(Pictures courtesy of African Globe: http://www.africanglobe.net/africa/cape-town-tales-city/)

We have heard politicians talk about South Africa having parallel economies[1]: one serving the well developed and the other, emerging sector of our society. The dichotomy should ideally result in active companies in the economy equally thriving in the development of new offerings and in the reuse of existing products and services. Reuse, in this case, referring to the creation of additional revenue by leveraging existing offerings and applying them in a different context. Writes Nimroth Gwetsa, 2 October 2014.

There is a season for everything. In business, there is a season for financial downturn (winter); development (spring); expansion (summer) and for defending market share (autumn).

Some parts of the world are still recovering from adverse effects of losses incurred during the peak financial downturn of 2009. Recession forced decision-makers to be more circumspect in funding the development of their businesses and related products and services.

Recession is a necessary evil and an essential part of life. It ensures our continued development. Solutions emerge from suffering caused by recession. Recession causes decision-makers to increase their prudence in managing resources, development of knowledge and methods for leveraging existing capabilities.

How, then, could companies earn new revenue from customers still experiencing adverse effects of the financial downturn?

Companies need to remain profitable to continue operating. Profit derives from increased sales against reduced cost of sales. Companies cannot sell more when customers are not buying more. Good creditworthy customers would not buy more when they do not have more income. The dichotomy of low company sales and customer purchases would not be easily resolved if nothing is done about the situation.

Innovation that promotes use of existing offerings in a different application context could trigger creation of additional revenue for companies and different spending patterns by customers. Manure turned to fuel is an example of leveraging existing product used ordinarily as compost and waste, to create value adding fuel energy. Reuse strategies could introduce new complexities and expenses. Not all such strategies result in the introduction of additional overheads and complexities. Each opportunity needs to be treated on its merits.

Companies have many sources for innovative ideas. The obvious is through suggestions from employees, customers and competitors among others. The not so obvious source is criticism. In the fierce competitive environment and scarce resources, companies tend to be more defensive against criticism levelled at them. Sometimes criticism is malicious. In other situations, it is well meant. If well managed, criticism can be a free source of innovation in leveraging existing offerings for application in a different context.

Entrepreneurs usually spot these kinds of gaps and make something out of nothing. Greater results could be accomplished through the establishment of mutually beneficial collaboration between independent entrepreneurs and companies. We need to see more examples of larger companies collaborating with smaller entities and individual entrepreneurs to create products and leverage existing products.

The reuse market in South Africa is far underdeveloped. The causes for underdevelopment are not limited to lack of funding. The concern has more to do with unwillingness to embrace reuse than it is about lack of opportunities or resources for reuse.

The extent of collaboration between entrepreneurs and larger companies is still at its infancy. It would seem larger companies prefer the winner takes all approach than sharing the market pie for continued mutual benefit. In spite of this, there is still much goodwill among larger companies in South Africa pursuing opportunities for effective collaboration with smaller players. The 3MFuture and MTN/ Standard Bank lawsuit and the Woolworths and Frankie’s dispute, among others, should not scare smaller players from approaching larger companies to leverage their current offerings.

I know a few, yet exceptional cases, where there is a tacit corporate policy forbidding revenue sharing agreements with smaller players. Understandably so, yet not necessarily condoned, perhaps their reluctance is motivated by the need to avoid grooming monsters that would one day devour them. In other cases, the reluctance could be motivated by greed, fear and selfishness.

In the climate characterised by financial lack, retrenchments and a scramble for survival, the culture in companies could be negatively affected. Staff would also catch the negative vibe and would yearn for recognition to secure their employment. In such cases, they could involve companies in unethical behaviour by “stealing” ideas from smaller entrepreneurs punting them to their seniors as theirs. They would do this confidently banking on the sheer size and muscle of their corporation and their belief that aggrieved smaller entrepreneurs would most likely lack resources to prove wrongdoing against them.

On the one hand, “stealing” and reluctance to share with smaller entrepreneurs may not necessarily be caused by the prevailing climate of financial difficulties. Obscene materialism and desire to earn more than others (this, being but all the deadly sins of greed, envy, jealousy and so forth) could be the reason for such behaviour. Such actions could result in the unfortunate creation of dog eat dog and survival of the fittest situation.

Reluctance to pursue opportunities with smaller entrepreneurs may not necessarily be done out of malice but out of genuine fear, conflicting priorities with other more value adding initiatives being considered and scepticism about the prospects for successful implementation. Some reasons could be owing to concerns about lack of skills and credible implementers to carry through the idea. Sometimes the failure to accomplish those ideas could be due to internal corporate politics where different powerful parties are deadlocked on conflicting agendas. We should not discount the lasting impact of laziness by powerful people reluctant to do the hard work. Neither should we discount the damage caused by large-scale system implementation failures that resulted in companies suffering severe financial and reputation losses. Having been scalped before, large corporates may have heard the good promises story before and your leverage idea may be seen by decision-makers to be in the same light, hence their reluctance to carry it through.

Generalising and bracketing everything in a box and reaching wrong conclusions is futile. Each case needs to be considered on its merits. Corporates should give more thought to ideas where entrepreneurs are more willing, for example, to place their resources at risk to reduce the risk on those corporates, though doing this for more share of the pie. Let those expected to decide on pursuing opportunities to leverage existing products and services finalise them based purely on the complete, ethical and sound stewardship merits of those individual cases, and not on malicious intent.

Such decisions are often complex and characterised by many factors for consideration. Sustainability is accomplished through careful planning for worst-case scenarios and eventual adaptability to environmental changes should similar scenarios transpire.

Let us see more cooperation between established companies and emerging innovators in leveraging their current offerings for mutual benefit and advancement. Best still, let us see more cooperation between big and small businesses without big business wanting to lord it over and absorb smaller ones.

[1] See http://www.thepresidency.gov.za/docs/pcsa/social/briefsynopsis.pdf (last accessed on 01.10.2014)