governmental organizations, by their very nature, need to sell the media stories of doom-and-gloom, as part of their fund-raising efforts and justification for their very existence. So the lazy journalist will follow this path of least resistance and tell the stories of starvation and civil strife.

But if there were an easy place to find compelling stories of business success, personal triumph, and economic progress, wouldn’t that also make for interesting journalism? So we’re talking about a media center, staffed with communications professionals, relentlessly scouring the continent for human interest stories, case studies, and trend stories that could be packaged up with quotable experts and fed to international news outlets at a moment’s notice. It’s called public relations, and it works for major corporations. So why not Africa?

Pure Business

With the exception of the Paris deep dive on July 10, China has been a curiously silent specter hanging around -- but not necessarily injecting itself into -- our global discussions on Africa’s prospects for economic development.  Frankly, the presence of large groups of Chinese businessmen at our hotels in Nairobi and Dakar has been more telling than some of the discussions to date.  But things clearly changed when we set down in Beijing on July 27 to meet with local business, government and academic leaders.

From the outset, China’s growing presence and influence in Africa has been one of the driving forces behind this GIO focus area.  Over the past five years, trade between China and Africa has quadrupled, and in 2006, it surpassed Great Britain to become Africa’s third largest trading partner, trailing only the United States and France.  More than 800 Chinese companies have established trade with Africa, resulting in more than $6.6 billion U.S. dollars of foreign direct investment (FDI) in the region by the end of 2006 – 14 times greater than at the beginning of the decade.  And building off its diplomatic relations with 48 of the 53 African nations, the Chinese government hosted the Forum on China-Africa Cooperation (F.O.C.A.C.) last November, drawing 1700 participants for what the was billed as “the largest summit China has hosted in modern history.”

Business participants in the Beijing discussions ranged from players long established in Africa, such as the China National Petroleum Corporation, the China Civil Engineering Construction Corporation and the China Development Bank, to newer entrants, such as telecommunications infrastructure giant Huawei Technologies Company and business consultancy The Beijing Axis. 

Not surprisingly, all shared bullish positions on the prospects for business in Africa, tempered with pragmatic, real-world examples of the challenges faced when entering the market.  One business leader lamented the dearth of established small and medium-sized businesses with which he could partner.  His preference would be to source locally as many jobs and contracts as possible, but few locals possess the core skills needed by his business. 

Others told tales of needing to supply massive amounts of fuel, medical supplies and food to simply establish and maintain base business operations.  Yet others observed how local tribal interests can often supersede “official” government policy, making for a complicated regulatory matrix to navigate.

But most Chinese aren’t daunted by the risks.  They acknowledged – tacitly – that they have a safety net not shared by publicly traded companies – the backing of the Chinese government.  Kobus van der Wath, the South African-born general manager of the Beijing Axis, observed: “The general perception is that when Africa does business with Chinese companies, they’re doing business with Beijing.  When American companies operate there, no one thinks they are doing business with Washington.  That’s a big difference, so it’s no wonder the U.S. and the E.U. are getting jittery.”

Ruth Solitei, the Kenyan ambassador to China, tried to assuage possible concerns from both Chinese and Western businesses: “Investors need to understand the policies we have in place.  Many African countries are members of groups that mitigate the risk and protect the investments outsiders make.”

The growing Sino-African trade relationship is also being fueled by Beijing’s economic policies.  In other words, Chinese investment generally comes with no strings attached, and that approach can prove very effective for opening new markets.  One GIO participant shared a recent conversation with Nigerian business leaders, who confided, “We want to do business with China because we can have an entirely open discussion.” 

While the Chinese express no interest in leveraging their trade position to influence local political issues, some business leaders say they are increasingly investing in corporate social responsibility programs across the continent.  A representative from a petroleum company explained:  “We open schools, bring Chinese medicine and introduce other services that don’t exist.  We invest so local people can manage some of the business.  It helps the local people but we also know it will eventually lower our operating costs (when we can source more work locally).”

Getting a full picture of the rapidly evolving Sino-African trade situation is clearly not possible with a single one-day session.  But impressions can be formed, especially when contrasted with the insights surfaced in other markets around the world.  In Beijing, perhaps more than anywhere else so far, the motives seem pure:  plain and simple, Africa means business to China, and China means business to Africa.

Power of the People

At every deep dive, we ask our participants to list what they think are Africa’s greatest strengths; the things that are unique to Africa that will help propel it into the global economic fray.

Many people single out the continent’s great store of natural resources. Some call out its rapidly developing prowess in the mobile and wireless space. But often we will hear from participants that Africa’s people, all 900 million of them, are the source of its power, and the key to its future.

This may sound like soft science at first blush. But in the Atlanta deep dive on the Africa focus area, it seemed that every subject we addressed, no matter how grounded in bottom-line business, circled back in some way to understanding who Africans are, what they want, and what they need. And that, sadly, is not something all businesses, both inside and outside Africa, fully comprehend.

“Africa has often been given what other people think Africa needs,” said His Royal Majesty King Adamtey I, the Suapolor, or traditional ruler, of the Se (Shai) state in Ghana. “But we are a continent, and every country is different.”

It is a theme that came up last week in Lisbon as well. There is a tendency in the Western world to treat Africa as one big market. Worse, there is the inclination to impose Western value systems on Africa through aid or business that has strings attached. The presumption is that Africa wants to be like the West, which is sometimes, but not always, true.

“It’s all about tapping into what’s inside these people,” said Joey Reiman, CEO of BrightHouse, an ideation company based in Atlanta, and author of the book Business at the Speed of Molasses. “Whatever we do about enabling Africa, we need to look at what the ethos is, the core sentiment of a country, organization, or region, and understanding the culture.”

Indeed this two-session deep dive went along way towards achieving that understanding. The meetings featured a fascinating mix of participants, including students from universities in Kenya and South Africa, executives of major multinationals like Anheuser-Busch, Motorola, Coca-Cola, Visa International, and Cisco, professors from Harvard, Wharton, Stanford, Princeton, and Cornell, and a host of microfinance institutions, independent think tanks, entrepreneurs, and non-governmental organizations.

And the issue of people came up again and again. When we talked about assessing risk and extending credit, a topic we touched on last week in Lisbon, the importance of having more than just empirical data on borrowers or business partners became paramount. Linda Hill, a professor at the Harvard Business School, put it best:

Another aspect of the importance of Africa’s people is in the diaspora, or the countless Africans that have left the continent to live and work abroad. Many of the diaspora have skills and capital that are badly needed in their home countries. But there is very little known about them once they leave. And it is even more difficult to convince them to come back, invest that capital, and transfer those skills.

There are some early efforts in that regard. The African Union has launched something called the 6th Region Diaspora Initiative designed to identify, educate, and network the diaspora in the Western Hemisphere, the so-called “6th region” of the AU. Africa Recruit has a more business-oriented focus, looking to connect Africans living outside of the continent with those living inside, in an effort to transfer skills and, potentially, investment.

Social networks like these can have a great impact inside the continent. But the overall theme of the day was that if business is going to get done in Africa, it is going to get done on Africa’s terms. And to do that, you have to know the people you’re dealing with. You have to work with them face to face. Because, as Nick Donofrio, executive vice president of innovation and technology at IBM, said in his closing remarks, “In the end, it’s all about people.”

Know Thy Customer

We were about half way through a truly scintillating discussion on Africa at the Lisbon deep dive, vigorously debating the pros and cons of microfinance, when Bill Carney, a serial entrepreneur and professor at the Instituto de Empresa in Madrid, abruptly changed the course of the conversation.

“Everyone seems to think microfinance is a good idea,” said Carney, shown here. “But nobody seems to know the customer very well. There is an ignorance of the customer base in Africa. We’re just not doing our marketing homework. We’ve got MBAs and PhDs studying this stuff and all they can do is throw money over the wall.  Where’s the market segmentation? Where is the customer benefit and value proposition that we would be talking about in any other market?”

And with that simple, hitherto unexplored sentiment, the conversation swung around and marched down a new, more productive path. This was an incredibly dynamic group, even by GIO standards, rife with intellectual firepower, and eager to turn words into actions. Among the group were representatives from Attijariwafa Bank in Morocco, NEPAD, The James Martin 21st Century School, Computer Frontiers Inc., The Royal Academy of Engineering, and the Ugandan parliament. There must have been some real chemistry in the room, because before our eyes, during breaks, during lunch, collaborative projects were being hatched.

But the dearth of market research was perhaps the most revelatory discussion topic of the day. Africans often caution the rest of the world not to think of “Africa” as one big market of more than 900 million people. Instead, they say, Africa is a complex place with 53 distinct countries and countless different markets. And yet when it comes to microfinance, Africans are commonly lumped together in enormous market segment, like the 300 million that live on less than $1 a day. There is virtually no understanding of what a borrower’s needs are, how much of a credit risk they might be, or how successful they have been after they are given a loan. And that’s no way to do business.

“You have to have an intimate understanding of the customer so that you can serve them better,” said Patrick Muthui, the CEO of Virtual Services at RMB Private Bank in South Africa, shown here. “And in order to understand and segment your customers you have to collect information on them. You have to know what their behavior is.”

On this point, there was no dispute. But how to obtain that information? Many Africans live completely off the grid, with no land ownership, credit, or even a single utility bill to their name. And it’s not just those living within the borders of African nations that go unbanked and unidentified. The diaspora, or those Africans that leave the continent to work and live abroad, and who often send money back home, are completely untracked, despite their obvious importance to the local economies.

The dilemma begs the question of whether national I.D. systems will be a necessary precursor to Africa’s economic emergence. Some lenders do require that borrower’s sign up for identity cards, using photo I.D.s and fingerprint recognition. And retail stores will often allow customers to pre-pay for a time, until their credit risk is better understood, and then will offer credit. All of which is helpful for those individual businesses. But these examples are such small pieces of a massive puzzle.

There are a few sources of good and growing information on African markets. Money transfer services like Western Union, wireless carriers, and a handful of retailers are beginning to store data. Now the information needs to be married, analyzed, and acted upon. Just another layer in the complex and confounding effort to bring Africa into the global economic mainstream. But this problem seems to be imminently solvable. And judging from the eagerness of the Lisbon deep dive’s participants just may get done.

Enter China

For a full month now, since the first deep dives in Africa back in early June, the GIO team has been scratching its collective head, wondering why we hadn’t yet discussed the role of China in Africa’s current economic revival. We allow our deep dive participants considerable latitude in setting the agenda for each day’s discussion. But our assumption was that China, and its $55 billion of annual trade with Africa, would be a topic with legs, coming up early and often.

But it is instructive that it wasn’t until our Paris dive, a meeting specifically designed to get the European perspective on Africa, that the topic of China was first broached. And it was clear in the first five minutes of the meeting that China was top of mind for the Europeans, a disruptive, catalyzing global economic force that had the former colonial powers sitting up straight.

Once again the GIO brought together a powerful group of thinkers, including representatives from the World Economic Forum, the London School of Economics, the United Nations Industrial Development Organization, the New Partnership for Africa’s Development, oil and gas giant Shell, Reuters, the Global Women’s Inventor and Innovators Network, and a handful of current and former European government officials. And though the group came from varied educational and professional backgrounds, they shared a common interest in the continued economic development of Africa, and, more specifically, the effect of China’s increasingly cozy relationship with many African nations.

“Europe is getting a wakeup call from China,” said Jean Pierre Lehmann, a professor of international political economics at IMD, the global business school located in Lausanne, Switzerland. “China is the new kid on the African block, and it is forcing Europeans to reflect on changing strategies.”

“China is the fear factor,” said Hubert Danso, vice chairman of the African Investment Advisory Group at NEPAD.

From there the conversation built very quickly. There was a feeling that in the past 40 years or so of post-colonial Africa, Europe has done little for the nations it once governed. While most of the successful businesses in Africa are owned by Western companies -- Unilever, Shell, Diageo -- there has been no African middle class built around these financial engines. And there is still precious little indigenous African business. “In some ways, China has done more for Africa in two years than Europe has done in the last 25 years,” said one participant. “China has put Africa on the map, and challenged the notion that Africa is the playground of Europe. You could argue that the relationship is exploitative, and that is somewhat demeaning for us Africans, but China has come in with a very straightforward agenda.”

This sentiment, the idea that China comes to the table without the colonial legacy and associated baggage, seems to be a critical factor fueling the global embrace between the African nations and China. But there are very real concerns that China’s aggressive investment in the African continent, it’s dire need for the resources therein, and the reaction this will produce from Europe, the United States, and other regions in need of resources, could set the stage for another round of economic imperialism if African nations do not manage the relationships effectively. One participant pointed out that Africa’s relationship with China is undermining the industrialization of Africa, as manufacturing jobs are lost to the efficiency and low-cost labor of China. But if African nations can reinvest the income received from the extraction of its raw materials and create new economies, then the relationship can result in positive change throughout the continent. This, of course, is the proverbial big if.

Africa's Mixed Messages

Thumbing through the latest issue of Vanity Fair, the so-called “Africa” issue, you get a pretty good sense of the mixed messages coming out of Africa these days. The magazine awkwardly combines the global glamour and celebrity typical of Vanity Fair, with the more pedestrian stories of a continent struggling to right itself and play a meaningful role in the world economy. It is a picture of contrasts, and it is, however unintended, emblematic of Africa’s current dichotomy.

There was Brad Pitt interviewing South Africa’s Archbishop Desmond Tutu. Bono putting questions to the presidential hopefuls. And Annie Leibovitz capturing dozens of celebs (mostly American) with her knowing lens. But it was the story by Kenyan journalist Binyavanga Wainaina that was the most paradoxical.

The wide-ranging piece hits many of the themes the GIO has grappled with so far in its Africa focus area: the role of the informal economy, Africa’s burgeoning wireless markets, and the political stability that is setting the tone for economic growth. But the main thrust of the piece is a complaint: American news media focuses too heavily on the disease, poverty, and corruption in Africa, and not enough on the positive stories.

This was something we also heard in our Nairobi deep dives. A few people suggested that in order for more investment to be made in Africa, the world needs to hear the truly hopeful stories of Africa. Stories like Safaricom’s ground-breaking mobile banking system M-Pesa. Or the stories of the many young students we met with, with bright minds and big dreams. One deep diver suggested a web site that is dedicated solely to telling stories of hope and achievement coming out of Africa.

But flip a few pages forward in Vanity Fair’s Africa issue, and you read this: “next year, 10 million children’s lives will be lost unnecessarily to extreme poverty,” or “H.I.V./AIDS is killing teachers faster than you can train them.” These words come from Bono, whose public efforts to cancel debt and raise awareness for African nations are tireless. A few pages more and you read a typical story on how the oil boom in Africa is fueling a vicious cycle of guns, conflict, and oppression.

So what is the message we are to believe? Is the real story of Africa one of entrepreneurial growth and political stability? Or is it the images we get from CNN, of poverty, disease, and hopelessness?

It is, of course, both. At the same time that Africa desperately needs charity to prevent the needless deaths of countless children, it also needs bootstrap businesses that borrow money, grow rapidly, and employ dozens, hundreds, or thousands of other Africans. And both stories need to be told, for different reasons, but to achieve the same end. If you read Mr. Wainaina’s story carefully, you see that not long ago, Africa had only one story to tell the world. Today, it has two competing stories. And that is the sign of a continent in transition.

The Downside of African Aid

After three deep dives in Africa, there is an issue that is quickly becoming the elephant in the room: the negative impact of aid in Africa. Rather than tiptoe around this thing for the next three months, it's probably better to get the discussion going early and often. We'll just have to see where it takes us.

It comes down to this basic question: Do handouts, both financial and otherwise, do more harm than good in Africa's struggle to break the cycle of disease, famine, and poverty. It is an explosive issue to say the least, and there are many impassioned voices on both sides of the debate. Advocates of aid believe that the billions that have been poured into Sub-Saharan Africa over the past three decades have been effective, if not sufficient. Opponents believe that delivering money, food, or medicine without strings attached breeds nothing more than dependency.

Though it's early, and we certainly plan to explore this topic in great depth over the coming months, the early indications are that within Africa there is a growing backlash against the international aid community. At first I thought this sentiment was strongest among the entrepreneurial participants in the Global Innovation Outlook. After all, if anyone would see the benefits of bootstrapping, it was these small business owners and investors. But when I looked closer at the transcripts from our meetings, I noticed that the strongest comments came from those you would least expect: government leaders and sometimes NGOs themselves.

"No nation has ever grown strong by accepting handouts," said one prominent government official. And these thoughts were echoed throughout the Nairobi and Dakar deep dives. There was the unmistakable sense that years of charity, and billions in aid, have not worked. The time has come for Africa to create its own wealth. We have heard this over and over again in our meetings. It's the classic teach-a-man-to-fish scenario. But it goes beyond that even. Some participants were concerned that NGOs attract valuable local talent that could be starting successful businesses in their home towns, employing hundreds of fellow Africans, rather than working with charitable outfits.

And we're not the only ones hearing it. In this New York Times column by Jason Pontin, the editor-in-chief MIT's Technology Review, the same issue is explored from the perspective of participants in the TEDGlobal 2007 conference held this month in Tanzania. In Pontin's account, the choice is between technology or aid. But we've been hearing a broader debate: entrepreneurship or aid.

Pontin rightly concludes that the choices are not mutually exclusive. And that aid will continue to play a critical role in the economic development of Africa. But some of our participants had wonderful ideas for how to put those billions in international aid to better use, and bridge the gap between aid and entrepreneurship. For example: why not use aid to fund small and medium business loans, something that is sorely need in Africa. They might even make a good return on their investment, and will help create jobs and economic growth by funding the gap between microfinance and commercial lending, something we've been calling the "mesofinance gap."

There are other ideas to be sure. And we welcome any impromptu brainstorming you'd like to do on the topic. We'll be sure to bring it up in Europe, Asia, and the U.S. to get the outsider perspective.

The Mobile Imperative

Because of its unique geography (which is vast) and its lack of fixed wire telecommunications infrastructure, many experts think that Africa is in prime position to leapfrog over landlines and become a leader in wireless. What most experts don’t know, however, is that Africa has already done it.

In Kenya, the GIO bore witness to the first killer application for mobiles in rural areas. Safaricom, Kenya’s leading wireless provider (and a ubiquitous presence throughout the country), recently launched a mobile money transfer service called M-Pesa. By sending a simple text message, Safaricom subscribers can send money to friends, family, and business acquaintances. The money is then stored in a virtual account until the recipient cashes it in at a local Safaricom office.

So what does it mean? For one thing, it revolutionizes banking for developing areas. Traditional banks have historically ignored the rural poor. In fact, 38 percent of Kenyans do not even have access to banking facilities. They are called “the unbanked.” But well over half the population either owns or has access to a mobile phone. In the past, Kenyans would send money through the mail, Western Union, or more informal means. But those money transfer systems were expensive (sometimes as much as 10 percent of the transaction) or lacked security. M-Pesa costs about $2.50 per transaction, and can transfer as much as $525 at a time. And subscribers are required to enter a password to transfer or access received funds.

This means that the cost of doing business in these areas is reduced. It also brings some of the aforementioned informal economy into a more structured, formalized world. Kenyans are signing up for the service at a rate of 1,000 per day. And it’s not hard to imagine the next steps for a service like this: digital wallets, in which the mobile phone becomes a means of payment not just between individuals, but also between local merchants. It’s a vision the developed world has been talking about for decades. And Africa is leapfrogging the world to get there first.

It all arises from Africa’s socio-economic makeup and geography. Remarkably, the infrastructure is already in place. Even in the most remote areas, like a Masai village on the Western boarder between Kenya and Tanzania, the wireless signal is strong and true. And mobile money transfer was already happening, as Africans bartered with their mobile phone minutes on pre-paid calling plans, as a form of makeshift mobile currency. Safaricom just formalized it.

There were a few topics that we fully expected to be a focus of attention in our Africa dives. And the role of mobile phones and networks was one of them. Our deep dive participants have not disappointed. Not twenty minutes into our student deep dive last week in Nairobi, an idea that came out of our last focus area, media and content, resurfaced. A lecturer from the University of Nairobi reiterated the power of mobile phones for integrating the rural poor into the broader economy. He even articulated the need for some kind of language service to address the issue of illiteracy. It was like déjà vu all over again, the exact idea a participant surfaced in our Mumbai dive on media and content. And the discussion of the power of the mobile platform has not let up since.

But some people, mostly cynics, have questioned the usefulness of mobile services for rural villages. We’ve heard a lot of questions about what kind of applications these people would use. On some level, we’ve been taking it on faith that, if given a powerful mobile platform, rural people would develop their own uses, some of which we can’t yet conceive. Mobile money transfer is a perfect example.

Pretty amazing stuff. Innovative, ground-breaking, totally cutting edge stuff. And 100 percent African. Safaricom is already working to extend the service internationally through its close ties to Vodafone. What other applications would be available on this platform? I encourage you to speculate on this blog. Send me comments and we’ll probe them further throughout the Africa deep dives around the world.

The Missing Middle

Reading some of the popular press, you might think that Africa is awash in capital. After all, there are countless success stories about microfinance, the small loans that help individuals start businesses in their local communities. Charitable organizations continue to donate huge sums. And we’ve all read that China is pouring money into Africa in an attempt to line up natural resources for decades to come. But, as we learned in our third Global Innovation Outlook deep dive in Dakar, Senegal, there is something missing from these stories: the middle.

While there is money available to individuals and big businesses, there is very little money available to small- and medium-sized businesses. And this lack of financing for SMBs, the so-called “mesofinance gap,” is holding back the real engines of economic growth for Africa’s developing regions, and has been troubling a number of our deep dive participants.

In Dakar, our participants were in total agreement about the nature of the problem, if not the solution to it. We had participants from Nigeria, Cote d’Ivoire, Senegal, Uganda and South Africa, representing a diverse array of organizations, including Compagnie Sucriere Senegalese (Senegal Sugar Company), Telnet Nigeria (largest telecom in Nigeria), NEPAD (New Partnership for Africa’s Development), the Association of African Universities, Manobi (a mobile data services provider), and Gate7 New Media (mobile new media company in South Africa). We even had South Africa’s ambassador to Senegal, Thembi Majola-Embalo.

But perhaps no one was more suited to address the mesofinance problem than David Beguma, the executive director of the Association of Microfinance Institutions of Ugandua (AMFIU). David’s job is guide the burgeoning microfinance industry in Uganda, and AMFIU includes more than 80 full-time members. He recognizes that the problem stems from microfinance institutions not having enough money to loan to SMBs, and commercial banks not having the appetite to risk capital on small businesses without much collateral. And even if a bank takes a chance on an SMB, the laws of most countries make it nearly impossible for the lender to recoup its investment through legal means. One participant estimated that 12 of 13 cases where a lender takes someone to court because of defaulting, the claimant loses.

But David has a two-pronged approach to trying to close the mesofinance gap:

David feels strongly that microfinance institutions need to start looking at their investments as more long term, allowing their clients a chance to grow into the SMBs that African nations so desperately need to employ people. But there are other ways to close the mesofinance gap as well. One participant was very big on vendor financing, the practice of suppliers loaning money to customers so those customers can purchase needed equipment to jump start their business.

And Thembi recommended that governments use their buying power to force big companies to take on local subcontractors, bridging the gap between small and big, and transferring much needed skills in the mean time.

However it gets addressed, it’s clear the mesofinance gap needs to be bridged, and fast. Small and medium businesses do more than just grow wealth and provide jobs. They are engines of innovation. And Africa needs them.

Collaborate, Collaborate, Collaborate

Towards the end of our first deep dive on the Africa focus area, a session that included 15 university students from all over the continent (including Uganda, Ethiopia, South Africa, Kenya, Tanzania), it was a young man from right here in Nairobi that sent a strong and direct message to the business leaders, government officials and academics that will constitute the future GIO deep dives: “Collaborate, collaborate, collaborate.”

This simple request came from Athman Fadhili, an MBA student from the University of Nairobi, who had spent a large portion of the day imploring the private sector to take a more active role in the development of curriculum at African universities. And he was not alone in his desire to see this kind of public and private collaboration. In a day-long, wide-ranging conversation that focused heavily on the overburdened African university system, many expressed the need for increased involvement from the businesses that will one day employ these students. But no one said it any better than Athman. So I’ll let him tell you what he wants, and how he thinks it can get done.

In general, there seemed to be a high level of frustration and discontent with  government ability to steer the university system (and a few other major infrastructure challenges). And no one in that room underestimated that system’s role in fostering a culture of entrepreneurship. So the students were clearly reaching out to the private sector for help. Help in influencing the government to overhaul curricula; help in creating internships to give students more real world experience; help fostering students and the ideas through mentoring programs.

“The private sector is known for its ability to implement and sustain ideas,” said Kevit Desai, the ICT Governor of the Kenya Private Sector Association (KEPSA), an industry group. “But it’s important that they do things the right way.”

And there is at least one example of the right way. At Cida City Campus, a university in South Africa that caters to students from poor backgrounds, there is an entire school for entrepreneurs. Richard Branson, founder of the Virgin conglomerate, donated the school (called the Branson School of Enterpreneurship), and even set up a seed fund to get students the capital they need to launch their businesses.

The Branson School is more of a purely philanthropic endeavor. But what Athman is calling for is large corporations that have the funds and long-term vision to create centers of learning in African schools in exchange for qualified, trained employees. It seems as though more of them would be willing to do it if the government loosened up its controls.

In other news from today’s dive, we did an interesting exercise with the students. The tendency in meetings like this is to dwell on problems. But today we asked the students to think of things that have gone right in Africa, examples of entrepreneurship and innovation that can serve to inspire. And the list was too long to publish in just one blog.

But the highlights included: a mobile service from Kenya wireless provider Safaricom, called M-Pesa, that allows subscribers to maintain bank accounts on their phones, and transfer money to other Safaricom subscribers; a Ugandan Health Information Network that uses low-cost handhelds to transmit continuing medical education information to doctors in remote areas; and a couple of entrepreneurs in Kenya that fashioned sandals from used tire treads and sold them for $100 a pair.   

A student dive was a great way to kick off the Africa focus area, as we will now take the perspectives of the youth of Africa to the business, government, and academic leaders of the world. And if this dive was any indication, the order of the day is going to be: collaborate.

Into Africa

Wow, this is huge.

The Global Innovation Outlook focus on Africa represents the most ambitious and challenging topic we’ve undertaken since the program began three years ago.  Previous focus areas have been grand in scale and complex to tackle, to be sure: transportation, the environment, healthcare. But Africa seems different in so many ways.

For one thing, it’s big. Really big. Continentally big. There are 54 countries in Africa, and just under a billion people. You could fit the United States, China, and Europe inside of Africa’s geographical borders and still have room for most of Central America. You could spend a lifetime just studying its various regions, climates, and cultures. In fact, some of our deep dive participants will have done just that.

That size and diversity actually means any discussion of Africa is really a discussion of multiple Africas.  There are the Mediterranean states which have long traded with nearby partners in Europe.  The strong Middle Eastern culture of Egypt and surrounding countries.  The resource-rich but very different worlds embodied by the sub-Saharan regions on the continent’s east and west coasts.  And South Africa with its long legacy of trade enabled by its unique geographic positioning.

But the thing that is driving  IBM’s interest in exploring this topic is the fact that Africa is poised to take a greater role in shaping the global economy over the next decade. Sure, Africa has always participated in the global economy. It has been mined for resources, mostly by foreigners, of all kinds since the beginnings of global commerce. But only recently has the world begun to see the potential for Africa to participate in global business on its own terms. And between the continent’s burgeoning trade with China (growing at 40 percent a year), its steadily growing economy (above 5 percent), and some much needed political stability, there is an undeniable sense that Africa is finally positioned to develop its own economic prowess.

To lay down some foundation for the discussions we’ll be having in Africa, and because it is such an enormous topic with countless moving parts, IBM has cultivated a powerful network of experts to help shape the agenda for the next three month’s discussion.  Makerere University in Uganda (argurably the most prestigious and successful of African universities), Reuters (also a GIO Media & Content partner), and NEPAD (New Partnership for Africa’s Development) are all working alongside IBM to ensure that the upcoming deep dives in seven different cities – Nairobi, Dakar, Paris, Lisbon, Atlanta Beijing, and Cape Town -- are as productive as possible.

In addition, IBM conducted something called a “ThinkPlace Challenge,” a kind of online brainstorming session, to surface ideas that we’ll want to pursue further in Africa. IBM has been using ThinkPlace internally for years, but this is the first time the forum has been opened up to participants outside the company. Already, we’ve seen some compelling ideas that warrant further discussion.  For example, one participant suggested that the GIO explore the “mesofinance gap.” This is the gray area between microfinance (very small loans given mostly to individuals) and typical corporate financing (for larger, more established companies.) Africa needs loan programs that target the small and medium businesses that will power regional economic development.

This is just one of many ideas we’ll be kicking around during the Africa deep dives. Other topics that we’ll be exploring will be infrastructure (mostly energy and telecommunications), investment partnerships (like unique public/private collaborations), and, perhaps most important, how Africa can develop its own areas of innovation expertise that can be leveraged throughout the world.

Like I said, this is big stuff.  We’ve got a lot to learn, and expect that the rich mix of perspective from within Africa and from around the world will unearth new ideas and approaches to innovation that have not yet been considered.  As we learn, you’ll learn too.  Check back with the GIO blog over the next two weeks as things kick off in Nairobi and then Dakar.

The Big Switcheroo

For the past three months, throughout the nine deep dives on media content, the Global Innovation Outlook team has seeded the discussions with a handful of different concepts. They are simple, high-level constructs, used to get the conversation going and keep it focused. Some of the discussion points have been easily embraced. Everybody found it easy to talk about user-generated content, for example. And piracy often generated heated, if not productive, conversation.

But one concept that deep divers struggled with was nicknamed “Let go to Grow.” It’s the theory that by letting go of traditional control over your business, you can build other, more profitable businesses around that which you give up. The phrase was popularized by Linda Sanford, an IBM senior vice president, who published a book on the topic. And there are a number of examples of companies giving away a valuable service or product (Google’s search, for example, or IBM’s own embrace of open source software) in exchange for a revenue model built around that service or product.

But most of the media executives at our dives, while familiar with the concept, just couldn’t see it happening in their business. Or at the very least, they had trouble conceiving of the business model that was going to arise after they let go of the very things they had been monetizing with great success for the better part of a century. So we desperately tried to get the groups to think around these corners. And one of the examples that Kris Lichter, IBM’s Director of corporate innovation projects and the man running the GIO, repeatedly used was a purely hypothetical example of George Lucas allowing fans to rewrite the ending to the Star Wars movies.

Well, the hypothetical is now reality. Last week Lucasfilm, the production company that manages the rights to the Star Wars movies, announced it would make 250 clips from the series available to the public online at starwars.com. The idea is to let the rest of the world mash up the clips, and remix them as they like. That this is coming from the man nicknamed “Lucas the Litigator” for his zealousness in protecting his intellectual property, makes it all the more astonishing. But starwars.com expects a huge boost in traffic, the Star Wars community will almost certainly grown, and a movie franchise that has no more movies to offer will sustain the business for decades to come. Makes you wonder what else might be possible in the world of media and entertainment.

Jarring Transition Alert! – Jarring Transition Alert! – Jarring Transition Alert!

Speaking of letting go, it’s about time for me to let go of the media and content topic area on this blog. Though there is still much to learn in this incredibly rich topic area, the GIO team is now transitioning its focus to the next topic area: Africa.

For the last couple of months, even as the media and content deep dives were wrapping up, we’ve been hard at work developing meeting agendas and discussion areas for our ten forthcoming deep dives on Africa. We will be focusing much of the discussion on how investing, lending, and business development can spur positive economic growth within Africa. This is no charity mission, mind you. Rather, the GIO wants to encourage innovation that can both create and sustain business opportunities, the ultimate goal of which is to create positive socio-economic change and bring Africa more fully into the global economy.

It’s going to be fascinating. We kick off with a double-dive in Nairobi next week, followed by dives in Dakar, Paris, Lisbon, Atlanta, Beijing, and a wrap up session in Cape Town in September. You won’t want to miss this, so stay tuned to this blog, and follow along as we dive deep into the world’s second-most populous continent.

The Power of the Pyramid

As the GIO team prepares to head to Korea and China this weekend, we’re spending a lot of time discussing one of the themes that came up in the Mumbai deep dive on media and content. The idea was that by disseminating affordable technology – broadband, mobile phones, PCs -- to the hundreds of millions of Indian villagers dotting the countryside, many of whom are impoverished, that microeconomic opportunity could arise.

At first blush, it is classic “bottom-of-the-pyramid” type of thinking. Made popular by University of Michigan professor C.K. Prahalad, the theory states that there is a huge economic opportunity targeting the 4 billion people in the world that make less than $2 a day. Call it the long-tail of socio-economics. Click here to listen to Prahalad's thoughts on the democratization of commerce.

But it has been my experience that whenever a bottom-of-the-pyramid discussion arises, there is always a sufficient amount of skepticism in the room, a palpable fear that exploitation of the poor is not far behind. I suspect that this tension will be an important theme going forward, especially during the deep dive in Shanghai next Thursday, and the subsequent focus area of the GIO, Africa, which kicks off this summer.

So before we start to head down this road in earnest, I think it best to clear up a few possible misconceptions. The first is that this is all about “tapping into a market.” Most cynics would question whether the poverty-stricken are really in need of high-speed Internet connections. After all, when you’re struggling to put food on the table, is Internet access really that high on your list of priorities?

Fair enough. But consider this: in Southern India, a wireless technology that can transmit 5 million bits per second over a 60-mile span for a fraction of the cost of Wi-fi is bringing telemedicine to villages that previously had to travel several hours just to see a doctor. Eric Brewer, a professor at UC, Berkeley, has been trialing the technology, called Wildnet (Wi-Fi over long distance), in villages throughout India and other parts of the world. Using the technology, Aravind Eye Hospital, in Theni, has been able to treat 1,400 patients a month at five remote centers for costs as little as 13 cents a visit. An article on this topic appears in the April 9 issue of Forbes, but is not available online. Here is a link to Brewer’s research group at Berkeley, called TIER (technology and infrastructure for emerging regions.)

That’s the kind of transformative effect that technology can have on developing areas. As we think about this topic, it’s important to remember that it’s not about taking existing technology and applying it to impoverished people. That doesn’t make a lot of sense. It’s more about considering what new technologies might make sense to address the problems of the poor, disconnected, and often forgotten people of the world. As Prahalad says, it's not just about creating "microconsumers," but also creating "microproducers." That requires real innovation.

It is also worth keeping in mind that when we discuss the issues surround “media and content,” it’s not just about entertainment, news, music and books. It’s about all kinds of content, like telemedicine, weather reports that affect farming habits, and educational programming, etc. The challenge is twofold: determining what kind of content impoverished people need the most (and this would vary from region to region); and how best to deliver it. Or as they say in the writing business: form follows content.

Countdown to Innovation

Starting tomorrow in New York, IBM will once again set the table for innovation and collaboration with the Global Innovation Outlook 3.0. What is the Global Innovation Outlook, you ask? The GIO, as it is affectionately known, is essentially a global series of open and candid discussions –- called “deep dives” -- with business leaders, academics, politicians, non-profit groups, and other influential types that have the knowledge and ability to affect change through innovation. I know, it’s a mouthful. But it’s a pretty big deal.

The GIO tackles some very tricky subjects; global issues that have a great need for innovative advancement. Issues that affect both business and society: healthcare; the environment; transportation. For a thorough backgrounder on the GIO, click here.  

By way of introduction, my name is Dan Briody, and I’ll be capturing the conversations from the deep dives all year long on this blog and through various other printed and online mediums. There are about ten of us that put the GIO together, and as the clock ticks down the final minutes and hours before the first deep dive, we’re all anticipating an enlightening year. It is a massive operation, this GIO. This year alone we’ll be collecting insights in 17 different countries on six continents. And the topics we’ll be covering are intensely interesting: Media and Content; Africa; and Security and Society.

Tomorrow’s deep dive on Media and Content will include some of the brightest minds in the world. Representatives from media and entertainment giants (Disney, HBO, Sony), marketing and advertising firms (Ogilvy & Mather, Mr. Youth), academic institutions (Syracuse University, University of Pennsylvania), VCs (Union Square Ventures, iN3 Partners) and non-governmental organizations (International Academy of Television Arts & Sciences, Public Knowledge) will gather to discuss, debate, and with any luck, emerge with some ideas for innovative approaches to everything from user-generated content to the blurring of the lines between advertising and entertainment.

The best part of the GIO? It’s wide open. You may not all be able to participate in the actual deep dive meetings, but you can read all about the insights that are emerging on this blog, and even contribute your own thoughts to keep the conversation. There will also be printed publications that come out periodically and will be available here.

It’s time to get this project started. Come back often and join the discussion.