People tend to equate entrepreneurs with innovation, and for a very good reason – innovation is important for entrepreneurship. But the two are distinct: innovators come up with a unique solution or idea, but it is the entrepreneur who turns that innovation into a revenue stream that, hopefully, in turn, supports more innovation. Without the entrepreneur, the innovation is just a nice concept, and without the innovation, the entrepreneur is just another businessman.
GIBS Professor Kerrin Myres has a long history of studying entrepreneurship and is herself an entrepreneur. She argues that innovation is fundamental to successful entrepreneurship and that one must distinguish between survivalist entrepreneurs and entrepreneurs who are wealth creators and have a long-term vision.
For the latter, innovation is vital to differentiate the business and carve out a niche. “Innovation is particularly important during start-up because that’s how the new player sets themselves apart and combats what I call ‘the liability of newness’ – consumers tend to stick with what they know,” she says.
This may seem obvious, but it’s hard to pull off. Most entrepreneurs start businesses in sectors where they have some experience and are, by default, programmed to reproduce what they already know in their new business. For example, many of the new businesses in South Africa each year are in the retail sector, but a vanishingly small number of them are innovative in any real sense, so relatively few of them are sustainable.
An equally large number of new “entrepreneurial” businesses are franchises, adds GIBS faculty member and strategist, Abdullah Verachia. Strictly speaking, franchisees are not entrepreneurial, he says – it’s the franchisor that is the entrepreneur. The franchisees are bound to simply “follow the recipe”, though in some cases, mechanisms exist for individual franchisees to feed innovative ideas up the food chain.
Professor Myres puts her finger on one of the key challenges relating to innovation: the need to keep innovating. After all, today’s innovator is tomorrow’s establishment monolith.
Large businesses find it hard to balance the imperative to improve and defend the current business model with the need to innovate to remain relevant to customers. But while they must contend with the inevitable complacency that comes with success, they at least have resources to devote to innovation.
By contrast, the entrepreneurial business that used innovation to gain traction in the market faces the challenge of an overworked founder fulfilling too many roles and a lack of resources overall. It is easy for innovation to fall through the cracks, although a lack of focus on innovation is a significant risk for SMEs as innovations can be copied easily enough and are frequently poached and perfected by larger corporates. All the small-scale entrepreneur has is the agility and entrepreneurial flair to generate new innovations to keep constantly differentiating their offering.
What is innovation?
One of the key challenges relating to innovation is a pervasive misunderstanding about what it is. For many, innovation equates to something – a product or a piece of technology – that is new (one might call this the seduction of glamour). Innovation often is, of course, as Apple’s ritual unveilings of its new devices testify, but it need not be, Verachia points out.
Innovation could be something relatively small or recombining existing components in a new way. Airbnb is an example of the latter – a highly innovative way of using existing infrastructure. Innovation might be a new way of marketing or a new business model. Covid-19 and its associated lockdowns spawned many innovations relating to business models: large corporates “pivoted” (to use the sanctified verb) their business models to accommodate remote working while start-ups offering well-being, counselling, baking classes, online yoga and so on ad infinitum sprang up.
Indeed, it seems as though a lot of commercially successful innovation results from recombining existing elements in new ways.
In the end, Myres and Verachia agree that innovation in the commercial sense is only successful if it delivers value to the customer that they cannot obtain elsewhere.
Let’s look at some South African entrepreneurs who have used innovation in different ways to create new niches for themselves. Two of them operate in what must be one of the most crowded sectors – the sneaker market – which is largely the preserve of massive brands like Nike and Adidas. Sneakers are expensive and de rigueur in youthful circles. A brand seems to operate as a social marker analogous to Jimmy Choo shoes or a Land Rover Discovery in different market sectors. In other words, a tough market to break into. However, local company, Bathu, seems to have succeeded. Founder Theo Baloyi, an accountant, understood that sneakers were essentially aspirational, but he also noted that no sneaker brand captured the distinct culture of urban Africa. Simple and logical, like all good ideas seem when you hear them.
Bathu’s success demonstrates the point about customer-focused innovation. Of course, behind that is all the necessary business of design, manufacturing, and marketing, but the innovation stems from an unperceived market need. But an innovation like this is very vulnerable to competition from me-too brands. So to maintain momentum, it will need to continue innovating.
The crowded sneaker market is the locus of another South African innovation. Sneaker Shack – “South Africa’s most trusted sneaker laundry” – seems to have created a classic aftermarket where, to this writer, at least, one had not previously existed. It’s easy to see the unique selling proposition once it’s spelt out: sneakers represent a significant investment and are more than just footwear. Therefore, despite frequent use, sneakers need to be kept in tip-top condition to lengthen their life and communicate the right message. Sneaker Shack provides a professional cleaning service that meets those needs.
Fixxr is another homegrown entrepreneurial start-up. The brainchild of co-founders Bayabulela Jolobe, Curtis Young and Mawethu Soga, Fixxr is essentially a platform that links car owners with mechanics who can perform services and effect repairs on the client’s premises. It’s a time-saver, but it also provides a way of finding the service one needs at the right price.
Jolobe says Fixxr is acutely aware of the need to keep on innovating. The core team schedules formal innovation sessions to consider problems that need solutions and develop new revenue streams. A platform like Fixxr is particularly suited to incremental innovations, and so it could thus be easier for it to innovate than a manufacturer like Bathu.
This kind of systematic approach to innovation is strongly advocated by Peter F. Drucker in his seminal, ‘The discipline of innovation’.
Innovation, says Jolobe, is about doing things better. It has become a way of thinking for him so that everywhere he goes, he is thinking about what improvements could be made. “You need to keep things moving in the right direction. Business owners must be committed to being better, not perfect,” he says. He adds that getting input from customers is vital in this ongoing process of improvement.
Another entrepreneurial innovator is OneCart, which operates in the online grocery shopping and delivery space, another hugely crowded marketplace thanks to Covid-19, and is currently dominated in South Africa by Checkers. The latter’s unique selling proposition is the speed of delivery, as reflected in its name – Sixty60 – but is confined to one retailer. OneCart addresses the gap to cater to clients who want goods from various stores. As in the case of Fixxr, one can postulate that innovations will be relatively easy to implement on the application once they are formulated.
Finally, in the fintech sector, Ukheshe began as a way to allow those without access to banking to participate in the economy. After multiple innovations, it now offers an application programming interface, Eclipse, that can be deployed within four to twelve weeks and gives clients access to a range of services from customer management to digital wallets, payment gateways, card issuing, card acceptance, bank integration, authentication, Know Your Customer (KYC), QR code acceptance/payments and numerous other capabilities.
“We live, eat and breathe innovation – it keeps our Eclipse API in touch with what our customers need or want to provide to their customers. The key to our success is we don't try to replicate something that has been done before, but we look for a gap and see how we can improve and solve this problem in a new and exciting way,” says Ukheshe CFO, Mike Smits.
Perhaps the key message is that innovation is essential when starting a business and throughout its life cycle. In the end, the entrepreneur is in the same boat as the corporate giant, and both must find ways to keep the flow of commercial innovations, or they risk decline.
Recipe for entrepreneurial success
Based on her experience with entrepreneurs and innovation, Professor Myres says there are two key steps entrepreneurs must take to stay ahead:
- Become ambidextrous. Put effort and systems in place to sense changes in your market while focusing on keeping the lights on. This is particularly true in the technology space, but the principle holds in all sectors.
- Be customer-centric. Innovation is not something to be pursued for its own sake; in commerce, at least, it must be relevant to the customer. And when the innovation is created, maintain customer focus by marketing the benefits and not the innovation itself.