Picture: 123RF/MATTHIAS ZIEGLER
Picture: 123RF/MATTHIAS ZIEGLER

Ever since the launch of Google, Amazon, Facebook and Uber, a new breed of company has emerged that employs digital technology and entrepreneurship to create disruptive innovations.

The significance of digital entrepreneurship is colossal when considering that economist Joseph Schumpeter claimed entrepreneurs may destroy industries while creating new ones. Some experts even suggest that digitisation, particularly in the form of broadband infrastructure, may be more critical than highways and railroads in today’s high-tech environment. In this sense, the digital economy can be seen as a real market opportunity for entrepreneurs.

The proliferation of new digital technologies, such as cloud computing, blockchain technology, the internet of things and artificial intelligence, has transformed the nature of business and forced individuals to find new ways of dealing with innovation and uncertainty. In turn, this has opened up a host of opportunities at the intersection of digital technologies and entrepreneurship.

The intersection of digital technologies and entrepreneurship is highly relevant to SA. 

We live in an era of such profound technological change that entrepreneurs can disrupt the market equilibrium by introducing new digital product-market innovations into the marketplace. Digital technologies have diffused faster than electricity and telephones. According to research conducted by the European Commission, smartphones have reached a 40% diffusion rate in only 10 years, while it took electricity almost 40 years to reach a 10% diffusion rate. 

Locally and globally, the pace of technological change is rapid and competition is intense, therefore the ability to rapidly adapt to technological change is critical for business success and survival. With digitisation, entrepreneurial processes have become less bounded. New digital infrastructures enable product ideas and business models to be rapidly designed, modified and recreated in repeated cycles of experimentation and implementation. Furthermore, the ability to rapidly enhance the capabilities and performance of the product or service at low cost and with ease is afforded by new digital infrastructures such as cloud computing and mobile networking.

For example, we have seen a rise in digital entrepreneurs who, supported by platforms such as Apple iOS, Google’s Android and Facebook, can strategically navigate the complex landscape of linking and adapting to different platforms to ensure entrepreneurial success. Similarly, crowdfunding platforms enable entrepreneurs to share their knowledge and business ideas, while the amount of capital collected is dependent on the entrepreneur’s engagement on social network sites such as Twitter, LinkedIn and YouTube.

In light of such developments, many experts argue that the development of new technologies has shifted from large corporations to small and medium-sized enterprises (SMEs) and investments in technology support the creation of smaller ventures to exploit technologically based opportunities.

The intersection of digital technologies and entrepreneurship is highly relevant to SA, where high levels of unemployment are prevalent and small business as a whole remains underdeveloped by international and African standards. While SA’s technological infrastructure is considered the most extensive of all African nations, the state of information and communications technology (ICT) in SA highlights the excessive costs of data on SA’s telecom networks in comparison to other African nations.  This is somewhat disconcerting when considering that the use of ICT has been shown to drive entrepreneurship in almost all market sectors by lowering costs and enhancing the ability of entrepreneurs to develop new tools to organise and share information in local and global markets.

But are SA’s SMEs harnessing technology to enhance their growth and performance?

According to a series of global longitudinal studies, only about a quarter of SA entrepreneurs use the very latest technology. Morocco is the African leader in this respect, with 72% of entrepreneurs using the latest technology. Indeed, the inherent potential of digital entrepreneurship is rapidly disappearing, when considering that innovation levels among SA SMEs have steadily declined since 2015.

Policymakers would be well advised to focus more on the digital economy to foster high-impact and high-growth businesses that are scalable and create value using digital technologies. Studies show that technology usage can lower transaction costs and encourage manufacturing, innovation and entrepreneurship while, at the same time, reducing the time required to start a new business.

But we need to remain cautious. While some scholars speak about a democratisation of technology across regions and societies, the World Bank concedes that despite many individual success stories, the expansion of opportunity for the poor and the middle class has so far been less than anticipated. Nearly 60% of the world’s people are still offline and cannot participate in the digital economy in any meaningful way.

Digital technologies have been spreading, but digital dividends are not spread equally over the global population. To rephrase American writer Walter Isaacson: the symbol of the atomic age, which tended to centralise power, was a nucleus with electrons held in tight orbit; the symbol of the digital age is the web, with countless centres of power all unequally networked.

• Urban is a professor at the Wits Business School.