TMT
Adaptation trumps innovation
COVID-19 lockdown restrictions across Latin America have forced many businesses to adapt and innovate but care should be taken not to confuse adaptation with innovation.
“Most businesses have had to adapt to survive the pandemic but relatively few businesses in Latin America have been genuinely innovative,” explains an executive at a digital strategy consultancy with offices in Chile, Peru, Argentina and Ecuador, “for example, a nightclub becoming a supermarket is not innovation, it is adaptation.”
“Most businesses have had to adapt to survive the pandemic but relatively few businesses in Latin America have been genuinely innovative.”
Executive, multi-national digital strategy consultancy
The pandemic has brought a boom in digital adaptation (remote working, e-commerce, food delivery, etc) but not necessarily in innovation as most companies have not developed new processes or business models. The CEO of a Google partner firm in Colombia told us, “Digital transformation can be a pathway to innovation as companies gain more systemised processes and better data.”
Cashflow challenges presented by the pandemic have also been a barrier to innovation as resource has been diverted from innovation to survival. The CEO at a Google partner firm recalls a recent example, “One of the most innovative banks in Colombia has stopped investing in innovation as it has been forced to adapt to survive.”
“One of the most innovative banks in Colombia has stopped investing in innovation as it has been forced to adapt to survive.”
CEO at a Google partner firm, Colombia
In some developed markets government is stepping in to ensure innovation doesn’t dry up but this has not been the case in Latin America. Take Colombia as an example, there are a growing number of success stories (Rappi, Frubana, Tpaga, Liftit, Habi, Mercadoni and Merqueo) but a Colombian investor saw little government support, “There are some tax exemptions for innovation and some funds were created several years ago to invest in technology (e.g. Innpulsa) but there isn’t anything else.”
It is a similar picture in Peru where some limited government funds are earmarked for innovation but most support is not targeted.
Businesses across Latin America are adapting to survive but all too often at the expense of innovation. There is a funding gap emerging that needs to be filled, with a growing stable of innovative companies, an expanding talent base and an emerging track record, perhaps more venture capital should be looking towards Latin America.
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