The Sunday Mail
Fredrick Mandizvida
Zimbabwe is focusing on industrialising its economy. To achieve this feat, several factors should be considered and each one of them must be sufficiently dealt with. Existing value chains are some of the key elements that local domestic and foreign investors critically analyse before making investment decisions. Due to globalization and technological changes,
domestic value chains are going through shorter life cycles while new sets emerge in existing markets, resulting in changes within industry setups, affecting their business models in the process.
I wish to discuss the changes brought about by disruptive technologies in the Zimbabwean economy with the role of virtual value chains in mind. Disruptive technologies impact the way of doing business in an economy. They tend to exert tremendous pressure on current value chains. In some cases, the effect is a complete reconfiguration or even the demise of existing value chains, together with companies or industries that drive them.
Markets that suffer such changes may see new or modified value chains emerging to determine new market dynamics. According to some writers, “A disruptive technology is one that displaces an established technology and shakes up the industry or a ground-breaking product that creates a completely new industry.”
Therefore, when thinking about the industrialization of Zimbabwe, one cannot help but consider the impact of disruptive technologies. It is therefore, common cause that any conversation on industrialization and modernization of the economy implies a change in the existing value chains.
A series of activities from the initial stages of making a product or service throughout to its final delivery to a customer constitutes a value chain.
Economic activity in a country set-up includes production, processing, manufacturing, exporting and importing of goods and services.
These processes take place within systems of value chains that evolve over time, forming complex economic matrices governing the country’s import and export formations.
Industry sectors are therefore characterized by specific types of value chains.
On the other hand, the efficiencies of any value chain are a function of the technology that drives it.
As technologies change due to innovations and technological advancements, disruptive technologies tend to change the economic dynamics of countries.
According to Professor Clayton M Christensen (1997), companies have two choices of technologies, namely, sustaining technologies and disruptive technologies.
The former is generally preferred by large corporations with an intention of incrementally enhancing it while smaller entities usually embrace disruptive technologies.
Large companies rely on sustaining technologies to enable them to maintain their marketplace dominance and customer reach. The obvious benefit small companies derive from disruptive technologies is the enhancement of cost efficiencies and agility to penetrate the marketplace.
Also, large companies tend to ignore the ultimate and long term impact of disruptive technologies often initially considering them to be of no consequence until it is too late.
While sustaining technologies result in retarding change in market dynamics, disruptive technologies tend to drive change faster as well as pushing forward the demise of existing sustaining technologies, together with their value chains.
Disruptive technologies also have a reputation for causing the collapse of markets and industries that are founded upon sustaining technologies.
In Zimbabwe, for instance, disruptive technologies are fast registering their footprints, threatening some value chains in the process.
One can quickly think of social media, 4G and LTE (Long-Term Evolution) technologies as some of the notable disruptive technologies which will impact on the way business is going to be done in Zimbabwe.
In the financial sector, mobile money platforms and plastic money payment systems have already transformed the way of transacting business in the country.
Different value chains originate from different drivers. Some of them emerge from technological breakthroughs in global markets which have a spill-over effect into the structural settings of other countries’ value chains.
In the few years to come, Zimbabwe must brace for significant ramifications of disruptive technologies like nanotechnology in nano-medicine, 3D and 4D printing technologies in the construction and manufacturing industries and the green technologies that give rise to alternative energy sources.
Likewise, emerging DNA and genomic medical platforms are going to change health delivery value chains.
Those in the information and communication industries as well as in research and development can no longer disregard the Big Data phenomenon and other digital systems. Equally, modern materials management systems have a strong bearing on the existing manufacturing and logistical processes and models that drive export markets through linkages to Global Value Chains (GVCs).
However, an interesting dimension is the character of modern-day economic settings where businesses experience the emergence of virtual value chains in which they operate in two distinct realms, namely, the physical realm or marketplace, and the virtual realm composed of the marketspace or e-commerce.
Information plays a central role in the marketspace as opposed to the marketplace.
With the advent of e-commerce and m-commerce, an emerging locus of value creation has also creeped into the Zimbabwean economy.
It manifests itself in the form of the use of customer databases, online accounts and mobile banking platforms like CBZ Touch, Zb E-Wallet, EcoCash and plastic money or e-payment systems like ZimSwitch, among others.
Other sources of virtual value chains include software for Embedded Intelligence Systems (EIS) used in disease monitoring and management systems such as software for insulin pumps that monitor and manage diabetes mellitus through auto-regulation of blood sugar; peep brain neurostimulators that monitor and regulate the state of the brain in psychiatric patients; and the pacemaker which regulates the heartbeat of people with cardiovascular problems.
All these and many more are digital and not physical assets and they do impact the process of creating and sustaining value chains resident in the virtual space.
Most of our manufacturing companies are still hesitant to aggressively secure market spaces for themselves in this emerging economic domain which point towards industrialization and modernization of the economy.
Admittedly, it is a complex and tall order for some local companies to create value in virtual systems owing to low levels of research and development anchored in expert engineering and software systems, scientific innovation as well as industry-driven technological creativity.
Capital investment constraints further curtail the creation of virtual value chains in Zimbabwe. Invariably, this is a market which still has low appreciation of the role and value of digital assets in value chains.
Clearly, a new narrative depicting the growing importance and role of virtual value chains ought to be highlighted as part of the country’s industrialisation thrust.
Local investors should, therefore, deliberately seek to identify investment opportunities embedded in virtual value chains that lead to the deepening of value addition and beneficiation across all the sectors of the economy and grab them before losing them.
A sad reality is that most of our propositions for value addition and beneficiation are still based on traditional value chains which are locked up with couplings located at the lower rungs of the ladders of GVCs where there is little or no wealth that is created at all. Such linkages are predominantly dependent on exports of raw materials by net exporting commodity-driven economies.
Our companies must therefore strive to move up the ladders of GVCs and find for themselves special niches in export markets.
A growing presence by local companies into high value nodes of virtual value chains does not only serve as a key indicator of the benefits and efficiencies that accrue to businesses within the economy, but it also shows the level of industrialization and modernization attained by the economy.
Two possible strategies industry should consider in these dynamics are pushing for entrance into high-value forward linkages or backward linkages.
The country’s industry must choose which strategy works best for which sectors of the economy. Business organisations like the Confederation of Zimbabwe Industries (CZI), the Zimbabwe National Chamber of Commerce (ZNCC) and the Employers Confederation of Zimbabwe (EMCOZ) should guide industry to define and pursue selected virtual chains in the context of the country’s quest for industrialization.
A lot of awareness and education around this subject matter needs to be raised.
Domestic players in the tourism sector may identify huge opportunities where virtual value chains link them to the rich nexus of GVCs for international tourist destinations.
In this regard, special couplings may be established through real-time tourist digital databases and business intelligence systems that ride on cloud computed platforms.
The application and deployment of geographical positioning system (GPS) technologies together with detectable embedded intelligent systems for tracking and monitoring wildlife in game parks can be a game changer for tourist attraction.
The industry should make it easy for tourists in any part of the globe to, at the click of a button, tap into the most exciting and attractive pillars of tourist Zimbabwe brand.
Digital systems should make it easy for prospective tourists to compare the country’s tourist resorts with those of any other country in the world with as much ease as possible.
In the same sector, it must be made easy for the tourists to transact using plastic money and other facilities that bring convenience to the fore of the country’s brand as a tourist destination of choice.
The same approach can be used in many other industry sectors from which the country can benefit through increased export earnings in a huge way.
Moving towards virtual value chains is an inevitable phenomenon which we need to deliberately speed up rather than to leave it to fate.
There is a convincing business case to this call.
By 2025, out of the seven billion people on planet earth, an estimated four billion will depend on the Internet of Things (IoT) as they will be connected simultaneously to as many as twenty gadgets.
This way, the IoT will be the game changer, giving rise to new forms of value chains and dictating the emergence of new business models.
With most GVCs increasingly establishing links in the cloud, enabled by Cloud Computing technologies, market efficiencies will also migrate to the cloud. Companies whose systems will be cloud based will realize efficiencies in terms of reduction in the cost of manufacturing, marketing and logistics.
For example, today the global giant Alibaba’s products compete in every marketspace across the globe as long as there is internet connectivity.
Its cost structure is set to be lowered further with the opening up of its Singapore-based cloud computing unit, Aliyun.
The same is true of the world’s leading online bookseller, Amazon. The companies use advanced digital platforms that enable customers from any part of the globe to place orders online and to track their shipment until they are delivered at their doorsteps.
Recently, Pokemon Go, the latest mobile phone App that has rocked the world with fifty million downloads witnessed from Google Play store alone within weeks of its launching into the marketspace, is set to change many business models across the globe.
The game which now competes well with Twitter and other leading Apps defines the intersection between the virtual and the real worlds.
It is considered that within weeks of its hitting the market, many industries have suffered various impacts due to its disruptive nature. Market watchers are also keen to see what Virtual Value Chains will emerge from Pokemon Go.
On the other hand, other market players are quickly positioning themselves along the various value chain nodes of the game to unlock first-mover virtual advantage and virtual value for their companies out of couplings within the Pokemon Go Virtual Value Chain. It will be interesting to see how this will pan out in the weeks to come.
There is also a strong prognosis pointing to the fact that by 2025, over 25 billion Apps and over 25 billion embedded intelligence systems will reconfigure both domestic, regional and global value chains, particularly in agriculture, manufacturing, mining, health and tourism sectors.
An estimated US$4 trillion worth of markets will also emerge with Africa as the leading and new frontier for yet another vicious economic warfare. The challenge is for Zimbabwe and Africa to move with agility to occupy the already crystallizing virtual value chains.
The important question is: what share of these virtual value chains and of the emerging marketspace will Zimbabwe take?
Will Africa once more fold its arms whilst it is being crowded out by the developed and other developing countries when it can do something to improve the lot of its citizenry?
If we are serious about the industrialization agenda, our country, among other African countries, should invest significantly in digital assets and infrastructure.
A key investment area is this regard is the National Information Infrastructure (NII). Zimbabwe still lags behind in this aspect. lt is however, pleasing to note that there are indications of Government’s commitment to this obligation even though a lot still needs to be done.
Public and private sector can also embark on infrastructure sharing to avoid duplication of efforts and thinly spreading resources across the country.
As Zimbabwe drives towards industrialization and modernization, conversations on disruptive technologies and Virtual Value Chains should assume prominent positions in business agendas. Industry and institutions of higher learning should also find ways to elevate this debate to higher levels within their respective agendas in the interest of achieving a sustainable socio-economic transformation.
Fredrick Mandizvida is the chief executive officer for the Zimbabwe Manpower Development Fund (ZIMDEF) and is a doctoral scholar of Technology Entrepreneurship. He writes in his personal capacity and can be contacted on [email protected]
