Innovation can happen in any part of the business value chain -in the business model, logistics, manufacturing, sales and distribution channel and customer service. If undertaken at the segment where a company has core expertise, innovation can catapult the company from obscurity to success. Innovation in the business model has led a revolution in the mobile phone market. Prepaid service now accounts for more than fifty percent of new mobile phone subscribers.
Innovation in manufacturing has led to concepts such as outsourcing and relocation to lower-cost manufacturing bases. Innovation in the sales and distributions channel has introduced multilevel marketing and franchising. Locating call centres in developing countries is the outcome of innovation in customer support and service.
At its core, innovation is not just about the technology. It is about sprouting new industries, opening new markets by the creative adaptation of ideas from other industries or countries. This series however, focuses on technology-based innovation and examines key dynamics that SMEs must understand. The main principle behind any technological innovation must be the commercial viability and profit-making potential, not the notion of creating a new or revolutionary product or service. The value of the product or service must be greater than the sum of its parts, this is the premise innovation is based on.
Technological innovation is most commonly seen in product differentiation. Take the humble ceiling fan, for example. For decades, we had to physically get up from the chair to adjust the fan speed. While the rest of electronic devices offered the convenience of remote controls, the ceiling fan stubbornly defied this handiness taken for granted by consumers. One company seized the opportunity and created a ceiling fan with a remote control. Both technologies had been around for years, what was missing was the innovation in fusing them together into one product.
We see similar examples of technology innovation in watches that have a compass or thermometer built-in, PDAs that incorporate mobile phones or even mobile phones with built-in MP3 players. In all these cases, the value of the end product is greater than the sum of its parts.
Technology innovation that results in product differentiation is usually based on combining two or more existing technologies. It is seldom based on new inventions or R & D from universities or research laboratories. Technology from one industry can be applied to another, creating innovative products that are distinguished from the competition.
What is key however, is that the innovation must be wanted by the customers. Otherwise, the innovation merely adds cost to the product and does not translate in increased revenue. Recall the period when the Video Cassette Recorder (VCR) ruled the day. Manufacturers scrambled over one another, offering an advance-recording function, sometimes up to one year in advance! Customers on the other hand, could not even figure out how to set the clock on the VCR -let alone program it to record one year in advance. While this feature sounded good to the engineers in the factory, it did not result in increased sales.
Apart from differentiating a product, true technological innovation also creates entirely new products or product segments. This comes about by combining two or more technologies together or by applying technologies from one industry to another. Take news alerts for example. Ever since the internet became pervasive, international news agencies have been providing daily news alerts to their subscribers using email. The Edge on the other hand, has innovated this idea to a higher level and provides real-time news alerts to the mobile phone using SMS. The consumer is no longer tied to his wired PC to receive the latest news, offering true mobility.
Even aromatherapy has seen technological innovation taking place. For hundreds of years, Asians have recognised the effect certain fragrances have on the state of the mind. Incense sticks have been used for relaxation, meditation, yoga and other activities that are central to the mind. Putting a technological twist to the idea, a Dutch company created a device that incorporates a bottle of perfume and plugs into the electrical socket. A small electrical heater disperses the fragrance of choice into the air. Neither the electrical heater nor the fragrance is rocket science, another example of true innovation that has created a product segment that did not previously exist.
One Malaysian SME recently launched a garden light powered by a solar panel. Now, you do not have to dig up your garden to lay electrical cables for garden lights. Each light is powered by its own solar panel. Neither solar panels nor garden lights are new, but the convenience gained by combining the two demonstrates that power of innovation. The end value of the product is clearly far greater than the sum of its parts. A new segment of garden lights has been created.
Yet another example of technological innovation is the ordinary water distiller for home use. The distillation process has been understood and used for thousands of years. The ancient Egyptians were brewing alcohol using distillation as far back as 5,000 B.C. Yet, convenient water distillers for home use did not appear in the market until just a few years ago. Adapting an existing idea from another industry and creating a new product in a different category is innovation.
Another facet of innovation is utilising technology to in reduce costs or increase the quality of a product. Technological innovation has invaded the most unlikely of places. Visit the kitchen of a typical an Indian curry-house and you will see a simple electric mixer continuously stirring thosai dough, replacing a laborious manual task. Some of the curry-houses even have an electric machine that kneads dough.
In the IT sector, technological innovations such as ERP and CRM software solutions, offer the promise of increasing efficiency and lowering operational costs. Web-based email, arguably the simplest of technologies, has fuelled greater communication at a fraction of traditional communication mediums. SMS, essentially email on the move, has been a phenomenon worldwide.
Innovation is about giving customers what they are willing to pay for. However, there are situations when you have to ignore your customers and forge ahead with technological innovation that they do not desire. We will examine these circumstances in the next article.
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: firstname.lastname@example.org