African Corporations should vertically innovate like Tesla and Zara to achieve proprietary and material novel innovation, and thus lead competitively, become wealthy and create jobs
This post is inspired by the findings in my latest two books (6th and 7th): ‘Innovate the Next: Success Frameworks to Innovating Products in Any Revolution’ and ‘Understanding the 4th Industrial Revolution & Innovation Easily.’ They are available on Amazon, in South African bookstores, and on my website.
Elon Musk is indeed the man of the current Industrial Revolution in terms of producing exponential proprietary technology. His companies, if not all – the case being Space X and Tesla – manufacture and assemble most of their components in-house.
Space X, the space exploration company, manufactures about 85 percent of its components in-house.
In an interview, Musk had the following to say about Tesla’s in-house manufacturing: “We’re designing and building so much more of the car than other OEMs who will largely go to the traditional supply base and, like I call it, catalog engineering. So, it’s not very adventurous and it basically ends up like older products end up — looking the same because they’re going to the same suppliers.”
Tesla manufactures about 80% in-house.
The two companies apply what is conventionally termed ‘vertically integrated manufacturing.’ It means they produce most of the components to their products. The result is they get to invent novel (to proprietary) innovations.
Why could this be crucial and perhaps for Africa as the title of the post alludes? My latest book Innovate the Next shows why and gives frameworks for understanding how technological novelty comes about and thus also how it can be created.
Inadvertently the book shows that novelty is achieved and sped up through vertical integration.
The outcomes of vertical integration, I detail in the book, is achievement and ownership of material discovery novelty and proprietary novelty of technologies.
By technologies I mean any product, whether virtual or physical, electronic to biotechnological, and of all past and present Industrial Revolutions.
The Fourth Industrial Revolution (the current) products are marked by emerging technology breakthroughs in a number of fields, including robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, the Internet of Things, the Industrial Internet of Things (IIoT), decentralized consensus, fifth-generation wireless technologies (5G), additive manufacturing/3D printing and fully autonomous vehicles.
In the book (Innovate the Next) I describe novel innovation as a range between material discovery novelty and proprietary novelty. I.e. without getting into a lengthy explanation, material discovery novelty is innovation that is new and has nothing like it in existence – e.g. like when the process of making the first true antibiotic (i.e. penicillin) was discovered in 1928 by Alexander Fleming for the first ever in recorded history. Proprietary novelty starts from a 10X improvement/evolution – e.g. like the 1975 Moore’s Law observed the trend of transistors on a microchip exponentially getting more in quantity and less per size every two years. Well, such detailed arguments are in the book.
Novelty is the basis of how civilization happens. There was a point where there were no cars, computers and aeroplanes. When they were invented, they were novel.
There was a time on earth where there were no human beings. Varying, multiple (over millions of years) and subsequent novelties later ushered our evolution and we were borne (evolved/innovated).
We remain a species – at least that we know of – that can create the manmade innovations mentioned above, e.g. computers and aeroplanes.
So, for civilization to happen, novelty has to happen (created) – i.e. to move from one Industrial Revolution to another.
Imagine you play soccer. You find out that you are average. However, you are the fastest in the fields you’ve played. And that is a novel finding for you. You then pursue sprinting as a sport and then you discover that you are in the top ten globally.
What this means is, through one sport i.e. soccer, you discover another talent you possess. Through soccer and adjacently leaning to sprinting, which we can say somewhat takes holistic integration of your body physically, is analogous in the manufacturing world to vertically integrated manufacturing and thus discovering areas of improvement that turn into novel to proprietary innovations.
Good luck with sprinting. I am kidding. It is just an example to reach a frame of understanding.
In the innovation of manmade innovations, when vertical integration manufacturing applied, the areas and components that can be improved are discovered. Some become novel and some become proprietary.
All in all, you cannot discover areas that can be improved if you outsource.
To move civilisation forward, we need novelty in manmade innovations. If one thing that history teaches us is, he who owns novel and proprietary innovation becomes wealthy. They sell without competition. It applies to nations and all other dynasties of the past.
I wrote an article that sort of took a swipe at Corporate South Africa, and that they are not innovative. To some it is controversial. It was a bit tongue-in-cheek deliberately. It is titled: ‘MBA and chartered accountant led corporate South Africa has failed to innovate products and thus failed to create jobs’ https://buff.ly/34pkHy5.
You don’t think MBA and chartered accountants and think patents. This is how I think of Corporate South Africa. They don’t produce patents because they import finished products from China.
My little brother, Kagiso Maloma, who knows and loves my baiting kind of humour, warned me that I should make my writings not dismissive so as to be heard by decision-makers. He gave me branding advice. I appreciate it. I am trying.
Here I am marketing my books to a wider audience and hence I say ‘African Corporations’ instead of ‘Corporate South Africa.’
I do think and believe African corporations should apply vertically integrated manufacturing. This will find and thus produce novelty (material to proprietary innovation), compete competitively and create jobs.
Think of the sprinter analogy I gave. We as Africans can discover a host of new novel ala sprinter like innovations.
Snippets of Elon Musk companies’ novel to proprietary innovations
*The text in italics is taken (edited) from ‘Innovate the Next.’
Tesla and Space X are able to be ahead with innovation because they vertically integrate. Through vertical integration, they discover what they can improve. Some become novel and proprietary and help them have a proprietary lead in the market.
Space X is the first to create and reuse an orbital rocket (Falcon 9 in 2017).
Up until 2000, the cost to launch a kilogram to space was about US$18,500 per kilogram. NASA paid about $1.5 billion to launch 27,500 kg to Low Earth Orbit.
On its website, Space X advertises a trip to low orbit at $62 million with Falcon 9 (carries 22,800, at $2,720/kg) and Falcon Heavy at $90 million (carries 63800 kg, at $1410,66).
Looking at these figures alone, space travel costs have really reduced since 2000.
Rival company United Launch Alliance (ULA) advertises its Atlas V at a starting cost of $109 million to low orbit.
To show Musk and his team always look to achieve novel innovation, their work-in-progress Starship, if successful will be the heaviest launch vehicle ever – and it will refuel in orbit.
It is because roughly half of the fuel of spaceships is used just to get into orbit. If such half is replaced in orbit, then travel to anywhere in the solar system becomes expansive. There is gravity pull on earth and not in the solar system.
Three of the longest mile range electric cars in the world are Tesla’s: Tesla Model S Long Range (379 miles), Tesla Model 3 Long Range (348-miles), Tesla Model X Long Range (314 miles), and only then followed Jaguar i-Pace (292 miles).
The Boring Company
The Boring Company plans to transit people quicker in underground tunnels between cities – proposing a 5 minute travel time for a conventional 45 minute drive in a city. They already have 3.2 KM active test tunnels in Los Angeles.
In the name of vertical innovation, they created their own boring machine called Prufrock.
It is slated to be 2 times faster than its rivals, the Godot and Line-storm. Apparently Musk wanted it 10 times better.
All this is in the name of innovation, i.e. trying to improve things. This is where novel innovation – material discovery and proprietary novelty – comes from.
Zara (the clothing retailer)
Zara is the world’s largest apparel retailer with over 2000 stores worldwide. It is owned by the Inditex group.
My fascination with Zara is they do vertically integrated innovation and manufacturing.
Here is a snippet of how they innovate vertically to achieve proprietary and material novelty
- Zara’s design team consists of 350 people and they generate about 18 000 new designs per year (360 a week).
- They take less than a month to get clothing to stores.
- Of course they keep a significant amount of their production in-house.
Well, that’s it.
The following is post was the most helpful and concise to understand Zara’s innovation dynamics: Innovation Lessons from Fashion Leader, Zara https://buff.ly/2Yir9Am.