Specialized Incubators will Spur Middle East Innovation

by Kamal Hassan

This is part two of my series on business incubators. See part one here.

In other parts of the world, innovators have complete access to business and societal needs and they come up with ideas to fulfill these needs with innovations. Their ideas turn into businesses with the help of incubators.

In the Middle East, lack of research on business and social needs means that many entrepreneurs go into business without specific goals in mind - which results in undifferentiated businesses that don't offer new value.

Here is where incubators in the Middle East can take a different approach. In addition to providing the general support that start-ups need, if each incubator focused on a specific business, social or environmental niche, it would add much needed direction to the process. These specialized incubators could conduct scientific and market research in their niche, and provide complete transparencies and opportunities for entrepreneurs to come up with ideas that solve specific problems.

For example, what if we had an incubator that focused on water shortage issues? One problem this incubator could tackle is the amount of water it takes - 140 liters - to grow the beans for only one cup of coffee! Coffee consumes two percent of the world's water, yet the answer is not to cut coffee consumption, but to decrease the amount of water needed to produce coffee beans. Imagine the innovative solutions that could be developed by an incubator full of entrepreneurs focused this problem.

By creating incubators that work with entrepreneurs on the front end of innovation, sharing research and information so that problems can be addressed in the open, we not only create innovative businesses, but also contribute to the welfare of society.

To make such an approach feasible, we also need to address a few other areas.

One, incubators need to staff appropriately for the niche they are in. Depending on the focus, this could include scientists and engineers, teachers and educational experts, manufacturing and supply chain leaders - whichever fits the needs of the specialized incubator. Office support staff, including business development and marketing, may also need specific expertise. An incubator that tries to specialize without recruiting specialized talent will not provide adequate support for the start-ups there.

Two, the approach to incubator funding needs to change. Instead of giving money to start-ups and letting them decide how to spend it, incubators need to hand-hold new businesses to help them spend it wisely. Too many new businesses make mistakes in this area, investing in costly research without projecting return on investment, or approving expensive marketing campaigns to outdo the competition. It's the incubator's job, as an experienced business advisor, to keep start-ups from making such financial blunders, and instead use their funding to acquire the talent and infrastructure needed to support the start-up once it leaves the incubator.

Three, start-ups need to have exit plans and incubators need to encourage start-ups to leave the nest. An incubator's profit typically comes from start-ups exiting the incubator through a sale - a merger into a bigger company, an acquisition by a private equity or venture capital fund, etc. - or through a public offering (listing the business on the stock market). Without a solid plan for incubators to profit from their investments in start-ups, many incubators will fail, and those that stick around will become money pits. Yes, the venture capital and private equity market in the region is small, but there are many companies from outside the region who would likely invest in our start-ups if they were truly innovative.

In my opinion, we have enough general business incubators in the Middle East. What we need now are specialized incubators that work with entrepreneurs to create new value for business and society. Incubators can foster innovation if we structure them correctly and incubate real innovation instead of falafel shops.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

Incubating Innovation in the Middle East

What Business Incubators in the Middle East can do to Contribute More to Innovation

by Kamal Hassan

Have you noticed that business incubators are popping up in the Middle East like falafel shops? The Entrepreneur Business Village in Dubai. The Bahrain Business Incubator Center (BBIC). The BankMuscat Business Incubator. iPark in Jordan. Ibtikar incubator in Abu Dhabi. And nearly every country in MENA has a technology incubator.

It's not a bad thing at all, as long as we keep the supply in line with the demand. What concerns me, however, is the assumption that an influx of incubators will somehow increase the region's innovation capabilities. It won't - unless we structure them correctly and incubate real innovation instead of just another falafel shop.


Innovation is an Art and a Science

Like art, innovation requires creativity, which incubators such as The Shelter in Dubai try to encourage. However, the process of creating a work of art is different than creating an innovation. An artist can sit down in front of a canvas and make something beautiful, or at least unique. The result doesn't have to be good in the technical sense, or make the artist famous. It just has to fulfill the vision the artist had in mind.

Innovators, on the other hand, require the end result to meet certain criteria. It must solve a problem, create new value, work better than other solutions, and be affordable and, ideally, sustainable to produce. Remember, we're talking about innovation, not invention. Inventions can afford to rely on creativity with a bit of problem-solving thrown in. Innovation cannot.

None of this is meant to disparage artists or inventors, only to remind us that innovation must go beyond creativity to be successful. Similarly, new businesses must go beyond being part of an incubator to earn the title 'innovative'. If the business doesn't offer something different and of value, it's not innovative, it's just another start-up.

A recent Zawya article on the obstacles facing small businesses in the Gulf underscores this point:


"The average Saudi small and medium-sized enterprise (SME) only survives for seven years. This is due not only to the return of foreign managers to their home countries, but also to the lack of differentiated and specialized products and services, which renders companies vulnerable to market changes."


Of course, there are other reasons that start-ups and entrepreneurs struggle to survive in this region, which only makes it more imperative that the struggle is worth it. If our incubators are merely supporting the business effort, without taking steps to ensure the effort adds real and sustainable value to the region, they are only doing half the job.


Technology Parks are not Incubators.

Technology Parks Feed Incubators with Ideas.

With all the so-called incubators popping up here, we are starting to resemble California's Silicon Valley 20 years ago. This area is now is home to such global giants as Google and Apple, and dozens of other technology companies that started out with innovative visions and managed to make them real.

For many people, the success of Silicon Valley is the ultimate innovation success story. While there are great lessons to be learned from Silicon Valley innovators, I think the lessons often get lost and the conclusion people come to is that "technology equals innovation."

Technological advances are often innovative, but it's not the only industry that can and does benefit from innovation. So I am concerned when I see that most of the incubators in the Middle East (or at least the ones that are supposed to increase innovation) are really technology parks, not incubators. What's the difference?

First, incubators are dedicated to small, early stage companies; technology parks typically house companies of various sizes and maturity, and even government and research facilities.

Second, incubators are designed to provide a temporary space for new businesses; technology parks boast more long-term projects and participants. The technology park business model is to host (lease offices) for big R&D and technology companies as long as possible. Incubators, on the other hand, focus on providing support for start-ups for a certain period of time before pushing them toward the door, which supports the incubator business model of keeping new businesses, and revenue, coming in.

Much like a premature baby grows and gets stronger in a newborn incubator, the point of a business incubator is to make a new business strong enough it can leave the incubator and survive in the 'real' world. For the start-ups in our regional incubators, what is the survival plan? I am not sure I see exit strategies for many of them.

So, what's the problem with incubators in the Middle East? They may work well for new businesses, but there is no guarantee the new businesses will offer innovative products, services or business models. On the flip side, technology parks work well for innovation, but typically on a large scale, which doesn't engage many entrepreneurs. They also limit innovation to technological advances, which is only one area we need to innovate.

In my next post, I'll explain how business incubators in the Middle East could better support entrepreneurs and innovation in the region.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

2010: The Year of Innovation and Entrepreneurs in the Middle East

by Kamal Hassan

What a year it has been in the Middle East! Let's start with the good news:

• Qatar Airways completed the world's first commercial passenger flight powered by natural gas.


• The fully automated Dubai Metro became the first urban train network in the Middle East.


• And in Saudi Arabia, the King Abdullah University of Science and Technology opened its doors. Called "an oasis of freedom," the university aims to fund research that will spawn economic diversity for Saudi.

2009 has truly been a year of breakthrough achievements in the Middle East. It's also been a year of disappointments. Who could imagine that the bottom would fall out of the real estate market in most of the Middle East? Or that unemployment would rise and workers without a stake in the Gulf countries would flee, leaving their debts unpaid? Or that Dubai World would need a $26 billion bailout?

Yet, as disastrous as these situations may seem, they provide an unprecedented opportunity for growth in the region... the growth of innovation and entrepreneurs. 2010 could finally be the year that start-ups and companies investing in innovative products, services, business models and management come into serious play in the Middle East. The conditions are ripe.


Cheaper Resources: The events of 2009 have made resources - office space, talented personnel, raw materials, supplies - that are often too expensive for new businesses more affordable. The Middle East will likely see an influx of entrepreneurs taking advantage of the cheaper cost of doing business. Such businesses will likely be cash-based and will be able to survive month-to-month while they develop a customer base. On the other hand, highly financially-leveraged organizations will continue to bleed money unless they have vast reserves of cash or liquid assets.


Innovation and Agility: Real innovation is not about "bigger, faster, taller, or fancier." It's about adding value for both the business and its customers. Established companies may lose sight of this as they get bogged down by misguided corporate agendas and shareholder expectations. Entrepreneurs, on the other hand, have less to prove, and less to lose. For new businesses, innovation, especially during tough times, becomes a daily occurrence as they look for unique ways to attract customers and add value. Some may even have the flexibility to adopt innovative new business models that take them in a completely different direction. Such agility is, and will continue to be, a real advantage in every industry.


Access to Affordable Technology: Sloan Management Review recently reported on how affordable technology is enabling businesses to test consumer reactions to new products more quickly, easily and cost-effectively than ever before. Thus, innovations can be tested and tweaked earlier in the development process, paving the way for a more successful market launch. While the article focused on the achievements of Google and other large, established companies, the underlying argument is sound for entrepreneurs and smaller businesses, as well. The cheaper technology becomes, the more the innovation playing field is leveled between organizations of all sizes. In addition, the Internet and social networking technology is enabling collaboration and open innovation as never before. This phenomenon will no doubt continue in 2010 as entrepreneurs around the world leverage this affordable technology.


Access to Information: Businesses today must deal with the most educated consumers the world has ever seen. Buyers know exactly what they want and have a higher level of expectations (green, socially responsible, clean energy, etc.). With such informed customers, companies cannot afford to limit their employees' access to information and new knowledge. Yet this is exactly what many established organizations are doing as they slash R&D and training budgets. Newer businesses, which tend to place more value on individual contributions, know that information and knowledge is essential to growth. So, while traditional companies hunker down and wait for things to get better, innovators and entrepreneurs continue to make things better by continuously learning and adapting.


Process Innovation: During the past year, companies both large and small were forced to cut costs. As per usual, organizations that could afford to cut jobs let the heads roll and hoped it would be enough. The UAE alone saw 16 percent of workers lose their jobs in 2009, and a recent survey by Gulf Talent reports that 15 percent of employers surveyed plan to continue cutting jobs. On the flip side, smart companies - many of them led by entrepreneurs - reduced job losses by focusing on managing processes, making them more cost-effective, innovative and efficient, and on eliminating or downsizing unnecessary infrastructure. Who do you think will be better prepared to face the challenges of 2010?

(Hint: it's not the company with fewer employees trained to do one thing that may not even be value-added anymore.)


So here is a question for the Middle East.

Where will you put your money and effort next year? Should we continue to follow the U.S. model of bailing out established corporations that are overextended with large-scale risky investments? Or should we increase support for entrepreneurs, start-ups and innovators that can make a real difference and also turn a profit?

Here's also a challenge for private equity funds: I read that you have $11 billion to invest in the region next year. What will you do to make 2010 the year of innovation and entrepreneurs in the Middle East?


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

Enemy inside the Gate - The Biggest Barrier to Innovation in the Middle East

by Kamal Hassan

What are the drivers for innovation in the Middle East? I recently asked this question of my colleagues in the social mediasphere. I wanted to better understand how people innovate in the Middle East, and compare the drivers for innovation here with that of other societies.

My question provoked many responses, several of which pointed to one underlying driver - necessity. As they say, necessity is the mother of invention. However, necessity is the most basic driver for innovation. Many other societies have moved beyond necessity.

In China, for example, innovation is technologically and industrially driven, and their R&D spending matches that of the U.S. and Europe.

The Japanese believe that if they lose money, they will recover it, but if they lose time, they won't. So a driver of innovation there is the need to produce new offerings quickly, and to be the first to market.

In the U.S., there are multiple factors that support innovation - a higher education system that encourages thought leadership and innovation, and a strong entreprenurial spirit and privately funded venture capital system. These factors combined lead to increased competition, which further drives innovation.

In the Middle East, we have necessity. The need to develop viable means of income in addition to oil. The need to improve quality of life for those in poor Middle East countries. The need to solve the water shortage crisis, unemployment among youths, technological backwardness, and more.

We also have government-led initiatives designed to foster innovation and support entrepreneurship. The Mohammed bin Rashid Al Maktoum Centre for Entrepreneurship and Innovation is a good example, as is the Qatar Foundation, and the King Abdullah University of Science and Technology in Saudi Arabia. All represent significant government investments to drive innovation. Certainly the resources and the will to innovate are there. Where we are in danger of falling short is the execution and sustainability of these plans.


Apathy - The Enemy of Innovation

It is interesting that in response to my question, what drives innovation in the Middle East, many responses listed the barriers to innovation here - the "buy versus make" culture; lack of support for entrepreneurship, especially among youths; too much talk and not enough action.

I believe that all of these problems are rooted in apathy. During the past year, I have visited many companies throughout the Gulf region. Although everyone expresses an interest in innovation, few put any resources into it. One organization, a multi-billion dollar telecom company, had one person in charge of R&D who was let go two years ago. Another, a $50 billion company with diversified holdings, has an R&D budget of $0.

These are not isolated examples. A 2008 report from the Economist Intelligence Unit put the region's R&D expenditure at less than one percent of profits. Compare that to Japan, which allocates more than twe percent to R&D.

In addition, some companies confuse innovation with suggestion boxes or brainstorming sessions. More often than not, these poorly planned programs merely generate "opinions" from unhappy employees, or incremental improvements to existing products, services and business models. These approaches are not a substitute for true innovation.

How do these companies survive? Because we have made it acceptible to rely on the innovation of others, which we reuse and resell. Where some societies and organizations struggle with the "it's not made here" mentality, we have the opposite problem. If it's not made, tested, proven and sold elsewhere, we tend to distrust it. We have created a culture of apathy that can afford to buy innovation elsewhere.

As a result, local ingenuity is often overlooked or discouraged in favor of imported innovation, and we become a hub that innovation passes through. We verbally commit to entrepreneurship, but the costly and difficult system of establishing a business here belies that commitment. In addition, there is too little privately funded venture capital to support entrepreneurs or new innovative models.

This culture of apathy threatens to negatively affect the execution and sustainability of current innovation initiatives. It is not enough to set aside financial resources for innovation and entrepreneurship. Without a systematic approach to innovation execution, any progress made will be minimal and difficult to sustain.

What would such an approach look like? Here are some high-level steps:

• Understand that innovation is a process and a system that needs to be well managed.


• Revamp business infrastructure so that it not only supports entrepreneurs, but allows them to fail and learn from their mistakes.


• Increase micro-financing and venture capital funding, and remove the red tape that discourages private funding.


• Increase the competitive landscape by easing government control on growing industries that require significant new technologies and innovation.


• Increase R&D budgets across the board, and educate organizations on how to maximize R&D spending (through systematic innovation).


• Embed innovation training in all levels of the education system, and for all employees.


• Focus on necessities instead of luxuries (water resources versus high-rises, enabling technologies versus shopping malls, production versus consumption).

On a personal scale, we need to work to overcome apathy and encourage creativity. This means we stop accepting the status quo and resolve to change it. We challenge old assumptions. We think outside the box. We share knowledge. We start trusting each other, and our abilities.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

Borderless Innovation and the Middle East

by Kamal Hassan

Borderless innovation, collaborative innovation, open innovation - all are terms that could resolve the lack of effective innovation and entrepreneurship models in the Middle East.

Think about it. What do we do here?

• We import talent that works for a few years, but the high turnover rate makes it difficult to implement lasting change.


• We hire consultants who do a few quick projects, and then leave with little knowledge transfer.


• We invest millions in massive projects that take years and years to see a return.


• We build educational institutions with the latest infrastructure and technologies, but only a few hundred students.

All of this contributes to a culture that relies on the innovation of others. What we need instead is a more simple and collaborative environment that learns from the rest of the world (without relying on them) to solve our own problems, improve our economies and advance our societies.


What we need is borderless innovation.

I'm not talking about looking beyond our geographical borders for solutions (although that can be a successful method for generating ideas if it's managed correctly). What I mean is looking beyond physical borders - the four walls that enclose your office, your department or your company. I'm also talking about social borders - the gap between public and private organizations, between big businesses and entrepreneurs.

Borderless innovation doesn't mean just outsourcing all your problems for someone else to solve. It means that the person (or organization) with the problem takes ownership of it; they take an active role in understanding the problem and developing innovative solutions. In addition to their internal problem-solving efforts, they also leverage the experience and expertise of people outside their borders to bring to light existing solutions or ideate new ones.

This is the logic behind borderless innovation - working collaboratively to find innovative solutions to complex business, economic, social and environmental problems, and create new value.

By way of example, one of my partners, NineSigma, has recently been contracted by the Piedmont region in Italy to develop an economic stimulus plan using borderless innovation. NineSigma is helping the region develop a list of strategic projects, and set up an open innovation network to solicit ideas and solutions from both local and global innovators to help stimulate innovation and growth in the region.

So, while the region is sponsoring the effort, the network brings together entrepreneurs, small, medium and large enterprises, universities and research labs as participants in finding the best solution for each project. All this is being done at a fraction of the cost of what it would take to build a fancy R&D lab. It's mainly done on the internet.

Would something like this work in the Middle East? I believe it could if given the chance. Our youth are very motivated and creative; they can do magic if they have the means and opportunity. They don't necessarily need an expensive R&D infrastructure to collaborate and innovate. Many are already taking the entrepreneurial path, using their own talents and innovative ideas.

Our governments and universities have innovation and economic stimulus as high priorities, although they are struggling to successfully execute in some cases. Using borderless innovation and collaboratively developing solutions might be the answer to move us beyond innovation apathy. One thing is for sure - we'll never know if we don't try.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

The True Nature of Innovation (Perception vs. Reality)

The new reality TV series, "Stars of Science," gives 16 young Arab inventors a chance to design and build their dreams. From a solar-powered generator for tents, to an oxygen-infused juice drink, contestants vie to impress the judges and the audience. The show has captured the attention of many viewers, some of whom are eager to demonstrate that the Arab world can produce innovations as clever and profitable as the rest of the globe.

"Stars of Science" is sponsored by the Qatar Foundation. While it's an honorable undertaking that encourages individual creativity, the one problem with the show is that it promotes only the popular perception of innovation. That is, a singular genius tucked away in a laboratory, experimenting with ways to make his or her inspiration a reality.

Many people equate inspiration, and subsequent inventions, with innovation, but they are not necessarily the same. The electric light bulb, for example, is one of Thomas Edison's best known inventions. But even Edison realized that the light bulb would be of no value unless electricity was available in every home. Thus, the innovation was not the light bulb itself, but the electrical grid later designed to make the light bulb a useful invention for people.

Another example is the wheel - an inspired invention, but one that only lived up to its potential after some innovative thinker attached more than one wheel to a slab and created a cart. Many inspirations lead to inventions. Like the wheel and the light bulb, some inventions catch on. Others, however, never make it past the prototype, and they never reach the level of innovation.

Contrary to the popular perception, innovation is actually the process of uncovering a problem for which there is no solution (or no good solution), and then developing a way to solve the problem. For example, the light bulb, when coupled with a citywide electrical grid, solved the problem of providing light after sunset without the mess and danger of candles. The wheel, when attached to a cart, solved the problem of transporting goods long distances over land. In these cases, the innovative solution was a tangible item, but innovation can also take the form of a process or approach that solves a problem.

For instance, consider the age-old innovation of curing meat to make it last longer, or using spices to make food more palatable. Restaurant service is another innovation, a solution for travelers and others who can't eat at home. Take-out and delivery are innovative approaches to restaurant service that solve the problem of eating at home without having to cook.

In the business world, in addition to solving problems innovation must also provide value to customers. In other words, the innovation must solve a problem that customers care about, and provide a solution for which they are willing to pay. All too often, companies offer new product features or expanded services, that company engineers and marketers think are innovative, but which don't really add value from the customer's point of view. (Think of the software upgrades you may have been required to purchase with a new computer, or the 'new and improved' shoe polish that seems to work just as well as the old kind.) As Scott Berkun points out in "The Myths of Innovation":

• "Many bright would-be innovators... fail to spend enough time exploring and understanding problems before trying to solve them."

Part of understanding the problem is viewing it from the customer's perspective. In this regard, we need to avoid the typical questions such as:

• "How can we improve this product/service?"


• "What innovation can we implement?"

The question to ask is "What is the user (or customer or client) trying to accomplish?" Such a question often leads to gaps that have been overlooked, and provides a perfect opportunity for real innovation.

For instance, when a person shines his shoes, does he care more about having a good shining experience, or about having polished shoes? Focusing on the experience of shoe shining, as the shine manufacturer might do, may lead to various product improvements, such as a quick-drying or non-streaking formula. However, focusing on the end result (polished shoes) might lead to the formula for a spray that can be applied when the shoes are made to provide long-lasting shine. The first is merely an incremental improvement, but the second is an innovation that not only meets the customer's end goal, but also broadens the market for the shoe shine company.

Solving problems and providing value to customers is the crux of innovation in business. But innovation should also lead to growth opportunities. Strategically, this means developing a balanced innovation portfolio that includes different types of innovations: products, services, processes, strategies and business models. A manufacturer, for example, shouldn't focus all its innovation efforts on new products, nor should a government limit its innovations to new services.

An organization's innovation portfolio should also be varied when it comes to the degree of innovation, from incremental to significant to breakthrough projects. Organizations that diversify their innovation portfolio along these lines almost always generate higher return on investment than companies that limit innovation to only one type or degree. In addition, companies that innovate simultaneously in multiple areas reap more rewards than those that innovate in a single area.

Today, innovation is a popular buzzword, but organizations that wish to grow through innovation will only succeed if they pursue real innovation - using a strategically-sound approach, which enables them to solve problems that provide real value to customers. It is an approach that can be learned and assimilated into any organizational structure, with the right guidance and tool set.

---

Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.