My exam is behind me now, and I can turn my attention back to topics that I would like to explore in this column. Before you ask me how the exam went . . . results come out in late July. Don’t worry, you’ll know if I pass because I’ll brag so loudly that you can’t bear but get fed up with me.

You may recall that my article How African Countries Can Spur Startup Innovation was inspired by an article published by BusinessWeek. I want to explore that topic further over the next two or three installments of this column. This time my inspiration comes primarily from How To Make A Region Innovative[1].

Before we dive in I should point out one important caveat. I am neither an economist nor a policy maker. Yet, I hope we can start and sustain a conversation that goes beyond my limited capacity to tackle a topic this enormous using the format of a series of “blog posts”.

Why the focus on “making Africa more innovative and entrepreneurial”? In two phrases, economic growth and poverty reduction. There is growing evidence to suggest that the internet is spawning an era of economic growth unlike any we have seen in history. In May 2011 The McKinsey Global Institute said[2]:

New McKinsey research into the Internet economies of the G-8 nations as well as Brazil, China, India, South Korea, and Sweden finds that the web accounts for a significant and growing portion of global GDP. Indeed, if measured as a sector, Internet-related consumption and expenditure is now bigger than agriculture or energy. On average, the Internet contributes 3.4 percent to GDP in the 13 countries covered by the research—an amount the size of Spain or Canada in terms of GDP, and growing at a faster rate than that of Brazil.

Africa has a rare opportunity to accelerate her efforts to diversify beyond the extraction and export of primary commodities and to create the conditions that will foster the growth of startups that harness the internet and software technology to build businesses that become successful enough to earn hundreds of millions, even billions, of dollars in annual revenue while employing hundreds if not thousands of her people in the process.

Ernest J. Wilson III states that four different sectors must link together to create a center of innovation (or innovation cluster), an environment that fosters creativity and innovation. He calls this the “quad” and it comprises;

• Government agencies that provide and invest in the infrastructure that is necessary for the activities that must go on within the center of innovation to occur. An example of such infrastructure investments would be the internet connection between Ghana and the rest of the world – over the course of a six month mentoring relationship, I never once successfully held a video chat using Skype with the team of four entrepreneurs in training at the Meltwater Entrepreneurial School of Technology in Accra that I had been assigned to assist as a volunteer advisor while they tried to conceive and develop an internet based software startup and compete for funding from the Meltwater Foundation. Other examples? Schools. Transportation. Power generation plants – yes, NEPA (aka Never Expect Power Always) I am looking at you. Power transmission lines.Land. These are the types of infrastructure investments that are critical to the establishment and success of a center on innovation. They are also the kinds of investments that government is best positioned to make because they must happen at a massive scale. Government also has to maintain the legal, regulatory and tax regimes that govern activity in centers of innovation.
• Universities provide a steady supply of people with the skills and the knowledge to pursue innovative solutions to problems that become the foundation on which great businesses can be built. Research that has sat in university labs can be brought to the real world. University students can continue the pursuit of solutions to problems they were grappling with in school after graduation by forming startups that set up their base in the confines of the center of innovation.
• Nongovernmental or nonprofit organizations provide services that highlight chronic problems waiting for the “problem solving” treatment that entrepreneurs are so good at providing. In some cases some nonprofits and NGO’s might even start solving some of these chronic problems. Two examples I am familiar with are the Meltwater Foundation and the Kumasi Center of Lifelong Learning – I am a volunteer advisor with KCCL.
• Businesses function as the economic engine of the innovation cluster by providing the capital for strategic investments in the kind of innovation that attracts large numbers of customers and generates profits large enough for reinvestment in more strategic innovation. This cycle of sourcing capital, investing it, generating profits, and reinvesting a portion of the wealth that has been generated creates a unique vitality and creativity that non of the other three sectors can replicate with the same level of success.

A high level of trust is necessary for the collaboration between these sectors to be successful. Without trust leaders within each sector will transact with a short-term focus and will tend not to look beyond the immediate transaction at hand. Innovation clusters only succeed when all four sectors work collaboratively knowing that their individual and collective interests will be protected over the long term.

Let’s talk again in two weeks. On deck?How To Make Africa More Innovative and Entrepreneurial – Part II.