Rewired for Innovation?

Released by: The Edge
Date: 30 October 2006

Accelerated, often disruptive change resulting in value innovation is the order of the day and the winner is the one who can do it better, faster and cheaper. Rewiring for innovation today means an organisation or an enterprise that is not just built for efficiency but one that can re-invent or re-model itself for value creation and growth.

IBM's bi-annual Global CEO Survey of more than 750 business leaders reveals that innovation is the key to gaining that highly desirable competitive advantage and 87% of them say they need to enact moderate to major changes in the next two years to address the pressures and take advantage of the opportunities available. They are so right because successful companies are the ones that innovate, continuously and holistically.

The real change is whether Malaysian CEOs have thought about their innovation agenda and programme to still be in business five years from now.

Value Innovation

Apple Computers is a classic example - its iPod includes several innovations and we are not referring to just the product itself but the entire eco or value system that goes with it. Apple took a cool-looking, ultra-simplistic product design, coupled it with a novel agreement with the music labels to sell their songs through iTunes (an online music store where consumers can buy individual songs for a low US$0.99), and packaged all of that with a killer branding strategy.

For some years now, the music industry has been fighting hard and attacking the music pirates for downloading music illegally. Threats of litigation and taking certain individuals to court pushed music fans to go `underground' while spurring the development of more creative `music rippers', so to speak. Apple, with its ear tuned to the underground movement, realised that high cost is the key deterrent and by introducing the killer US$0.99 per song, made it possible for music fans to download songs legally!

Innovating to deal with globalisation

In Malaysia, businesses and organisations too are trying to deal with the impact of globalisation, a changing workforce and rewiring themselves from a production-based economy to a service-based or knowledge-based economy. It means having a new breed of highly creative knowledge workers to develop new products, services, technologies and business models and find ways of drive sales, add value, be customer-centric and keep an eye on consumer fears.

On a grander scale, this has a lot to do with our competitiveness as a nation itself, especially when we are up against the likes of India and China, two countries that have seen amazing transformational progress.

Many ideas actually get nowhere from the word go. So, the real question here is what makes an innovation a runaway success? Real innovation firstly must not only make commercial sense, it must also enable a company to differentiate itself and create real value to generate a competitive advantage. From the management standpoint, the ability to see the ideas from concept to product is the key challenge.

Unfortunately, many business owners and managers believe that innovation must come from laboratories filled with PhD-holders in white coats. That's a misconception. All it takes is a creative mind capable of generating bold ideas and the commitment to nurture, develop and take it to commercial fruition.

Innovation is so much more than just hot new products such as the cool-looking mobile phones, shiny digital cameras and nifty PDAs. It is the creative process that goes into bringing these gizmos to the market. Innovative management entails reinventing the entire business model, overhauling traditional processes and reconstructing the entire services, if necessary. Air Asia is a classic example of a service innovator, outflying its more `dinosaurish' rivals with a new operating model and highly creative pricing. It leveraged on the Internet, creating huge savings via a paperless environment and offering low prices so that now `everyone can fly".

Innovation is not a one-off thing

Dell rocked the PC industry by going directly to the consumer, resulting in an industry- wide consolidation and putting countless smaller players out of business. Competitors like HP have gotten wiser and caught up and now Dell's profits have fallen by half in the last quarter. Can Dell can reinvent itself and dominate once again through creative destruction and a novel value innovation?

Innovating is risky as well. For every successful innovation, there are hundreds, if not thousands, that failed along the way. One should not bet the entire future on just a single idea or product. Companies can find creative ways to reduce risks, via partnerships, investing in new start-ups or "co-opetition". Arch rivals Sony and Samsung co-developed LCD panel technologies, which made commercial sense because instead of duplication and competing in technological research, they competed on design and pricing. Now that is innovative collaboration!

Some companies take innovation a step further - by involving employees' families, customers, consultants and suppliers. IBM's CEO Samuel J. Palmisano tapped the collective minds of 100,000 people through an IBM Innovation Jam - a 72-hour online brainstorming session that allowed IBM to mine new ideas; the 37,000 ideas generated were then consolidated into 31 ideas. Palmisano has committed a whopping US$100 million to getting the best of the crop.

Innovation starts with people

This shows that innovation is worthless without on-ground proposals, sound management, wise investment and committed people. That means one must put together the process and policies, harness the right technology and create an inspirational development culture that brings people together regardless of departments, geographic locations and cultures. There must be a disciplined and consistent manner in which creative ideas are synthesised, debated, tested, produced and put into action.

It doesn't matter if only one out of every 100 or 1,000 becomes a success. There are no guarantees, except for the fact that inability to innovate is a recipe for failure in the long term. And this is where knowledge management comes in very handy. It encompasses capturing, transferring, distribution, revitalising and creative usage of knowledge within an organisation. It provides for a more systematic approach to the process of managing ideas and knowledge capital that can include competencies, intellectual assets and capacity to innovate. Ideas can be retained, even after the employee leaves. Ideas can be redistributed, reinterpreted in a whole new different context and cross-pollinated: For instance, a high-speed rail service that will take you from KL to Penang in one hour for only RM9.90, an "AirAsia on rails"!

Innovation is an oxymoron

Yes, innovation management may seem like an oxymoron but given that innovation is fast becoming an imperative, the cost of not doing it and managing it so that it delivers consistent profit and long-term growth far exceed the risks involved. The bottom line is that if you don't innovate, your competitors will or worse still, someone from an entirely different industry will, and wipe out your corporation.