Why do companies in the Democratic Republic of the Congo (DRC) innovate*? Identifying, making, and selling a new good or service can take a lot of work, but many companies choose to do it. For example, after the launch in July 2018 of its new online banking service, the United Bank for Africa said that it is “committed to improvement in the quality of its customer service, by introducing products ever more innovative” (link; my translation from the French). Other goods and services introduced in recent months include energy drinks (link), cinema services (link), and maternity care (link).
Companies can have many reasons for innovation. Often, a company wants to change something in order to either increase profits or satisfy another organisational goal, and the innovation is a good way to do it. This post will consider some important reasons for innovation, and illustrate them with recent examples from the DRC. Table 1 lists the reasons that this post will examine.
Table 1. Reasons for innovation
Reason 1: To satisfy consumer demand
A company may innovate to satisfy consumer demand. The unmet demand may be recognised by potential consumers, and the company may decide to innovate after talking to them. Alternatively, the unmet demand may be unrecognised by potential consumers, and the company may innovate based on its own expectations of what consumers will want.
An example of innovation to satisfy consumer demand is the introduction by the company Transco of a new bus route in Kinshasa in July 2018 (link). The route connects two parts of the Congolese capital, Mokali and Zando, that were not previously linked by bus. The new route meets an unmet demand for bus transport, but also for transport more generally, as it “is one of the rare alternatives that Kinshasa residents have during a strike by other means of transport such as taxis, or during a shortage of fuel” (link).
Reason 2: To respond to competitors
A company may innovate to respond to competitor actions or to get an advantage over them. They may develop a good or service that is entirely new, and try to take the consumers of a competitor’s existing product. Alternatively, they may develop a good or service which is a copy of an existing product, but which the company hasn’t made before (so it is innovation for the company, but not the market). The company may be trying to capture consumers from a competitor, either as a new entrant to the market or in response to a competitor’s earlier innovation.
An example of innovation to respond to competitors is the introduction by the company Congo Airways of flights from Kinshasa to Johannesburg in South Africa in May 2018 (link). The Kinshasa to Johannesburg flight is not an innovation to the market, as South African Airways already provide direct services, and numerous airlines provide indirect services. However, the flight is an innovation for Congo Airways, which will hope to take customers from these competitors.
3. To reduce production costs
A company may innovate to reduce production costs. Often the innovation will be the introduction of a new process within the company, and the customer won’t see any difference in the good or service they buy. Sometimes, the good or service may change as well, for example if a service is automated so that workers are replaced by machines.
An example of innovation to reduce production costs is the introduction by the United Bank of Africa of automated online banking in July 2018 (link). The automated banking, aided by artificial intelligence, allows the bank to serve customers with far fewer staff members, saving money on staff. Another aspect of the innovation is that the bank can provide services outside of usual working hours.
4. To respond to government legislation
A company may innovate in response to government legislation. Legislation may ban a certain product, or raise the cost of manufacturing it, and the innovation will develop a replacement product. Alternatively, legislation may prevent an item or person being employed in the manufacturing process, and innovation will develop a new way of manufacturing that doesn’t use them.
An example of innovation in response to government legislation is the introduction by Kinshasa supermarkets of biodegradable wrapping by August 2018 (link). DRC government legislation banned the use of plastic wrappings and bags from July 2018, and some supermarkets in Kinshasa responded by introducing packages made of cardboard or tissue. The legislation also increases demand and profits from direct sale of bags (link), creating incentives for innovative responses among those sellers as well.
5. To respond to the emergence of new technology
A company may innovate in response to the emergence of a new technology. The emergence of a new technology is only part of the innovation process, and the company would still have a lot of work to do to complete the process. For example, the technology would have to be included in a good or service, which would have to made attractive to consumers, and then sold.
An example of innovation in response to the emergence of a new technology is the introduction of 4G mobile phone services by Vodacom Congo from 2018 (link). The 4G network technology had emerged internationally and in the DRC, allowing faster and larger data transfer across it. Vodacom Congo introduced a network based on the technology in the DRC, and goods and services such as software and SIM cards which allowed the technology to be used by personal users. It also marketed the goods and services.
6. To respond to conditions within the company
A company may innovate in response to conditions within the company. One example is that the company may have an owner or manager who is very enthusiastic about innovation, and the company innovates to satisfy them. Alternatively, a company may require a more skilled workforce, and innovates by developing a training program for them.
An example of innovation in response to conditions within the company is the development of electric cars and trains in Angola by the entrepreneur Gabriel Shabani (link). Shabani was an important influence on the innovation. He couldn’t reach agreement with the DRC government over his initial plan for the innovation, but he persisted. After approaching and reaching agreement with the Angolan government, the innovation proceeded.
7. To perform a public service
A company may innovate to perform a public service. The company’s owners or employees may want to benefit other people without selling them anything, and may want use the company to do so. The public service may also have benefits for the company, such as improving its public image or creating future demand for their products. The innovation may be developed in a similar way to commercial innovations, by identifying good ideas, converting them into usable goods or services, before passing the goods and services to the recipients.
An example of innovation to perform a public service is the introduction of a course to teach school students about personal finance, which was done by BCDC bank in 2018 (link). The innovation helps students understand and manage an important influence on their life. It also improves the company’s public image, and may encourage the students to bank with BCDC in future.
In summary, there are many reasons why Congolese companies innovate. Some of them are discussed here: to meet consumer demand, to respond to competitors, to reduce production costs, to respond to government legislation, to respond to the emergence of new technology, to respond to conditions within the company, and to perform a public service. The many reasons, and the many accompanying examples, suggest that understanding innovation more fully would help businesspeople develop their companies.
* Innovation is the development of an idea into a new practical use. It includes the identification of an idea that may be useful, its conversion into a usable form, and supporting work such as design or sales that help to apply the idea. The conversion of the idea into a useful form is usually called invention. However, many studies of innovation focus on how to identify ideas and how to do the supporting work. These parts of the innovation process are quite similar to other managerial work.
Similar definitions of innovation are used in well-known textbooks on the subject. In the textbook Dodgson, Gann, Salter, “Management of Technological Innovation”, innovation is “the successful commercial exploitation of new ideas”. In the textbook Schilling, “Strategic Management of Technological Innovation”, technological innovation is “the act of introducing a new device, method, or material for application to commercial or practical objectives”. In the textbook Tidd, Bessant, “Managing Innovation”, innovation is “the process of growing [good ideas] into practical use”.
The blog and site are written by James Waters. He is a British economist.