THEORIES, POLICIES, IMPORTANCE AND CHALLENGES OF INNOVATION

(A Comparative Case Study Analysis of Andela & Jumia Nigeria)

PRESENTED BY

EBUNOLUWA JEGEDE
AND
KOREDE OLAGOKE

OCTOBER, 2024.
 INTRODUCTION
1.1 Definition of Innovation
According to International Organization for standardization 2020, Innovation can be defined
as the practical implementation of ideas that result in the introduction of new goods or
services or improvement in offering goods or services. Invariably, they define Innovation as a
new or changed entity, realizing or redistributing value.
Similarly, Damanpour and Schneider (2020) also defines innovation as the implementation of
a new idea, product, service, or process that results in improved efficiency, effectiveness, or
competitive advantage. These definitions emphasize the implementation of new concepts or
solutions that lead to improved outcomes such as increased efficiency, effectiveness, or
competitive advantage. It underscores the practical aspect of innovation and its impact on
organizational performance.
1.2 Case Study Overview
This study examines two Nigerian companies namely Andela Nigeria and Jumia Nigeria.
Andela is an organization that cultivates IT talent in Africa and provides leading global
technology companies with access to a high-skilled resource pool. Andella was founded in
Lagos Nigeria in 2014 to train the next generation of developers and have evolved over the
years to become a giant developing software developer, providing tech talent solutions and
enhancing digital skills as such, this company operates across different sectors including
Information Technology (IT) sector, Business Process Outsourcing (BPO) industry, Global
Talent Network as well as offering Digital Transformation Services.
Jumia however was founded in Nigeria in the year 2012 by Jeremy Hodara, Sacha
Poignonnec who happens to be ex-McKinsey consultants alongside Tunde Kehinde and
Raphael Kofi Afaedor. A company founded originally in Nigeria in the year 2012 grow within
just five years and have its operations expanded to other countries including Egypt, Morocco,
Ivory Coast, Kenya and South Africa
Through Andela and Jumia Nigeria's experiences, this study explores the significance,
challenges, and theoretical foundations of innovation in driving organizational growth and
competitiveness.
2.0 Theories of Innovation
The term "innovation theory" refers to a collection of theories that make an effort to explain
the factors related to the acceptance of novel concepts. It focuses on how inventions spread
within a society group and the decision-making processes that result in the adoption of new
goods or services (Machiel, 2019). It's critical to recognize that there are many different types
of innovation theories as noted by Adams and Gan (2019) as well as Garcia & Calantone,
(2018), these theories include Diffusion of Innovations Theory (Rogers, 1962), Disruptive
Innovation Theory (Christensen, 1997), Open Innovation Theory (Chesbrough, 2003),
Absorptive Capacity Theory (Cohen & Levinthal, 1990), Knowledge Spillover Theory (Jaffe,
1986), Institutional Theory (Scott, 1995), Social Network Theory (Wasserman & Faust, 1994)
as well as Entrepreneurial Orientation Theory (Miller, 1983)
a. Diffusion of Innovations Theory (Rogers, 1962)
Diffusion of Innovations Theory, developed by Everett Rogers in 1962, describes the
five factors that affect the propagation of new ideas through social networks:
trialability, observability, complexity, relative advantage, and compatibility. The steps
of knowledge, persuasion, decision-making, implementation, and confirmation make
up the adoption process. According to Rogers, adopters can be divided into five
groups: innovators (2.5%), early adopters (13.5%), early majority (34%), late majority
 (34%), and laggards (16%). Early adopters, or opinion leaders, are primarily
responsible for influencing the ideas of others. To boost adoption rates, the idea places
a strong emphasis on observability, trialability, and simplicity. Although there were
certain drawbacks, such as the oversimplification of social processes and the omission
of organizational context and power dynamics, these were addressed in later revisions,
such as Rogers' 2003 edition. Combining this theory with others, such as Social
Network Theory, offers a thorough understanding of innovation diffusion,
empowering practitioners and innovators to create successful dissemination plans.
b. Disruptive Innovation Theory (Christensen, 1997)
The 1997 introduction of Clayton Christensen's Disruptive Innovation Theory
explains how new technology or business models upend established markets by
providing easier, more convenient, and less expensive solutions. Christensen made a
distinction between disruptive innovations, or radical shifts, and sustaining
innovations, or incremental improvements. Disruptive innovations usually target non-
consumers or underserved customers and appear in low-end or new markets. They
gain traction by their simplicity, affordability, and accessibility, eventually displacing
existing products or services. Disruptive innovations are typified by lesser
profitability, a distinct value proposition, and initially subpar performance. According
to Christensen's view, it's critical to anticipate and address disruptions rather than
depending exclusively on long-term innovations. To effectively disrupt the market, a
new business model that is different from the current one is needed to serve the new
customer base.
c. Open Innovation Theory (Chesbrough, 2003)
Open Innovation Theory, introduced by Henry Chesbrough in 2003, emphasizes
collaboration and knowledge sharing across organizations to drive innovation.
Chesbrough argued against the conventional closed innovation paradigm and in favor
of internal innovation processes, external knowledge sources, and external innovation
exploitation. Three fundamental ideas underpin open innovation: (1) sources of
external information, including partners, suppliers, and customers; (2) internal
innovation methods that incorporate external knowledge; and (3) external exploitation
of innovation through joint ventures, spin-offs, or licensing. This strategy boosts
flexibility, lowers expenses, and speeds up innovation. Openness, cooperation, and
intellectual property sharing are important traits. Chesbrough's idea emphasizes the
significance of establishing innovation ecosystems, managing external relationships,
and absorbing external knowledge. Organizations may maintain their competitiveness,
encourage entrepreneurship, and propel growth by embracing open innovation.
d. Absorptive Capacity Theory (Cohen & Levinthal, 1990)
Absorptive Capacity Theory, introduced by Cohen and Levinthal in 1990, explains an
organization's ability to absorb, assimilate, and utilize external knowledge to drive
innovation. Three elements are identified by the theory: knowledge utilization,
assimilation, and acquisition. Communication routes, organizational structure, and
past knowledge all affect absorptive capacity. High absorptive capacity organizations
are able to identify, absorb, and use outside knowledge, which boosts their
competitiveness and innovation. Cohen and Levinthal stress the value of internal
knowledge sharing, diversity of expertise, and research and development.
Organizations with effective absorptive capacity can exploit outside knowledge,
adjust to changing conditions, and promote innovation.
e. Knowledge Spillover Theory (Jaffe, 1986)
Knowledge Spillover Theory, introduced by Adam Jaffe in 1986, describes the
transfer of knowledge across organizations and industries, leading to innovation and
economic growth. Jaffe distinguished between two categories of spillovers: indirect
(such as personnel mobility and geographic closeness) and direct (such as research
collaborations and licensing). According to the hypothesis, when businesses invest in
 R&D, knowledge spillovers take place, resulting in externalities that help other
businesses. Knowledge spillovers are facilitated by geographic concentration,
industrial diversification, and research intensity. In order to harness spillover
advantages, Jaffe's theory emphasizes the significance of teamwork, investment in
R&D, and proximity to knowledge hubs. Innovation, entrepreneurship, and regional
economic development are all fuelled by efficient information spillovers.
f. Institutional Theory (Scott, 1995)
Institutional Theory, developed by Richard Scott in 1995, explains how institutional
forces shape organizational behaviours and innovation. Three pillars are identified by
the theory: normative (social norms, values), regulative (rules, regulations), and
cultural-cognitive (shared ideas, mental models). By creating credibility, influencing
stakeholder expectations, and directing decision-making, these pillars have an impact
on organizational innovation. According to Scott's idea, innovation must be in line
with institutional norms, laws, and cultural values. To remain legitimate and succeed,
organizations must strike a balance between internal innovation processes and
external institutional forces. Establishing alliances, leveraging resources, and
disseminating breakthroughs are all made possible by effective institutional
alignment.
g. Social Network Theory (Wasserman & Faust, 1994)
Social Network Theory, developed by Stanley Wasserman and Katherine Faust in
1994, explains how relationships and networks influence innovation diffusion and
adoption. The idea highlights how crucial network structure, centrality, density, and
betweenness are in influencing the dissemination of innovations and information flow.
Nodes (people or organizations) and ties (relationships) make up social networks,
which promote influence, cooperation, and knowledge exchange. Both weak ties
(acquaintances) and strong ties (close relationships) are important for the diffusion of
innovation. Innovation adoption can be accelerated by network position, centrality,
and filling in structural gaps. The idea of Wasserman and Faust emphasizes the
necessity of examining and utilizing social networks in order to promote the
dissemination of innovation.
h. Entrepreneurial Orientation Theory (Miller, 1983)
Entrepreneurial Orientation (EO) Theory, introduced by Danny Miller in 1983,
describes the processes and behaviours that drive entrepreneurial activity within
organizations. Risk-taking (inclination to take measured risks), Autonomy
(independence in decision-making), Innovativeness (willingness to experiment),
Proactiveness (ability to foresee and seize chances), and Competitive Aggressiveness
(intense competition) are the five dimensions that make up Entrepreneurial
Orientation. Strong Entrepreneurial Orientations increase an organization's capacity
for innovation, expansion, and environmental adaptation. Miller's idea emphasizes
how crucial it is to foster an entrepreneurial culture, support experimentation, and
provide staff members the freedom to lead innovation and competition.
Andela Nigeria and Jumia Nigeria exemplify innovative organizations in Nigeria. Traditional
IT talent development is being disrupted by Andela's training programs and talent solutions,
which exhibit dispersion of innovations (relative advantage, compatibility, trialability).
Diffusion of innovations is also seen in Jumia's e-commerce platform, which is upending
traditional retail. Through alliances with local/international businesses (Jumia) and
multinational IT corporations (Andela), both businesses take use of open innovation. They
increase their ability for invention by absorbing and using outside knowledge (Absorptive
ability Theory). Knowledge spillovers are facilitated by the company's expansion into other
nations (Jumia) and proximity to Lagos' tech cluster (Andela). While partnerships make use
of social networks, Nigerian regulations guarantee legitimacy (Institutional Theory) (Social
Network Theory). Both businesses have an entrepreneurial mindset that promotes growth by
independence, creativity, and taking risks.
Common themes emerge across both companies. Entrepreneurial orientation drives growth
through innovation. Growth is aided by open innovation and knowledge sharing, and
legitimacy is guaranteed by adherence to institutional standards. Innovation dissemination is
fueled by partnerships and social networks. These results offer a starting point for examining
the importance, difficulties, and theoretical underpinnings of innovation in promoting
organizational development and competitiveness in Jumia Nigeria and Andela Nigeria. The
complexity of innovation in these Nigerian businesses is highlighted by the application of
several theories, including the following: Diffusion of Innovations Theory, Disruptive
Innovation Theory, Open Innovation Theory, Absorptive Capacity Theory, Knowledge
Spillover Theory, Institutional Theory, Social Network Theory, and Entrepreneurial
Orientation Theory.

3.0 Policies for Innovation

According to Celeste et. al (2004), The term "innovation policy" describes a collection of
legislative measures intended to increase the volume and effectiveness of inventive
endeavours, such as developing, modifying, and implementing new or enhanced goods,
procedures, or services. At the municipal, regional, and federal levels, these policies are
essential for promoting the transfer of technology, information, and skills across scientific,
technology, and industry organizations.
Policies for innovation includes but not limited to the following.
i. Research and Development (R&D) Funding: Governments may
provide grants, tax incentives, or direct funding to support R&D
activities in various sectors, encouraging private and public entities
to invest in innovative projects.
ii. Tax Incentives: Policies that offer tax credits or deductions for R&D
expenditures aim to lower the financial burden on companies,
stimulating investment in innovation.
iii. Intellectual Property Protection: Strengthening IP laws encourages
innovation by protecting inventors' rights and incentivizing
investment in new technologies and ideas.
iv. Innovation Hubs and Clusters: Creating regional innovation
ecosystems (e.g., technology parks or innovation districts) fosters
collaboration between businesses, academia, and government,
enhancing knowledge transfer and innovation.
v. Public Procurement for Innovation: Governments can act as lead
customers by procuring innovative solutions, which encourages
companies to develop new products and services that meet specific
public sector needs.
vi. Education and Skill Development: Investing in education and
training programs ensures a skilled workforce capable of driving
innovation, particularly in STEM (Science, Technology, Engineering,
and Mathematics) fields.
In the context of Andela Nigeria and Jumia Nigeria, policies supporting innovation are crucial
for growth and competitiveness in Nigeria's tech industry. The Nigerian government's
Science, Technology, and Innovation (STI) strategy, the National Information Technology
Development Agency's (NITDA) programs, and private sector-led projects like the Lagos
Innovation Hub are important endeavors. Companies like Andela and Jumia are able to
prosper because of these regulations and activities, which create an atmosphere that is
favorable for innovation, entrepreneurship, and technological growth. These policies can
stimulate economic growth, job creation, and Nigeria's positioning as a leader in the global
digital landscape by encouraging IT development, R&D, and startup growth.
4.0 Importance of Innovation
The following are the identified importance of innovation
i. Fostering growth: Innovation helps companies adapt and overcome challenges.
ii. Competitive advantage: Developing unique products and services sets you apart from
competitors.
iii. Meeting customer demands: Innovation helps meet evolving customer needs.
iv. Increasing efficiency and productivity: New ideas and processes improve
productivity.
v. Attracting and retaining talent: Innovative companies are more appealing to
employees.
For Andela Nigeria and Jumia Nigeria, innovation is crucial for sustained growth and
competitiveness. Innovation promotes growth by allowing Jumia to increase its e-commerce
products and Andela to adjust to shifting global IT demands. By creating distinctive goods
and services, like Jumia's regionalized online shopping experiences and Andela's customized
tech talent solutions, both businesses are able to obtain a competitive edge. As Jumia's data-
driven strategy improves customer happiness and Andela's agile training programs cater to
client needs, innovation aids in meeting changing customer demands. Additionally, through
improved operations and process automation, innovation boosts productivity and efficiency.
Last but not least, the creative cultures of Andela and Jumia draw and keep top talent.
Andela's entrepreneurial atmosphere and Jumia's pioneering attitude attract talented people
looking for exciting work settings, which eventually propels company success and expansion
in Nigeria's tech sector.
5.0 Challenges of Innovation
The following are the identified challenges of innovation
i. Impractical expectations for innovation
Imposing unreasonable expectations makes individuals lose confidence. As a result,
innovative outputs suffer. Sometimes, in innovation, we sensationalize, overestimate,
and overpromise an idea that generates an expectation threshold that is difficult to
meet.
ii. Unempowered innovation teams
Some innovation managers are concerned that innovation would divert the attention
of their workforce from their daily tasks and responsibilities. As a result, some
employees don’t feel equipped nor motivated to participate in the exploration of new
ideas or even in discussions related to the company’s innovation activities.
iii. Resistance to change
People often say that change is constant. But sometimes, humans have this natural
tendency to be afraid of change, especially big ones. However, in business, to
accomplish progress, it is necessary to embrace change
iv. Difficulty in transitioning from one phase to the next
Given that the innovation team is composed of different people with diverse ideas,
this could potentially become a problem as their opposing views could affect their
way of working towards an accessible and meaningful output. This could potentially
affect them in the long run
v. Futile innovation toolbox
Without access to powerful innovation tools, it’s impossible to manage innovation and
keep track of your innovation initiatives in today’s highly competitive business
environment.
Jumia and Andela Nigeria face various innovation challenges that hinder their growth. Output
might be impacted by disillusioned teams brought on by unrealistic expectations for
innovation. Idea generation can be stifled by underpowered innovation teams, as seen by
Andela's early difficulties juggling innovation with core responsibilities. The uptake of new
services may be slowed by resistance to change, especially among Jumia's traditional
clientele. Diverse viewpoints within Andela's international teams make it challenging to
move between innovation phases. Additionally, Jumia finds it difficult to oversee and monitor
projects in the absence of efficient innovation toolboxes, which reduces its competitiveness.
Furthermore, Andela has trouble expanding its creative solutions to new markets. Both
businesses must manage expectations, cultivate an environment of empowered innovation,
and use agile approaches to accelerate advancement in Nigeria's quickly changing technology
sector in order to overcome these obstacles.
6.0 Conclusion
This comparative case study analysis of Andela Nigeria and Jumia Nigeria explored the
intricate dynamics of innovation, examining theoretical foundations, policy frameworks,
importance, and challenges. According to the study, both businesses' growth and
competitiveness are supported by innovation theories including disruptive innovation and
diffusion of innovations. Innovation is encouraged by effective policies, such as the Science,
Technology, and Innovation (STI) policy and the National Information Technology
Development Agency (NITDA) efforts in Nigeria.
The importance of innovation was evident in Andela and Jumia's ability to adapt to changing
market demands, gain competitive advantage, meet evolving customer needs, increase
efficiency, and attract top talent. Nonetheless, obstacles continue to exist, such as unrealistic
expectations, underpowered innovation teams, opposition to change, trouble shifting between
phases of innovation, and inefficient innovation toolboxes. A culture of empowered creativity,
controlled expectations, nimble approaches, and calculated policy interventions are necessary
to overcome these obstacles.
This study contributes to the understanding of innovation dynamics in Nigeria's tech industry,
highlighting the need for synergies between policy, practice, and theory. Sustained growth
will depend on tackling innovation obstacles and utilizing policy assistance as Andela and
Jumia continue to influence Nigeria's digital landscape. For scholars, entrepreneurs, and
governments looking to support innovation-driven economic development in Africa, the
findings provide insightful information. Nigeria may realize its full potential and become a
leader in the global digital economy by embracing innovation.
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