After listening to me talk about the Innovation Prize for Africa recently, my 8-year-old son asked me a very challenging question: "What is innovation?"
Just as I was trying to think of a simple way of answering him, he added another question: "Are you innovative, papa?"
That question gave me even more trouble because I have never invented anything technologically speaking!
But this made me realise that the definition of innovation is not wide enough in general and certainly does not capture the expansive ingenuity I see across the African continent every day.
I believe that innovation is often too narrowly defined. Most people think innovation is dominated by developed countries and highly driven by research and development. This reduces innovation to mobile applications. In my experience, this view no longer reflects reality.
Recently economists have revisited what is known as "Schumpeter's View" and found that it proves true both in practice and theory. The 19th century economist held that innovation is driven by monopoly power - the power to earn extraordinary returns on investment.
This tells us something about where we should expect to find innovation, particularly in Africa. Based on this theory we should be looking for the greatest innovation in developing economies characterized by a lack of competition.
Schumpeter's view also broadened the notion of innovation by listing five types of innovation:
1) new products; 2) new methods of production; 3) new sources of supply; 4) new exploitation of new markets; and 5) new ways to organize business.
By embracing this more comprehensive notion of innovation, we open our minds to new ways to improve industries, economies and societies. We need to apply this broader view to Africa's innovation ecosystem.
Practically speaking the best way to strengthen the African innovation ecosystem is to improve access to financing. This is not just my view; the "WEF Executive Opinion Survey" also cites financing as the biggest challenge to doing business in Africa.
I see this every day in my work. Therefore, I am calling on private-sector leaders, government, NGOs, and others to create new financing vehicles that responsibly promote African innovation.
Today, venture capital-backed jobs account for 11 per cent of US private sector jobs and venture capital has generated approximately 21 per cent of US GDP. Each 1USD invested in venture capital backed companies has on average has seen a return of 600 per cent since 1970. By comparison venture capital represents just a fraction of the African economy.
The innovation potential in Africa is immense, yet the relatively small amount of venture capital is limiting Africa's development. Ironically, it is also limiting the opportunity for VCs. However, I remain optimistic. Inspired by the innovators I meet every day, I am confident that if they can create solutions to some of Africa's most intractable problems, we can take a broader view of innovation and create new venture models to fund their ingenuity. This is what Africa deserves. This is the future we will innovate.