Innovation-led R & D The Key For SMIs

As mentioned in the last article, the surest and fastest way to ruin, for Malaysian SMIs, is by engaging in R&D focussed on creating revolutionary products that break new scientific or technological grounds. As pointed out, SMIs do not have the resources and staying power required in the invention game. Innovation however, is a different story.

We need to understand how invention differs from innovation. It is not a case of mere semantics, this understanding is crucial if SMIs are to profit from R&D and increase their competitiveness against counterparts in low-cost producer countries.

An innovation is rarely based on a new scientific or technological breakthrough. Rather, it is the clever and creative combination of existing ideas or technologies. This can result in an entirely new product or differentiate an existing product sufficiently to afford a competitive edge to the company. It can also involve finding new and creative uses for existing products and technologies. These new uses may open new markets or fulfil the unmet needs of the existing customers.

True innovation starts from the commercial or business perspective and is motivated by the desire to make profits. This means that R&D has to be minimal and existing ideas and technologies have to be ‘recycled’ or combined in creative permutations to keep the cost low. Time to market is paramount and lengthy R&D cycles are taboo. These characteristics are no different from the invention-led R&D that large corporations undertake. What is different however, is the nature of R& D and its level of complexity.

Innovation is not rocket science, it is a unique and creative reuse of existing ideas, knowledge, technology or products. Difficult and extensive R&D belongs to the realm of invention, not innovation.

Innovation is not just restricted to products, it is equally applicable to the service sector. Innovative services launched by forward-looking companies have been responsible for stealing market share from long established companies by the creative combination of existing ideas or by applying ideas from different industries to their own.

Let’s look at how the internet has fuelled innovation and spurred novel service industries by putting a new spin on old ideas. The auction business has been around for many decades, if not centuries. eBay took this age-old concept and merged it with the power of the internet, resulting in a new industry created around the world. In Malaysia, Lelong.com is the de facto eBay and has managed to create an auction-culture among the local internet users.

Established companies in the auction business have naturally been hurt by this fusion of technology and the auction business model by an upstart company. Further innovation has led to the combination of E-Auctions with mobile phones, bidders can now get SMS alerts on their phones when a particular price point is reached or when the auction is coming to a close.

Obviously, the companies had to engage in R&D to develop the solution as no off-the-shelf systems was available. This is an example of innovation-led R&D, where the focus was not on new scientific discoveries but to develop a solution that could be applied to the business immediately. Patents, if any, were only a by-product of the R&D and would have been filed as an offensive measure.

Similarly, the internet has been used to put a new spin on other old ideas. Business to Consumer (B2C) e-commerce is an innovation that has successfully combined the old mail-order industry with the ease and global reach of the internet. Conventional mail-order companies that did not migrate to the internet model ended closing their doors. Again, companies that pioneered B2C e-commerce had to engage in innovation-led R&D to develop the software they needed. There was nothing magical or difficult about the software and indeed, many companies outsourced the development effort to low-cost programmers in India.

The Internet is a great equaliser and has given many other old ideas a new spin. Now, Electronic Books (E-Books) threaten to cut publishers out of the publishing value chain by selling electronic versions of books directly to consumers, doing away with the conventional book distribution infrastructure. Smart innovators are taking this idea further and creating hybrid models that combine the best of both worlds. Take the Malaysian journalist and budding author Oon Yeoh, for example. His soon to be launched technology-related book will be available, chapter by chapter, over the internet for a small fee. Pushing the boundaries of the norm, Oon will provide updates over the internet, as the technology landscape changes. No more being stuck with an outdated book with obsolete ideas, Oon’s book will remain current and will command a place not only on your bookshelf but also in your internet browser bookmarks.

Similar innovations are happening with electronic greeting cards and newsletters that are delivered directly over the internet. Innovation-led R&D developed these solutions and opened markets that were previously dominated by just a few large companies.

It is not just the internet that has spurred innovation. The use of existing technology, disguised as a Trojan Horse, has also resulted in various innovations. Just look at the elderly folk, most of whom are computer illiterate and suffer from the digital divide, withdraw cash from an ATM machine. Lying beneath the seemingly simple screen and numeric keypad is a full-fledged powerful computer. The users however, are blissfully unaware of this as all they have to contend with is a keypad and instructions on the screen, in the language of their choice. This is innovation, applying existing technology differently and opening possibilities that would otherwise not be possible.

Innocent looking games consoles like the Sony PlayStations are set to become Trojan Horse as they begin offering online connectivity and services over the internet. The optional network adapter functions as a modem and connects the Sony PlayStation to countless other users in the globe, offering real-time multiplayer gaming. It also allows Sony to sell new games online, possibly displacing games vendors in the future.

Examine your Astro decoder box and you will find that it is fitted with a modem, able to connect to the internet for email and web browsing. Can you imagine the thousands of parents who will be able to keep in touch with their children and family members using email, without ever learning to use a PC? This is innovation at its brilliance. Rocket science? Not exactly.

Innovation typically exploits earlier inventions and makes money out of extensive R&D conducted by others, either through licensing the technology or by reverse engineering. Contrary to what some may believe, there is nothing wrong or illegal with reverse engineering, as long as the original copyright is not violated. In fact, Intellectual Property Protection does not allow an idea to be protected. Only the specific implementation of an idea can be protected, leaving enough manoeuvrability for SMIs to innovate and reverse engineer their solution using alternative methods.

The next article will examine the different categories of technological innovations and how SMIs can use them for creating a competitive edge.

Source: Dr. Kamal Jit Singh is the regional director of British Telecom’s Asian Research Centre and specialises in using innovation as a strategy for increasing competitiveness. He also teaches strategic management to an MBA class in Singapore. Comments: singhk@pd.jaring.my