Design Thinking: empowering SMEs to drive South Africa’s economic growth

The South African economy faces several challenges, including sluggish economic growth, rising unemployment figures and continuous power cuts, which are adding more pressure on businesses across the board. Richard Perez, Director of the Hasso Plattner d-school Afrika* at the University of Cape Town, says, “Small and medium-size businesses could be the answer to some of these problems.”

SMEs – the answer to South Africa’s problems

The role and contribution of SMEs to the economy are well-documented and uncontested. The International Finance Corporation (IFC) estimates that the local SME sector contributes 34% of the nation’s GDP annually, with these businesses employing 50 to 60% of all workers.

To support the sector’s expansion and elevate its contribution to the economy, there’s still a lot of work to be done. The IFC claims that South Africa’s early-stage entrepreneurship rate should be three times higher, based on the country’s current number of SMEs and GDP per capita.

Empowering SMEs through Design Thinking

“We don’t have a shortage of people with the tenacity and grit to identify an idea and do something with it,” says Richard. “But there isn’t enough support in that early phase of a business. Many entrepreneurial programmes and support focus a lot on the technical side. You know, it’s the business plan, the financial support, the HR.”

While these are, of course, important for any business, he adds, “What we need is to build an entrepreneurial mindset, which I believe is a crucial component of business development. It’s necessary to implement programmes and training initiatives that aim to cultivate this mindset and foster the confidence needed for creative and innovative entrepreneurship.”

Richard proposes a Design Council that supports and promotes the Design Thinking industry. He says that countries that support design-led thinking through the establishment of such councils have seen a massive improvement in innovation, SME growth and overall economic forecast.

Using Singapore as an example, he unpacks how the country established the DesignSingapore Council in 2003 to boost the country’s value and economic growth. Today, about 7% of the population engages in entrepreneurship, making Singapore one of the leading countries for business investment. Last year, over 45 000 businesses were registered, approximately one per 100 people.

Stages of design-led thinking

Design-led thinking is more than just a process. Ultimately it’s a mindset and attitude that you bring to a challenge. One of these mindsets is appreciation that there is a structured process to developing an idea and hence design thinking provides an effective methodology which provides a solution-based approach to solving problems. It is a non-linear, iterative process that can have anywhere from three to seven phases, depending on whom you talk to.

According to the d.school at Stanford, there are five stages of design thinking models.

1. Empathise: During this stage, research your users’ needs.

2. Define: State your users’ needs and problems.

3. Ideate: Challenge assumptions and create ideas.

4. Prototype: Start to create solutions.

5. Test: Try your solutions out.

5 ways SMEs can benefit from design-led thinking

1. Cultivating a customer-centric approach: Design-led thinking places a strong emphasis on understanding and empathising with the customer’s needs and desires. By adopting this approach, SMEs can gain valuable insights into their target market, enabling them to develop products and services that truly resonate with their customers. This customer-centric focus helps SMEs create solutions that solve real problems, leading to higher customer satisfaction and loyalty, which may equate to better profit.

2. Driving innovation and differentiation: Design-led thinking encourages SMEs to think creatively and embrace a culture of innovation. By employing techniques such as brainstorming, ideation and prototyping, SMEs can generate fresh ideas and develop unique offerings in the marketplace. This emphasis on innovation allows SMEs to stand out from competitors, attract new customers and open up new market segments.

3. Fostering agility and adaptability: SMEs often face resource constraints and must be nimble in responding to market changes. Design-led thinking promotes an iterative and flexible approach to problem-solving. Through rapid prototyping and testing, SMEs can quickly validate assumptions, gather feedback and make necessary adjustments. This iterative process enables SMEs to adapt their products or services based on market feedback, reducing the risk of investing in a solution that fails to meet customer expectations.

4. Promoting collaboration through diversity: Design-led thinking encourages diverse perspectives and expertise to come together, fostering a multidisciplinary approach to problem-solving. SMEs can leverage the collective intelligence and input of different opinions, leading to more robust and holistic solutions.

5. Encouraging failure: Design-led thinking encourages ideation and prototyping before entering the market with new products. This way, entrepreneurs and SMEs can fail as often as they like, developing a strong product and improving the failure rate. According to the University of the Western Cape, only about 1% of micro-enterprises that have started with less than five employees have grown to employ 10 people or more. This means the success rate is high while growth prospects are low.

In conclusion, Richard highlights that everyone wins when SMEs in South Africa adopt design-led thinking. He says: “That’s where the future of South Africa sits – with SMEs. Some of these businesses will become big corporates. Some will remain SMEs, but they will hire a large number of unemployed people and come up with innovative solutions for some of our problems, including things like loadshedding.”

ARTICLE BY THE MINDSPACE TEAM

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