Gauteng Innovation Strategy Discussion Draft v2.1

8/9/2019 Gauteng Innovation Strategy Discussion Draft v2.1

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Discussion Draft v2.1 23/02/2010 | Gauteng Provincial Government,

Department of Economic Development

DEPARTMENT

OF ECONOMIC

DEVELOPMENT

GAUTENG INNOVATION STRATEGY


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Table of Contents1. Executive Summary ....................................................................................................................................... 2

2. Introduction..................................................................................................................................................... 3

3. Defining Innovation ............................................................ ................................................................. ............ 4

3.1 Types of Innovation ............................................................................................................................... 4

4. The Gauteng Regional Innovation System ........................................................ ............................................. 8

5. Innovation and Development ........................................................ ................................................................ 11

6. Targeted Industries and Sectors .................................................................................................................. 13

7. Problem Formulation ............................................................................................................... ..................... 14

8. Strategic Goal ......................................................... ................................................................. ..................... 15

9. Policy Objectives .......................................................................................................... ................................ 16

9.1 Effortless communication and access to information ................................................................ ........... 169.2 Provision of Innovation Spaces ........................................................................................................... 17

9.3 Driving social and public innovation .......................................................... ........................................... 17

10. Intervention Mechanisms .................................................................................................... ..................... 19

10.1 Innovation Development Office............................................................................................................ 19

10.2 Creation of an Collaboration Networks ................................................................ ................................ 20

10.3 Innovation Incentivisation .................................................................................................................... 22

10.4 Cluster and Precinct Management ...................................................................................................... 24

10.5 Smart City Development ................................................................ ...................................................... 25

11. Action Plan ......................................................... ................................................................. ..................... 27

A. Defining Innovation ............................................................ ................................................................. .......... 28

B. Systems of Innovation .................................................................................................. ................................ 35

C. National and Provincial Policies ................................................................................................................... 39

D. Advisory Panel on Innovation ................................................................. ...................................................... 47


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1. Executive SummaryInnovation is at the heart of a countrys, and regions, progression along the developmental path. Innovation

finds new and more efficient ways of solving the problems faced by every part of society and a society that

does not innovate can never do more, with less.

This Gauteng Innovation Strategy begins by explicitly recognising the importance which must be attached tosocially-oriented innovations. At the same time, recognising that communities themselves are the source of

innovation, as well as individuals, will provide direction as to how, why and where we should be supporting

innovation. It will also help in understanding the benefits that can arise from innovation.

The Innovation Strategy Statement for Gauteng will be:

To accelerate innovation in all its forms, in order to bolster and support the broader strategic

objectives of employment creation, and sustainable social and economic development.

The objectives achieved through the implementation of this strategy will then be:

A more efficient use of resources both public and private in delivering on the objectives of the

various strategies and policies developed by the Provincial Government

The creation of new and valuable knowledge relevant to the social and economic priorities

identified in other policy and strategy documents

To support the movement towards an advanced, knowledge-based economy by creating

appropriate functions and infrastructure.

Flowing from this strategy are three policy objectives:

Creating effortless communication networks, and vastly improving access to information

Creating spaces for innovation, in particular all aspects of a green economy Driving social and public innovation.

These must be reflected in a set of specific, achievable projects and interventions. Currently, proposed

intervention strategies include:

The development of an information and knowledge exchange network, with characteristics of both

social networks, as well as open innovation systems

Incentivisation programmes to stimulate appropriate research, development and innovation aligned

to the provincial strategies; this will include both direct incentivisations such as innovation

vouchers as well as the potential use of government procurement

The development of specific industrial innovation clusters, focused on driving innovation in a lowcarbon economy, green technologies, and other industries as identified by the Gauteng Industrial

Policy

The collaborative support across Gauteng of Smart City programmes, in order to drive the

development of an integrated Smart City-Region

Where other strategic interventions can be identified and added, they will be. It is then through these, that

innovation within the province can not only be supported, but actively promoted and accelerated.


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2. IntroductionThis document presents a set of interventions which aimed at significantly affecting the prominence of

innovation within Gauteng Province. Importantly, these interventions will catalyse innovation towards

achieving the various strategic priorities of the Province.

It is also important to consider the breadth of authority which the provincial government has in influencinginnovation. Many of the important factors lie within the scope of national government departments and

ministries.

For example, tax relief is exclusively the role of national government. In the space of innovation, or at least

research and development, specific tax dispensations have been created to support and drive these

activities. These R&D Tax incentives are meant to encourage scientific and technological research through

tax rebates for expenditure incurred in the course of research and development. However, there may exist

additional areas in which the provincial government will want to further incentivise development. Although

Provincial Government does not have any constitutional responsibilities around tax-based incentives, there

may be either support, or facilitation, mechanisms, which can be used to bolster existing nationalprogrammes.

The intervention mechanisms contained within the document require between 4 and 20 weeks to begin

implementation. This period will allow for the proper development of full business and implementation plans.

The purpose of this document is, therefore, to obtain authority to begin a full business planning and

implementation process around these interventions.


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3. Defining InnovationAn unofficial definition of innovation can be stated simply:

Innovation is the process by which new and valuable knowledge is produced, utilised and leveraged by

society

Although this definition is suitable for a basic understanding of the concept of innovation, it is necessary to

expand this definition significantly, in order to identify mechanisms to promote innovation. It will also be

necessary in order to better understand the role which innovation plays within society.

A Limited view of Innovation

Generally speaking, government policies both within South Africa, and globally, have a limited view of

innovation as being focussed on economically beneficial knowledge creation. Put differently, innovation is

largely viewed as a means by which new technological products are brought to market, as well as means

by which the market is made more efficient. Very little attention is paid in accelerating other forms of

innovation such as social and public innovations these address social goods such as education,healthcare, safety and security, as well as public service delivery.

A revised definition of innovation is therefore proposed, as part of the Gauteng Innovation Strategy, which

accounts forallforms of innovation.

3.1Types of InnovationInnovation is ultimately the production and diffusion of new and valuable knowledge. This knowledge is not

restricted only to technological products and processes. More generally, this knowledge is not necessarily

limited (at least initially) to economically valuable knowledge. In order to drive innovation across the

province, this strategy therefore actively recognises the following types of innovation:

3.1.1 Economic InnovationThis is the traditional view of innovation it relates to products which are generally new-to-the-market, i.e.

brand new inventions.

These also refer to organisational or process related innovations, which find new and improved ways of

doing business, of producing goods and services. This sector is increasingly critical for global

competitiveness, given the prevalence of the services sector within the Gauteng economy at over 65% of all

activity.

Economic Innovation would also support, for example, the optimisation of local value chains in the

manufacturing industry organisations such as the Automotive Industry Development Centre are intrinsically

innovative, through constant introduction of new production management processes, and process re-

engineering.

An example could be a process such as just-in-time, or just-in-sequence manufacturing. Although these

processes are well understood in the automotive manufacturing industry, they could potentially be

transferred to other sectors as well. Such process engineering methodologies are traditionally not viewed (at

least in South Africa) as innovative because, strictly speaking, they are not a technologically new process.

This can severely limit the implementation of a new methodology, if there are financial implications.

The transfer of such methodologies or products, or the adoption of them within South Africa, is explored

more fully below in Section 3.1.4: Open Innovation.


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3.1.2 Social InnovationSocial innovation is related to organisational innovation, except instead of restructuring firm-level processes

to achieve greater efficiencies and thus profits social innovation relates the ability of community

structures and members to implement new social structures in order to achieve social benefits

Where product-related innovation satisfies the demands of consumers, social innovation meets demands forpublic good which are not necessarily satisfied through current structures. There is a strong argument that

South Africa is more in need of solutions to the latter problems, than the former; trickle-down effects from

economic growth are not having a sufficient impact on the social challenges of the country, and so new

social processes and initiatives must be conceptualised to deal with these challenges in other words,

social innovation may be of more importance to the South African environment than product innovations, at

least in the short- to medium-term.

Social innovation has different driving forces to economic innovation it is natural then that the mechanisms

for incentivising social innovation must also differ. It may be closely connected with Public Innovation (dealt

with separately below), but can often be performed by communities and community-based organisations.

Here, the constraint on innovation may not be a profit-motive, but rather a direct lack of resources

community-based organisations would very much like to do their work more efficiently, but do not have the

capacity to develop those solutions themselves.

What is also important about social innovation, especially that performed by communities, is that there is a

much stronger sense of ownership of the solution. Social innovations are often locally developed, but these

successes are not necessarily disseminated amongst the wider community. On the other hand, social

innovation solutions which are government-driven through public innovation processes, for example tend

to be widely disseminated, but not necessarily owned by the people on the ground.

Figure 3.1: Relationship between ownership and transferability in social innovation, NESTA, SC/03, March 2007

Figure 3.1 shows the relationship between the transferability of a social innovation, and the ownership felt by

the developers of that innovation. The fundamental characteristic of a truly successful social innovation will

be the personal ownership of that innovation, by each member of society.


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3.1.3 Public InnovationMuch of the focus on innovation, as noted already, is on those types of innovation driven by the private

sector, for private sector consumers. However, there are significant efforts made in public service innovation

in other words, in attempting to identify new mechanisms and processes by which the public sector is able

to deliver on its mandate.

This area has a very strong history throughout South Africa, and the world. Examples include programmes

such as the Community Works Programme (CWP) which provides a novel approach towards providing an

employment safety net. Crucially, much of the innovation within the public sector is very specific towards a

social and cultural group. Therefore, while there are certain similarities between social programmes in

different countries, each must be customised towards what is appropriate in a particular region.

It is critical, given the social challenges facing Gauteng, that Public Service Innovation is recognised and

supported. The Provincial Government has a number of very aggressive strategic targets. It is not certain

that, by continuing with business as usual, that GPG will be able to achieve those goals. It therefore

becomes necessary for the government itself to become innovative in fulfilling its mandate to the citizens of

Gauteng.

3.1.4 Open InnovationOpen innovation is a paradigm that assumes that firms can and should use external ideas as well

as internal ideas, and internal and external paths to market, as the firms look to advance their

technology Henry Chesbrough, 2003, Open Innovation

The central idea behind open innovation is that any organisation cannot rely simply on the knowledge

produced internally, but should at all times try and find other solutions externally.

Open innovation is therefore a paradigm in which people who are looking for solutions, are connected with

people who have solutions. Open innovation is about knowledge sharing, about collaboration, aboutengaging with stakeholders and co-operation.

By disseminating existing ideas, it becomes possible for individuals and organisations to adopt newer and

more efficient systems, which have already been innovated. Thus instead of creating new valuable

knowledge, this particular process of open innovation can help spread the most effective types of

knowledge.

It is also important to understand the scale of information which can be accessed through open innovation.

South Africa, in 2006, produced approximately 0.5% of the worlds total research output. Phrased differently ,

99.5% of all knowledge produced in that year occurred outside of South Africa. Although this relates

specifically to basic research, the picture painted is that the vast majority of solutions are produced outsidethe country. Even if South Africa were to achieve the Department of Science and Technologys goal of 2.5%

of global research this still leaves 97.5% produced elsewhere.

Open innovation is a mechanism by which this 99.5% of knowledge can be leveraged for the solution of

South African challenges.

Solutions to problems become commonly shared amongst the members of society, and the most efficient

and effective solutions can be implemented. Within this diffusion, we identify three areas:

1. Innovations which are new to the firm: these are innovations which individual organisations can adopt to

make their own processes more efficient and effective. These innovations may already exist in otherfirms elsewhere


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2. Innovations which are new to the country: these innovations have been developed outside of South

Africa, generally for the solution of challenges and consumer markets specific to other areas. However,

many of these innovations can either be directly applied, or modified slightly, to become effective within

South Africa

3. Innovations which are new to the world: these innovations are the absolutely new innovations, ideas

that have been developed and implemented for the first time anywhere in the world

The idea of open innovation helps to drive the first two innovation types it allows for more efficient

functioning and markets by adopting the most efficient processes and mechanisms. Open innovation can

also lead to globally new innovations but the largest impact will be through the diffusion processes of areas

1 and 2.


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4. The Gauteng Regional Innovation SystemAn Innovation System is a description of the various role-players, stakeholders, relationships and functions

that support the innovation process within a given region. South Africa has traditionally adopted a very top-

down, government-centred description; it is also heavily weighted towards economic innovation, and

describes what could be called an innovation pipeline: a funnel in which ideas are poured into at one end,

and consumers receive some product at the other.

In order to recognise all the other forms of innovation, as well as recognise that society plays an integral part

in the innovation process (as opposed to simply being unquestioning recipients) an expanded definition of

the regional innovation system is proposed:

The Gauteng Regional Innovation System (RIS) is the entire system of innovating agents and

entities, along with their end-users, which together are responsible for the development, production,

and use of new knowledge which is both socially and economically useful. This System will provide

the framework within which the Provincial Government is able to catalyse, support and facilitate the

innovation process, through policy and targeted interventions.

Figure 4.1: The Innovation System for Gauteng Province

According to this classification, the RIS is divided into 4 primary areas. These are:

1: The Demand Agents of Innovations

2: The Supply Agents of Innovation

3: Supply-affecting factors

4: The overall policy environment

Private

Sector

Public

Sector

Community

AcademiaCIVIL SOCIETY

&

CONSUMERS

HEIs

Incentives

Policy

International

Environment

Colleges

Primary

Education

Resources

Governance

3

2

1

4

Funding


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It is important for us to describe our innovation system in this manner, because it directly tells us where, and

how, we can begin to implement changes in order to bolster innovation.

There are then several areas that, from a policy perspective, can be focussed on to drive innovation.

4.1.1 Recognising the demand for InnovationIt is assumed that a firm responds to the needs of a market, and is furthermore aware of the market

demands. This is what drives product innovations consumer demand. Even semi-disruptive innovations

such as personal music players (e.g.Apple iPod) were designed to respond to a perceived market demand

(although at the time it could not necessarily be predicted how successful the technology would be).

However, the demand for innovative solutions that arises from within communities is much more difficult to

establish, because there may not be any formalised channels of communication either direct or indirect,

i.e. either through direct market research, or perceived demand that can be derived from the demand for

similar solutions or products. Alternatively, many communities within South Africa may not have ready

access to means of communications, e.g. access to the internet or large social networks. Alternatively,

special interest groups may not broadcast their demands to the wider community, simply because there islimited direct interest in that community.

Therefore, mechanisms should be explored that increase the communication and interaction between those

who demand innovative solutions, and those who are able to help supply the solutions. Alternatively, how

does one enrich the interface between Levels 1 and 2 within the RIS?

4.1.2 The Innovative SocietyThe RIS proposed here recognises that innovation is not simply the product of a select group of scientists

working in a laboratory. Instead, there are a range of actors that play an important role in delivering

innovative solutions to the challenges of society.

There are then four groups into which innovators may find themselves:

Academia one of the traditional areas for innovators, this remains a core component of the

innovation system. Academic institutions are largely responsible for basic research and

development in virtually every sphere of knowledge, they provide education and skills development

that supports innovation, and act as attractors for people with ideas

Private Sector referring not only to large corporations with significant R&D budgets, but more

importantly to the SMME sector. Small (


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it. This is done at no cost, for the benefit of everyone a community driven process for the benefit

of the entire community.

The question can now be asked how and where can we support and facilitate these role-players to deliver

innovations faster and more successfully?

4.1.3 Affecting the supply of innovatorsThere are numerous factors which affect innovation. The most immediately apparent of these is the ability of

individuals to develop innovative solutions this is naturally directly related to the average level of education

within South Africa.

Although exceptions will always exist, it will be virtually impossible for any individual that does not have the

appropriate cognitive skills and education. This is not simply a question of technical knowledge or expertise

(though that may be important for product innovations). But basic cognitive skills will also refer to basic

numeracy and literacy skills, or the ability to perform logical deductions and other softer skills.

The most important aspect to affect long-term rates of innovation will therefore be to improve the level ofeducation within society. This process is already well under way, and has in fact been given additional

emphasis through the specialised division of the national Department of Education into two distinct

ministries.

However, apart from affecting the direct supply of innovation-capable human capital, there remains the

question of redirecting existing human capital into innovation-related activities. There are significant

resources available which are capable of innovation, but do not necessarily work in these fields for various

reasons, but generally simply because of financial reasons research, in general, does not pay as well as

profit-oriented employment positions.

At the same time, firms themselves are under financial pressure to survive, and so will tend not to redirectfunds away from profit-generating activities towards processes which do not immediately produce benefits.

How are we then able to persuade citizens to pursue innovative activities, when they are faced with so many

other pressing challenges?

4.1.4 Funding SupportEven before the issue about the profitability of research, there exists the larger problem of adequate seed

funding for innovation, especially for SMME-type organisations whose business itself may be based on a

single product or service innovation. Without funding to establish these businesses, it is extremely difficult for

entrepreneurs to turn inventions into innovations.

Although there is an established finance sector within the country, there is insufficient immediate researchthat speaks to the relationship between innovation, and those funding agencies. This is further complicated

by the expansion of the innovation definition as the majority of these social innovations will either be

funded through donor funding, or direct public expenditure. Significant further research will need to be

undertaken in order to understand the intricacies of innovation-focussed funding.


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5. Innovation and DevelopmentInnovation is the process by which we bring new ideas of value into use within society thereby making

more efficient use of our resources and time, and finding better solutions to the challenges that face us. To

quote from Paul Romer, one of the founders of endogenous growth theory,

A useful metaphor in an economy is in the kitchen. To create valuable final products, we mix inexpensiveingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients,

and most cooking in the economy produces undesirable side-effects. If economic growth could be achieved

only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and

suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that

economic growth springs from better recipes, not just from more cooking

Although the above description refers specifically to economic growth, it is well understood that one of the

pre-requisites for any form of social development is economic development. The challenge, especially in

South Africa, is to ensure that such economic development is equitable and inclusive. Innovation is an ideal

mechanism to drive such an inclusive growth path, because innovation occurs firstly at the level ofindividuals and so, correctly incentivised, individuals can reap the benefits of their own labour.

Secondly, innovation results ultimately in an increase in the average productivity of an economy creating

more efficient ways to do business results in higher output, which ultimately benefits society overall.

Thirdly, social innovations allow for a general increase in the standard of living of all citizens, especially

when those innovations are implemented successfully by the innovating communities.

Finally, innovation has the unique characteristic amongst economic activities to create new markets, even at

a global level. This creation of local value chains allows firms and individuals to obtain the maximum benefit

from their labour, rather than having to import high value knowledge and products into the country.

This last concept is critical so long as South Africa and Gauteng do not generate their own intellectual

property, they will remain intermediary locations, where raw or semi-processed materials are exported, and

finished products imported. This extends equally into services as it does into products South Africa must,

in the long term, develop its own value chains in the service industry, rather than relying on being middlemen

for advanced countries.

Figure 5.1 below shows the relationship between Multi-factor Productivity1 and the average intensity of

business R&D. It shows that, in general, as the intensity of research increases (along the x-axis) the

productivity of the region (along the y-axis) also increases.

This, however, is restricted strictly to science and technology related research, and to economic type

innovations. The research conducted excludes innovations in such fields as human and social sciences, as

this has traditionally been excluded from innovation research. However, it stands to reason that, if economic-

type innovations can have such a direct impact on the economic state of a country, then socially oriented

innovations will also have an impact of the social state.

1 Multifactor productivity measures reflect the joint effects of many factors including new technologies, economies of scale,managerial skill, and changes in the organization of production


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Figure 5.1: Change in MFP and in average intensity of business R&D

Box 5.1: Science, Technology and Innovation: Implications for Growth

Extracts from Science, Technology and Industry Outlook, OECD 2001

A cursory comparison illustrates that a strong correlation exists between GDP per capita, and formal

R&D. Analyses of the link between increases in business expenditures for R&D (BERD) and increases

in MFP show a similar relationship (Figure 5.1 above): OECD countries in which business expenditureon R&D relative to GDP grew most rapidly from the 1980s to the 1990s typically experienced the

largest rates of MFP growth. However, importantly, not all countries with increased expenditure on

business R&D saw an improvement on MFP. Some experienced marked declines in MFP despite

growing levels of BERD. This distinction emphasises the fact that increases in R&D funding are, by

themselves, insufficient to drive improvements in MFP and economic growth. The way in which R&D

funds are allocated (e.g. the institutions to which they are directed, the fields of science and industry to

which they are related, and the kinds of mechanisms used to finance R&D) and the processes for

commercialising and disseminating knowledge, matter crucially...

Cross country comparisons of growth patterns provide additional insight into the elements that underlie

differences in R&D efficiency across the OECD. Recent econometric analysis of 16 OECD countriesreaffirms that increases in private sector, public sector and foreign R&D all contribute to increases in

MFP.


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6. Targeted Industries and SectorsThe final component which should be considered before the development of strategic interventions is the set

of industries and sectors in which innovation is going to be driven.

By targeting very specific industries, sectors and areas of society, clear and measurable objectives can be

set, and a firm roadmap can be implemented.

These sectors and targets follow directly from the various policy and strategy documents that have been

developed by the Gauteng Provincial Government, and include the following2:

The ANC Manifesto, as adopted by the Premier of Gauteng

The Gauteng Industrial Policy*

Green Jobs Strategy

Gauteng Integrated Energy Strategy*

Information and Communication Technology Strategy*

Gauteng Employment Growth and Development Strategy*

Local Economic Development Strategy

The 2009 Business Environment Assessment Report

Gauteng 2055

In addition, an economic profile of the province gives insight into the existing economic industries that cannot

be left behind; for example, although automotive manufacturing is not explicitly supported within the Gauteng

Industrial Policy, it is a crucial component of the economy and society within the province.

The various sectors have therefore been selected based on the policy and strategy documents guiding the

Department, in combination with the socio-economic profile of Gauteng.

There are numerous references towards innovation, and driving an innovative society, contained withinthese various documents. Notable, however, is the lack of specific, actionable processes to achieve that

society. This has been one of the primary reasons for the actual development of this Innovation Strategy,

and the output-driven interventions suggested.

A number of common themes emerge throughout the above policy and strategy documents, as well as in the

various national government policies which also have influence. These are:

The move towards a Green Economythis strategy has placed the Green Agenda as the primary

recipient of innovation support

Job Creation the strategy ensures the security of employment for future generations by creating

industries and societies within the province which are locally relevant, globally competitive, and

sustainable into the future

Improving service delivery by collaborating and interacting closely with all stakeholders, the

strategy provides government with an opportunity to empower local communities more effectively

Sustainable Industrial Development by supporting those industries (such as green technologies,

but also others such as automotive manufacturing) in functioning as efficiently as possible, while at

the same time remaining globally competitive through the production of our own knowledge

systems and intellectual property

2 As at 1 February 2010, items marked with an asterisk are at different stages of completion; finalized versions will be

referenced as and when they become available, but will be monitored to ensure that any changes reflect equally within thisstrategy. The full relationship of these documents to this Innovation Strategy is considered in Section C: National andProvincial Policies


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7. Problem FormulationBased on the understanding provided above, what are the core issues that must be addressed in order to

drive innovation?

1. INNOVATION SCIENCEWe must recognise and drive all forms of innovation, not simply scientific and technological innovation.This will allow us to support the demands of citizens, and the ability of government to deliver on its

mandate

2. SOCIETY IS NOT A PASSIVE RECIPIENTMembers of society play an active role in driving innovation, especially if they are involved in the actual

innovation process. Therefore, the role of society in innovation must be developed further, and

mechanisms to strengthen this role must be created

3. COMMUNITY INVOLVMENT BUILDS PARTNERSHIPSSociety is not just an active participant in innovation, but is ultimately responsible for all demand forinnovation. This means that in order to innovate in a relevant fashion, the needs of society must be

directly taken into account and so by bringing communities into dialogue with other agents,

partnerships can be built to drive social and economic development

4. INNOVATION STRENGTHENS THE SUCCESS OF OTHER POLICIESBy integrating innovation across various other policy documents and strategies, it is possible to

continuously improve upon, and support, the delivery of any other strategy. Innovation is therefore a

cross-cutting, environmental factor that can help support other strategies in achieving their own

objectives

5. BUILDING AND INNOVATIVE SOCIETYCreating an innovative society requires closer integration between the various agents that drive

innovation which are simply every member of society. Therefore, it is important to understand how

and where to build stronger mechanisms for interaction, and how to make those interactions more

successful

Based on these five broad challenges, the remaining sections construct appropriate strategic outcomes,

policy objectives and intervention mechanisms to address these, and drive innovation forward.


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8. Strategic GoalIt is clear that there are a number of pre-existing strategic and policy objectives adopted by both National

and Provincial governments, as well as the Department itself.

It is then necessary to align any innovation-related strategy with these, in order to support, and drive, the

higher strategic priorities.

The Innovation Strategy Statement for Gauteng will be:

To accelerate innovation in all its forms, in order to bolster and support the broader strategic

objectives of employment creation, and sustainable social and economic development.

The objectives achieved through the implementation of this strategy will then be:

A more efficient use of resources both public and private in the achievement of the DEDs

overall strategic objectives

The creation of new and valuable knowledge relevant to the social and economic prioritiesidentified in other policy and strategy documents

To support the movement towards an advanced, knowledge-based economy by creating

appropriate functions and infrastructure

This Statement is interpreted through a set of policy objectives, given in Section 8.


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9. Policy ObjectivesThe Strategy Statement is founded on the understanding that innovation can drive and assist Gauteng in

achieving the global objectives of employment creation, equitable growth and inclusive society.

However, there must be specific policy objectives in order to craft tactical interventions. These policy

objectives centre on the ability of innovation to catalyse and accelerate specific departmental objectives.

Innovation is therefore not a goal in of itself, but a tool by which other objectives can be reached quicker and

more efficiently.

A central characteristic of each policy area is the mechanism which drives employment creation. Thus, for

example, in promoting a green economy, attention will be paid specifically to supporting the labour-intensive

aspects of any green economy. The areas in which GPG will take specific policy decisions are the following:

9.1Effortless communication and access to informationMarkets function by allowing buyers and sellers to interact and trade goods and services. Information

access is one of the fundamental requirements for the efficient clearance of markets.

There are two kinds of information failure that can exist within a market one is a direct lack of information

about the products available for sale. In theory, if every product in the market is known to a buyer, then that

buyer will be able to make an informed decision as to the most efficient solution for their demand. This

ensures that the best solution is selected.

The second kind of information failure relates to the balance of information between buyer and seller, known

as information symmetry. With asymmetric information, either the buyer or seller has hidden information

which provides them with an advantage in negotiating a fair price.

Both kinds of information failure result in inefficient markets for the following reasons:

Sub-optimal solutions are selected, therefore resulting in an inefficient allocation of resources

Unfair prices are paid for goods and services (both over- and under-estimated depending on who

has the information advantage) resulting again in an inefficient allocation of resources

Although these concepts are generally applied to economic and/or financial markets, they apply equally to

any market in which there is a supply and demand of a particular com modity. Specifically looking at the

Innovation Market i.e. the market for optimal solutions the products being traded are more-efficient

solutions.

The first policy objective revolves around the ability for buyers and sellers of innovation to communicate:

Policy Objective 1: to strengthen the communication and knowledge-sharing structures and

interfaces between the central three levels of the Regional Innovation System, in order to accelerate

the diffusion of knowledge and resources between these three levels.

It should be noted that this intervention is equally valid for socially oriented innovations (such as public

service innovations) as for product type innovations.

This policy objective directly responds to the three strategic objectives as follows:

1. SO1: Improving the allocation of resources to increasingly efficient solutions, as well the creation of new

solutions that are inherently more efficient


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Policy Objective 2. In contrast, a new community-based policing structure would be supported through this

current policy objective.

The critical difference is that innovations for whom the benefit cannot be restricted to a single individual, and

also cannot be afforded by an individual, must be supported through a different mechanism to product-type

innovations.

Policy Objective 3: To support and promote innovation activities targeted at developing socially

valuable solutions and intervention strategies

These activities will be targeted specifically within the following areas:

Employment Creation

SMME Development

Education and Skills Development

Health and Welfare

Public Service Delivery Community Safety and Security

This responds to the strategic objective as follows:

1. SO1: Ensuring that efficient public service models and interventions are able to be communicated and

transferred to the communities requiring those services

2. SO2: The creation of improved mechanisms for social development in order to accelerate the

developmental agenda priorities such as employment creation and inclusive economic growth

3. SO3: Through addressing critical social challenges, individual resources can be diverted towards

education and improvement as opposed to survival-type needs, thus increasing the skills resources

needed for a knowledge-based economy


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o Private Sector

o Academia

o Government Organisations

o International representatives

o Other interested parties

An electronic networking platform that provides additional functionality to enhance and supportactivities that are represented within the face-to-face networks, and outside events, such as:

o Databases of member activities

o Archives of presentations, lectures and displays related to member activities

o Active networking components that connect and introduce FLOW members outside of the

physical events

o Connections to relevant information about supporting organisations and processes

The Innovation Hub already has a community based networking structure, called INNOV8. This community

meet on a regular basis, and interact and engage with each other with a view towards sharing information

and knowledge. It is proposed that this community form the seed from which a larger community is grown.

Furthermore, there are additional characteristics of an open innovation network that go beyond the scope of

a simple social networking function. By placing solutions into an open environment, it allows for community

review of the proposed solutions, and thus potential optimisation of those solutions. This method of

incremental innovation functions best with a large number of innovators who have access to the solution

proposal.

The electronic network needs to be created, though there are a number of platforms which already capture

certain aspects of functionality, e.g. the BlueIQ Portal.

Development and Implementation Timelines

Given that there already exist strong social networks at The Innovation Hub, a further development plan to

extend the Innov8 community towards social and public innovation role-players can be achieved inside of 4

weeks. This can be then be implemented immediately afterwards collaboration events can begin within 8-

12 weeks of the approval of this document.

It is envisaged that a period of 24 weeks will be required to formalise collaboration networks between the

various agents identified above, such as the universities, private institutions, embassies and others.

These components can be developed in-house to the Department and its agencies (specifically, The

Innovation Hub regarding the Innov8 community expansion).

10.2.2 Communication InfrastructureAlthough certain groups of innovation agents will have access to advanced communications systems such

as high-speed internet, there are significant groups which do not have access to these resources.

The G-Link Programme already begins to lay this communication network throughout Gauteng, and it is

proposed that DED collaborates with the GSSC in order to identify the appropriate support which can be

provided to enhance the G-Link Programme in providing the base system which the FLOW network can

leverage.

Given the existing network assets DED has (for example, the BlueIQ Network Portal) a plan for the

modification and roll-out of these systems can be achieved within 8 weeks. This modification and roll-out

plan will need to be outsourced to an appropriate organisation.


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10.3 Innovation IncentivisationUp until the time that an innovation, of any form, is implemented and compensated for by the market or

society, it is an expense to the innovator, the company and the community.

Ultimately, an innovator is spending their time doing non-profitable work, in the sense that there is no

immediate reward for what they are pursuing. However in the event that they are successful, the benefit toeveryone is significant.

However, this process is an expensive one to maintain, and many companies, individuals and communities

simply do not have the luxury of spending time developing innovations. It is therefore critical for an

appropriate agency to mitigate the financial difficulty caused by innovation.

The purpose of Incentivisation is to encourage preferential expenditure in a particular area, by the private

sector. However, the Tax Incentives developed by DST exclude several significant areas recognised by theProvincial definition of Innovation. These are:

The treatment of individuals as innovators

Social and Public innovation (where performed by private sector or community based

organisations)

The exclusion of technology transfers from other parts of the world

Furthermore, the incentives are discriminatory, in that only research and development which is scientific or

technologically oriented is potentially eligible.

However, there are significantly more areas that can be incentivised to encourage innovation, including bothdirect incentivisation of innovation suppliers, but also encouraging collaboration between demand and

supply drivers, and those factors which may influence the supply of innovation.

Incentivising specific areas and innovation agents supports all three policy objectives, by encouraging

innovation in a particular direction, encouraging collaboration between parties, and promoting social

innovation.

There are a number of incentivisation mechanisms proposed for further development. All of these areas

require full economic and financial modelling, as well as regulatory and legal evaluation. The expected

timeline for delivery of these interventions is 20 weeks. This will need to be outsourced to an appropriate

organisation.

Tax Incentives for Research and Development in South Africa

Through the Department of Science and Technology, legislation was passed in 2004 (with amendments

in 2006) incentivising taxpayers to perform research and development, through certain targeted tax

rebates. For eligible activities, a deduction at the rate of 150% of expenditure is available directly in

respect of scientific or technological research and development.

Taxpayers can thus claim for the eligible scientific or technological R&D expenditure on salaries and

wages, materials, building, machinery equipment, R&D overheads and R&D contracts.

One of the important restrictions that are notable in reference to the provincial strategy is the exclusion

of social science and humanities research.


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10.3.1 Individual IncentivisationIndividuals are as equally motivated to increase their wealth as private organisations. Therefore, in deciding

whether to be employed within a research-oriented organisation or a more traditionally corporate

organisation, and individual will generally select the position where they are paid the most.

Although further research must confirm this, corporate organisations will be better able to remunerate staff,as they do not have to sacrifice resources towards activities that do not have immediate benefits, such as

research and development. Although large firms are capable of maintaining full-time R&D facilities, this is

not feasible for SMME companies which generally perform their own innovation.

It is therefore proposed to establish some form of personal salary-related tax rebate or grant, for

researchers within Gauteng performing R&D within the strategic industries and sectors.

10.3.2 Encouraging Innovation through Public ProcurementPublic procurement can provide a massive demand for innovative solutions; however, this is complicated by

the rigorous and sometimes narrow interpretation of the Public Finance Management Act.

This document is very conscious of the responsibility and duty of public office bearers to ensure that public

money is spent appropriately, and without undue risk. However, there still exists scope for encouraging

innovation within the ambit of the PFMA.

Systems and organisations such as the Small Business Research Initiative (SBRI) in the UK, and the Small

Business Innovation Research Agency (SBIR) in the US, are able to channel significant amounts of funding

into viable, innovative solutions.

The basic idea behind the SBRI in the UK is that public challenges or problems are opened up to the public,

in a competitive application system, and subjected to an assessment process. The most successful

applications are awarded contracts to develop the actual products and solutions. Following a secondassessment stage, a select number of the companies are then awarded a full contract for a further period.

It is therefore proposed to establish a similar organisation, process or agency within Gauteng.

10.3.3 Social Innovation IncentivisationWhere the existing National Policy does not recognise social innovation in terms of tax incentives, or other

formal acknowledgement, the Gauteng Policy explicitly supports the development of innovation in

addressing social goods.

This area is further complicated by the problem that social goods are often not traded for on an open market,

and usually provided by public service organisations. Therefore, social innovation is strongly connected withorganisations such as the Centre for Public Service Innovation.

This component is partly addressed by the Incentivisation of individuals performing research into social

sciences and humanities, but there are additional groups that can also be incentivised.

It is proposed that encouraging Corporate Social Investment3 into social research programmes can

immediately accelerate the development of new innovative delivery models.

3One of the aspects excluded from the national Tax Incentive is Corporate Social Investment into research and development (of any

form).


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10.3.4 Innovation Collaboration VouchersMany organisations community-based, private sector and even academic simply do not have the

resources to perform any innovation. Although this can be mitigated somewhat through networking practices

which are able to transfer knowledge, often there remains a certain level of customisation to ensure full

implementation.

Therefore, there are many organisations which, though desperately in need of more efficient processes and

products, simply do not have the means to acquire them.

The proposal is to establish Innovation Vouchers, which can be used in conjunction with an

approved organisation to perform research, development and innovation.

The concept of an Innovation Voucher (IV) is simple IVs can be bought or donated, these can then be

traded with an approved organisation for them to perform a particular research task. However, the IVs

themselves are discounted against the actual value of the research. For example, a R50 000 voucher may

purchase effectively R100 000 worth of research. This enables companies to innovate at a subsidised rate

through collaborative efforts with research organisations.

The research areas supported by these IVs will be the strategically identified sectors and industries.

10.4 Cluster and Precinct ManagementInnovation often occurs through interaction through sharing of both knowledge and expertise, and of the

challenges facing society, and the opportunities demanded by consumers.

Bringing together a group of like-minded people often results in the development and evolution of those

people and by extension, of the changes they create within their networks. This can be expanded easily

into the idea that clusters of like-minded companies also promote, foster, and accelerate their own

development.

Clustering is not a new strategy in economic development strategy; nor is clustering a new concept in driving

innovation. The entire concept of a Science and Technology Park is based on the premise that clusters of

R&D organisations will be able to innovate faster because of the benefits arising from clustering. It is

important to realise that a cluster need not be a massive conglomeration of many firms and entities even

small clusters of 5-10 institutions can result in significant benefits to each other, and their clients.

The proposal is to establish a network of Innovation Clusters throughout the Province, focussing on relevant

research areas and aligned to the development of the strategic industries and sectors.

These clusters will be developed in conjunction not only with the various innovation strategies of theprovince, but in close collaboration with the other industry-focussed strategies for example, supporting the

development of an alternative energy manufacturing industry; the automotive manufacturing industry, and

others as identified in time by the Gauteng Industrial Policy, Integrated Energy Strategy, ICT Strategy and

others as appropriate.

The IDO will develop a full cluster-development strategy in order to identify appropriate areas, costs

and other aspects of a Provincial Innovation Cluster Network.

This will respond to all three policy objectives, as it facilitates easier communication between innovation

agents through the effects identified above, it catalyses and supports certain targeted sectors and industries,

including social and public innovation.


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The development of a holistic cluster strategy for the province can only be finalised in conjunction with the

conclusion of critical input documents such as the Gauteng Industrial Policy.

However, initial cluster development plans can already be initiated, focussing specifically on thedevelopment of a Green Technology Cluster.

The development of this cluster can be performed internally to DED and The Innovation Hub, working to

expand the existing TIH Strategy around a green precinct a precursor to a full cluster. The expected

timeline is 12 weeks for the development of a full implementation strategy for this one cluster.

10.5 Smart City DevelopmentThe notion of a Smart City does not have a robust definition, as the concept and theory is still under

debate. However, a working definition of a smart city captures the following characteristics:

An advanced information and knowledge infrastructure that allows for easy and fluidcommunication

An efficient public service system that utilises the communications infrastructure in service delivery

and public services

Strong levels of communication within, and between, the different members of the community,

including the private, public and civil sectors

A safe, secure and environmentally friendly location

An integrated city environment, in which the various components of the city (e.g. infrastructure,

security, utilities, transport) are interfaced and networked to allow real-time monitoring and rapid

response

A strong connection between different Smart Communities who are able to respond to the

challenges of the city region

Based on these characteristics, we can define a smart city as:

A City-Region is the urban centre of the future which is founded on the ability of every aspect and citizen to

communicate effortlessly, and to fulfil their roles in the most efficient manner. The Smart City will be an

integrated city, where all the various components of the city infrastructure, municipal services, safety and

security, business, education, healthcare and others are connected into a single communication network

that allows for maximal functionality.

Smart Cities are important for any Regional Innovation Policy, because they are related to the underlying

core economic actors within a region the metropolitan regions. By creating Smart Cities, various forms of

efficiency are improved significantly, including both economic and social efficiency.

At the same time, Smart Cities support communities that are healthier, better educated, and are provided

with more effective services. However, these smart solutions are not provided by government organisations

exclusively. Instead, more efficient solutions are developed by members of the community itself, whether

corporate or private citizens. What is needed to ensure the development of these solutions, however, is a

strong local communication network, or social network, that allows for effortless communication between the

demanders of smart solutions (the city-regions) and the suppliers of these solutions (the innovators).

Within Gauteng, only Tshwane has established a formal Smart City initiative. It is critical, however, that this

knowledge and expertise is spread wider than just Tshwane.


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A Smart City network is different from the FLOW network proposed earlier. The Smartness of the region

speaks more to active management of the city and its services through communication, feedback,

monitoring and evaluation.

An example may be the implementation of traffic management systems that adjust traffic signal times based

on the real-time traffic flows. Another example would be real-time crime monitoring systems, or self-monitoring infrastructure utilising advanced in-built electronics. Additional benefits flow from Smart City

designs, including improved health and welfare of the citizens, faster service delivery through active

communication, higher safety measures for infrastructure and facilities, and many others.

It is therefore proposed, in collaboration with the various municipalities, to develop and implement

an integrated Smart City-Region plan for Gauteng province, both in terms of infrastructure and the

overlying service layer.

This responds directly to Policy Objective 1, as it creates and promotes increasingly efficient communication

networks to address municipal challenges.

Existing programmes such as G-Link should be evaluated to understand how they can be expanded from an

infrastructure roll-out plan, to a system of fully connected communities.


The first stage of this intervention is the signing of formal Memoranda of Understanding with the various

metropolitan and district municipalities.

It is expected that this process can be handled internally to DED, and will take between 12 and 16 weeks.

The development of a full Smart-City Region Plan is likely to take in excess of a year, and will require

outsourcing. A Smart-City Concept Strategy can be developed inside of 20 weeks, and can be achieved

internally.


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11. Action PlanThe following concrete actions therefore need to be taken:

The establishment of, or commitment of resources to, a small team with the capacity to develop full

feasibility plans around the various interventions. The team itself need not be full time, except for a

core management group. The team could, in theory, be composed of individuals already within theDepartment of Economic Development and its agencies; any specialised skills lacking can then be

sought as required.

Intervention Mechanism Output Timeframe

1. Innovation Development Office

1.1 IDO Charter Charter describing function andmandate of IDO

20 Weeks

1.2 IDO Institutional Design Organisation design, and institutionalarrangements for IDO

20 Weeks

2. Collaboration Networks

Social Network Design Marketing and Networking Strategy 4 weeks

Electronic Networking Design Business Case for electronic socialnetworking & interaction infrastructure

8 weeks

Social Network Events Regular hosted events 8-12 weeksfrom

Incentivisation Schemes

Individual Incentivisation Proposal Full Business case for allincentivisation mechanisms, includingfinancial, legal, regulatory analysis,and institutional design, whereappropriate

20 weeksInnovation Procurement Design

Social Innovation Support Proposal

Innovation Voucher Proposal

Cluster DevelopmentGreen Technology Cluster Proposal Implementation Plan for Green

Technology Cluster12 weeks

Smart City-Region

MOUs with Municipal Entities Signed MOUs 16 weeks

Smart City-Region Concept Conceptual Strategy Document 20 weeks

The establishment of an Advisory Panel for the duration of the study, to provide expert advice and

guidance on the interventions. This will be a high-level, conceptual Panel that is able to pro-actively

guide and support the development of the various interventions. The Panel should be composed of

various specialists, both local and international. This Advisory Panel will be established in

conjunction with the appropriate stakeholders.


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A.Defining InnovationAn unofficial definition of innovation can be stated simply:

Innovation is the process by which new and valuable knowledge is produced and utilised within society

Although this definition is suitable for a basic understanding of the concept of innovation, it is necessary toexpand this definition significantly, in order to identify mechanisms to promote innovation. It will also be

necessary in order to better understand the role which innovation plays within society.

The Organisation of Economic Co-operation and Development (OECD) has, since 1992, invested significant

amounts of time and energy into the measurement and understanding of Innovation, and how it relates to

economic development.

The Oslo Manual represents the OECDs guidelines on this measurement, and provides some insight into

firstly, a definition of Innovation, and secondly, the understanding of Innovation within the South African

government context.

Since 1992, the definition of Innovation has gradually expanded. The first two editions of the manual (1992,

1997) used what is termed the Technological Product and Process (TPP) definition of Innovation. This was

to indicate the focus on the technological development of new products, as well as new production methods.

Subsequent versions of the Oslo Manual have then referred to an expanded definition of the term

Innovation specifically expanded to take account of other forms of innovation, such as marketing and

organisational innovation. According to the 2005 Oslo Manual,

An innovation is the implementation of a new or significantly improved product (good or service), or

process, a new marketing method, or a new organisational method in business practices, workplace

organisation or external relations.Closely connected to this, however, are the notions of Innovation Activities, and the Innovative Firm:

Innovation Activities are all scientific, technological, organisational, financial and commercial steps which

actually, or are intended to, lead to the implementation of innovations...

The Innovative Firm is one that has implemented an innovation within [a particular time frame]

These concepts provide a solid basis from which to expand and modify our understanding of innovation, and

how it is possible to influence the innovation process to achieve social and economic benefits.

South African Definitions of Innovation

According to the National Advisory Council on Innovation (NACI), innovation can be defined as

...implemented technologically new products and processes as well as improvements in such products and

processes

This is closely related to the TPP definition of Innovation of the first and second Oslo Manuals, but excludes

the expanded forms of innovation such as marketing and organisational.

An Expanded Definition of Innovation

The OECDs Oslo Manual recognises that its analysis is limited, in that:


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The Manual covers innovation in the business enterprise sector only

It deals only with innovation at the level of the firm

It covers only four types of innovation product, process, organisational and marketing

It covers diffusion up to the level of the firm

This is perfectly acceptable for the purposes of the manual. It is critical, however, for any governmentstrategy or policy to move beyond these limitations to a wider understanding of innovation. Doing so will

allow for a more complex and appropriate set of interventions to stimulate innovation in all its forms. It should

be noted that the South African definition of Innovation is closely related to that of the 2nd Oslo Manual.

This document now outlines several proposed adjustments to the concept of Innovation which should be

adopted as part of the Provincial Innovation Strategy.

Innovation encompasses all forms of knowledge

Innovation is ultimately the production and diffusion of new and valuable knowledge. This knowledge is not

restricted only to technological products and processes. More generally, this knowledge is not necessarily

limited (at least initially) to economically valuable knowledge.

Instead, any form of knowledge or idea which is demanded by any part of the community, and which is

subsequently created to meet that demand, can be understood as an Innovation. Assuming that innovation

can only ever meet a market demand presumes that markets exist for the product prior to said innovation.

This is, however, not the case for so-called disruptive innovations which create their own markets post

innovation.

Furthermore, the assumption that product-related innovation (whether in the form, function, production or

management) is the most important form of innovation, excludes critical types of knowledge production such

as social innovation.

Social innovation is related to organisational innovation, except instead of restructuring firm-level processes


structures and members to implement new social structures in order to achieve social benefits. This concept

requires significant further work to clarify and detail, however, some examples should provide a working

definition.

Safety & Security: Numerous communities throughout South Africa have, initially at a community

level, implemented various forms of security measures to protect against the prevalence of crime.

These include concepts such as security villages, protected or restricted access to

neighbourhoods, and community policing forums. Although certain of these may have evolved out

of, for example, community watches they represent innovation at a social level, for social benefit,

rather than for economic profit motives

Community Welfare: The Community Works Programme being piloted in South Africa is an

example of an innovative mechanism for which ensures a variety of benefits accrue to society. It

functions as an employment safety net, thus ensuring that at least some income is generated by

communities. It also achieves provides various public goods in a limited fashion, thus supporting

the work already performed by government in a number of areas

Education: The Open University in the United Kingdom was the first institution that combined

several different items distance education, technology adapted for education, and minimal entry

requirements for degrees. The result was a properly innovative mechanism for providing hundreds

of thousands of citizens with access to high-quality education, using technology wherever possible


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to support the education process. This directly responded to social needs of education and self-

development

Where product-related innovation satisfies the demands of consumers, social innovation meets demands for

public good which are not necessarily satisfied through current structures. There is a strong argument that

South Africa is more in need of solutions to the latter problems, than the former; trickle-down effects fromeconomic growth are not having a sufficient impact on the social challenges of the country, and so new




The Community as Innovators

The structures put forward by the NACI (detailed in Section B: Systems of Innovation) put forward the idea

that innovation (understood by the NACI as product-type innovations) is performed by various institutions,

including

Higher Education Institutions Public Research Institutions

Private Sector Organisations

Enterprises

Non-government Organisations

While all of these institutions do, in fact, perform innovative activities, there are additional innovative actors

that should be considered.

Firstly, innovation whether within an institution or not is ultimately performed by individuals. The benefits

arising from that innovation, may rest with the firm (or other entity, but for simplicity this document will only

refer to the firm) but it is performed by an individual, or at least groups of networked individuals. Therefore,it is important to explicitly recognise that innovation is an individual activity.

These networks may be either formal (e.g. within a company) or informal (such as self-organising

communities). Although inventions are almost inevitably achieved by single individuals, innovations result

from multiple skills and disciplines, partnerships and collaborative work.

Secondly, and through the recognition that innovation is performed by individuals, it is clear that there are

significant amounts of innovation that is not co-ordinated or performed within the constraints of either firms,

or government policy. The clearest example of this is the open source software movement, in which

individual programmers contribute time and energy, with no specific personal benefit in mind, to produce

goods that are used by a greater community. There are a range of other multi-billion US dollar industries

which have evolved through the dedication of a small interest group, with little to no interest from either the

private sector or government4.

Thirdly, social innovation is often driven by members of a specific, but potentially small, community. There is

therefore no economic incentive for firms to develop appropriate solutions; at the same time, depending on

the nature of the community, it may be difficult for innovators to even be aware of the demands of that

community. In the South African environment then, while various communities may face a range of

challenges, these challenges are not communicated to the wider social network. It is then difficult for groups

that may have existing solutions to connect to those demanding solutions. The result is that the communities

4 Examples include off-road / mountain biking, as well as the Hip-hop music industry both started as community effortswith no commercial or government influence.


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themselves ultimately begin crafting their own solutions, which may be similar in nature, but are developed in

isolation.

The fourth and final characteristic that should be recognised is the increasing collaboration that occurs

between firms and the community in the final development of products and solutions. Although this is

currently most obvious in certain product-oriented innovations, it can be extended outwards into socialinnovations with the appropriate tools. Examples of this would include Microsofts (and other IT firms) use of

Beta-testing a product before final release. In this process, a beta version of a product is released to a

limited community of interested parties (though in Microsofts case this may be several million users). These

users then provide feedback and comment on the product before it goes into its final development phase

and released to the general public. This process helps to bind the community into the innovation process.

The Cathedral and the Bazaar

In 1997, Eric S. Raymond coined the phrase the Cathedral and the Bazaar. He was specifically referring to

software development processes in relation to Linux; however, broad concepts of this can be expanded

towards innovation in general.

Cathedral-type development involves a small group of individuals, or a single organisation, which labours to

produce a single, grand solution. There is limited involvement of the wider community in such development

or construction, and it is assumed that the end-product (the Cathedral) will meet the needs of the general

population.

On the other hand, Bazaar-type development involves as many individuals as possible, constantly

negotiating and developing small scale innovations. This, by necessity, requires intense collaboration

between all the different role-players, and constant monitoring and evaluation of the viability of solutions.

Each mode has a specific strength, and related challenge.

Cathedral-type development is extremely focussed on a particular outcome, and can be clearly defined from

the beginning. Construction will not start until there is a clear goal in mind. This provides a very structured

approach, and can address long-term strategic issues. However, because of the lack of collaboration, and

the minimal number of solution developers involved, finding the most efficient solution takes time; it may also

ultimately not respond to the needs of the population.

Bazaar-type development is diametrically opposite to this in that it directly responds to the immediate

needs of society, and tends to produce a strong sense of ownership within that society; because they are

involved in solving their own problems, they take more responsibility for ensuring the success of whatever

solutions are developed. The drawback, however, is that Bazaar-type development is, of necessity, smallscale and being small scale, cannot directly address longer-term strategic issues. It drifts according to the

whims of the people involved.

One of the laws which was recognised in this description was loosely stated as: with enough eyeballs, all

bugs are shallow. This is taken to mean that if enough people are considering a challenge, the solution will

be easy to find.

This speaks to the heart of Open Innovation by inviting as many people to solve problems as possible, the

most efficient solution will be found with the least effort.


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Social Innovation

Social innovation is related to organisational innovation, except instead of restructuring firm-level processes


structures and members to implement new social structures in order to achieve social benefits

Where product-related innovation satisfies the demands of consumers, social innovation meets demands forpublic good which are not necessarily satisfied through current structures. There is a strong argument that

South Africa is more in need of solutions to the latter problems, than the former; trickle-down effects from

economic growth are not having a sufficient impact on the social challenges of the country, and so new




Social innovation has different driving forces to economic innovation it is natural then that the mechanisms

for incentivising social innovation must also differ. It may be closely connected with Public Innovation (dealt

with separately below), but can often be performed by communities and community-based organisations.

Here, the constraint on innovation may not be a profit-motive, but rather a direct lack of resources

community-based organisations would very much like to do their work more efficiently, but do not have the

capacity to develop those solutions themselves.

What is also important about social innovation, especially that performed by communities, is that there is a

much stronger sense of ownership of the solution. Social innovations are often locally developed, but these

successes are not necessarily disseminated amongst the wider community. On the other hand, social

innovation solutions which are government-driven through public innovation processes, for example tend

to be widely disseminated, but not necessarily owned by the people on the ground.

Figure 3.1: Relationship between ownership and transferability in social innovation, NESTA, SC/03, March 2007

Figure 3.1 shows the relationship between the transferability of a social innovation, and the ownership felt by

the developers of that innovation. The fundamental characteristic of a truly successful social innovation will

be the personal ownership of that innovation, by each member of society.


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Public Service Innovation

Much of the focus on innovation, as noted already, is on those types of innovation driven by the private




This area has a very strong history throughout South Africa, and the world. Examples include programmes

such as the Community Works Programme (CWP) which provides a novel approach towards providing an

employment safety net. Crucially, much of the innovation within the public sector is very specific towards a

social and cultural group. Therefore, while there are certain similarities between social programmes in

different countries, each must be customised towards what is appropriate in a particular region.

It is critical, given the social challenges facing Gauteng, that Public Service Innovation is recognised and

supported. The Provincial Government has a number of very aggressive strategic targets. It is not certain

that, by continuing with business as usual, that GPG will be able to achieve those goals. It therefore

becomes necessary for the government itself to become innovative in fulfilling its mandate to the citizens of

Gauteng.

There is very little focus provided on PSI within the existing body of policy literature around innovation.

However, this strategy document puts forward the contention that accelerating and supporting PSI is crucial

in achieving the strategic goals of the department, and the province.

Much of the focus on innovation, as noted already, is on those types of innovation driven by the private




One of the agencies of the National Department of Public Service and Administration is the Centre for PublicSector Innovation (CPSI). The role of this institution is, self-evidently, to support public sector entities in

developing new, innovative mechanisms for service delivery. There is therefore recognition of the

importance of public sector innovation within the South African environment. However, this recognition is

independent of other support mechanisms for innovation; it also excludes any type of innovation for the

public sector which arises from outside the public sector.

This is problematic, since there are countless solutions to public service challenges provided by private

sector groups, civil society, or the international environment.

A particular example of public innovation, which deals with the above problem, is Knowledge Management

Africa (KMAfrica). This project was established by, amongst others, the Development Bank of South Africa.

The strategic goals of KMAfrica are of particular relevance to this document, given the symmetry they show

with the proposed intervention mechanisms:

Enhance the implementation of knowledge management in Africa

Leverage the use of knowledge in policy and service delivery Promote partnerships among the public sector, private sector, and civil society in the creation,

synthesis and use of knowledge Build knowledge management networks that will enable the creation and utilisation of knowledge

Build an institutional infrastructure that will facilitate the implementation of the knowledge

management mandate across Africa


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B.Systems of InnovationThere are a variety of definitions for the concept of a System of Innovation, some of which are presented

below:

The network of institutions in the public and private sector

Documents

Gauteng Innovation Strategy Discussion Draft v2.1