#26 The Unexplored Innovation

The video below was shared by Ravi Varmman from HELP University. My view on this video is that innovation happens everywhere. Innovation in regardless of small or big can have a powerful impact on the society. Being a big follower of C.K Prahalad’s view (fortune in the bottom of the pyramid), there is so much fortune in these places. If you look at the population in India, there is so much of unexplored market. This unexplored market does not necessarily means new customer or potential customer but also possibility of a new innovation collaborative effort. Therefore, we are no longer looking at who are the customers but also the need to understand who are these people that serves the customer. Take a look at these quadrants:

		Suppliers
		Existing	Unexplored
Customers	Existing	Sustain	Partnership/JV etc
	Unexplored	New Product Development	New Innovative Collaboration

Once we can match the unexplored suppliers with the unexplored customers, we create mass new innovation opportunities. Possibilities for a nation to self-sustain.

One lesson to take away from this is that you need to give freedom to these nations to innovate. By freedom, I mean removing limitations and controls over these nation and removing the mindset that “i know it all”. They are the one who understands the needs of their society and has been living under such conditions their own life. When innovation happens, bring the idea back or customize their idea to the current market or even a new market elsewhere. Recall the Tata Nano car (https://cesquare.wordpress.com/2012/02/19/13-find-the-market-the-the-brains/). Innovation happens everywhere and to everyone from diverse culture. People are born smart in their own ways. We need to help educate these people to realise their potential. Opportunities are everywhere if we change our mind-set.

Check out the video:

 

In order for undeveloped nation to grow, we must change the way their people think and what the world thinks of them. What the world needs to do now is to bring awareness and opportunity to these people to self-sustain.

 Photo taken from: http://www.thebetterindia.com/wp-content/uploads/2010/01/tilonia2.jpg

Vijay Govindarajan on Innovation

Another great insight on innovation. The three principles of innovation at the end of the video sums up what most businesses should try to adopt in their quest to innovation. 

#13 Find the Market, then the Brains

In the current economic landscape, we have seen the shift of power from the developed to the emerging markets such as Indonesia, China and India. This fundamental shift has prompt businesses to rethink their growth strategy. One factor contributing to this is due to the mass market in these emerging countries. If we take this into context, the world currently has approximately 7 billion people and out of this 7 billion, 2 billion belongs to the rich countries and the remaining 5 billion people belongs to the poor and emerging country. The 5 billion people serve as tremendous market opportunities. The late Proffessor C.K. Prahalad calls this the fortune at the bottom of the pyramid.

How businesses can tap into this market is by having big dreams in these emerging economies. Businesses should prevent bringing innovation from developed economy to developing economy. This is because if we look it into detail, there is a huge gap between the incomes per capita between these two categories. How could a person earning $800 per year afford something from a country where the people is earning $15000 per year. This does not only address the issue of income gap but also the lifestyle of these people.

Innovation should be done in these developing countries tailoring to the needs and capabilities of the people. I quote this from Proffessor Vijay Govindarajan, Innovation is not just creativity. It does not only taking into account the brain. Innovation is commercializing creativity. These two words (commercialization and creativity) should not be separated when we are looking at an innovation point of view. Thus, there should be a market for the creativity before setting the brains to it. And this can be found in developing countries such as Indonesia, China and India. More recently, Indonesia has become a popular destination for investment due to the huge domestic consumption.

Several success stories can be seen. This includes the introduction of Tata Nano, the world cheapest car in India which only cost $2000. Before this, most people in India travel on 2 wheelers which cost approximately $1500. Tata Motors sees this opportunity and brought the brains into the market which then proves to be stroke of genius.

Overall, there are still many stories in the 5 billion people which have yet to be unfolding. It is the business’s role to explore and amplify the signals for innovation.

With the world becoming more connected, businesses that are not on the lookout for emerging markets are destined to lose out in the midst of competition. Businesses now should start putting more resources into these un-tapped markets and build their business around these massive markets of opportunities.

Inspired from: http://www.youtube.com/watch?v=1KUFkQBDo74

Photo taken from: http://liveindia.tv/india/india%E2%80%99s-population-pegged-at-1210-2-million/

#12 Fat, Lazy and Blind

The quest for competitiveness for Businesses usually starts with the three questions. Consider a simple example, ABC Ltd is to compete in the market and one of their main performance indicators is the Return on Asset (Return/Total Asset). The question the manager first asked is how they can improve on this performance indicator in order to be ahead of competition.

The manager first looked at how the business can remove excess idle resources which are not utilized. They asked the question “are we fat?”. He first will go into the quest to remove the excess unutilized fats lying around. He starts disposing idle assets and sometimes even firing redundant staff. The first step is called “restructuring”. This step is the easiest for them to do in order to compete as it is easily within their control. In terms of performance indicator, it shows an improvement as total asset reduces. However, few months later, the competitor comes biting. The manager then feels the need to improve furthermore.

He then looked into the second area to improve and asked the question of “are we lazy?”. Is the people not working hard enough or is the machine not as productive as before. The manager then squeezed every single employee to work their ass off. The manager even replaced old machine with new machine in order to improve the productivity. This step is called “reengineering”. When we look back at the performance indicator, it increases the numerator which now generates more output thus translating to higher returns (assuming production is equals sales). Overall, performance indicator improves and the manager feels good about it.

Few months later, one of the closest competitor went through a fully reinvention of their processes which is relatively new to the industry. As the competitor has been working on it for years, they are able to be the first one to roll out this new process. The manager of ABC Ltd then looks into their business and notice that there is something which they are not seeing. They asked the question “are we blind?”. Are we measuring what is not supposed to be measured? Is there any flaw in our measurement system? Are we not seeing what we are supposed to look out for? They now lacks behind their competition that is constantly looking for new ideas and innovation.

In this phase of competition, companies fail because they fail to recognize these three questions concurrently. They only start to look when everything fails and this can be very costly to businesses. It is as if a fish on a hook before discovering land. They make the mistake of making the move which is the easiest to achieve. This may be drawn from poor reward system where companies give rewards on performance based indicator and not idea based indicator. Of course, this does not mean that performance based indicator is flaw (able to motivate people to perform, however it is not in the context of this article). The lesson to take home is to recognize the three questions concurrently. Professor Govindarajan proposed to have a separate unit to address the question of “are we blind” as it is through external unit that is able to diagnose industry weaknesses. This involves develop an own benchmark as opposed to industry comparison, creating own map and unlearning the past. As for the internal unit, the question of “are we fat?” and “are we blind” should be recognized concurrently as time is of essence especially in this phase of competition. It is foreseen that competition will become more intense in the future.

“Business competing in the future should have a holistic view of where their business is going. This will come from addressing the three questions of “are we fat?”,”are we lazy?”, and “are we blind?”. The first two questions cover the organization transformation while the last question covers both industry transformation and organization transformation. By having concurrent action, the business is in the proper quest for competitiveness”

 Inspired from: Competing for the Future by Gary Hamel & C.K. Prahalad

Photo taken from: http://www.buzzom.com/2011/02/nokia-on-the-lookout-for-os/

Small Companies vs Large Companies in Innovation

David vs goliath is one of those instances that being small does not necessarily means at the losing end. It is how the small companies leverage its advantage over the bigger companies. Below are few factors that small companies may perform better than big companies.

Flexibility
Most small companies adopt a matrix like roles and function. This allows the small companies to perform various roles and functions at any time. In the view of innovation, we are looking at changes to the usual operations of the business. Thus, being able to perform different roles cross functionally proves to be an essential advantage to smaller companies. On the other extreme, big companies generally have a well defined and rigid job structure and functions in view of better management of resources and accountability. Due to this, they are not able to move around effectively during changes in terms of higher cost and longer period to change. Having this in mind, smaller companies may be a disadvantage when there is a fundamental change whereby resources may be insufficient to respond to changes. Large companies on the other hand may have the resources to utilize especially in R&D.

Unlearning
Great thinker like Vijay Govindarajan and CK Prahalad has provided that companies must fundamentally unlearn what they know in order to advance in innovation. This is particularly true as innovation is about changes and moving forward. Companies are not able to innovate effectively if it clings on to their past knowledge. Innovation is not about extrapolating the past but driving the future. Large companies usually have a great pool of knowledge and resources. This will cause them to be less than willing to let go of the past as much of their investments are tied up to their assets (being patent, research and development). On the other hand, smaller sized companies usually have less of their resources tied to the assets. These companies usually utilized the spillover effect from larger companies. Despite not able to compete in a larger scale, they enjoy the ability to exit and enter a new market at lower cost. Thus, smaller companies usually are more willing to let go of the past to fully embrace innovation. Yet, they may face participation challenges as they may be reluctant to invest judging from what they have been doing in the past (capitalizing on spillover effect from larger companies).

Risk taking
When we innovate, we are taking a large degree of risk. Risk remains the most important factor in innovation. As smaller companies have limited downside risk and unlimited upside return, they are more than willing to take the risk as opposed to larger companies. Larger companies also have a larger degree of accountability to stakeholders. They usually try to avoid unnecessary risk. This make sense because they have to satisfy more stakeholders and thus will take a safer choice unless only if it is necessary for going concern issue.

Speed in Communication
In the new era of competition, the fastest usually wins the race. In large companies, there are usually many levels of hierarchy. Thus, any ideas that are thought of are communication to the organization in a longer period of time. This resulted in the ideas losing momentum and gained insufficient buy-in as described by John Kotter as death by delay in his book (Buy-in, Saving Ideas from being Shot Down). Idea losing momentum usually will cause lack of energy to fully embrace innovation. This will result in lack of participation and ultimately good ideas die. This is different in smaller companies as ideas are usually a collective view and the objectives are well communicated with the organization as a whole. This is good in two ways. One is that ideas is communicated when is in at its peak. Two is that bad ideas are able to be determined earlier to avoid resources being used wastefully.

“Success factor in innovation is determined through the ability to repond to changes in a short period of time. This requires a great deal of unlearning the past, communication of ideas and flexibility”

Inspired from: http://www.business-strategy-innovation.com/wordpress/2011/05/innovation-differences-big-vs-small-companies/

Photo taken from: http://aazmin.blogspot.com/2011/04/kerja-selepas-phd-kerja-tempat-belajar.html

Innovation vs Creativity

“Innovation is not creativity, innovation is commercializing creativity… innovation is the multiplication of creativity and execution ” -Vijay Govindarajan-