Innovation is about profitability. Having a great idea and rushing ahead, allocating scarce resources to it, is one of the biggest blunders an SMI or SME can make. Unless the path to profitability is clear, the company should either drop the idea or proceed with it in a non-conventional manner that does not tie up scarce resources.
Innovation involves a three-stage process that includes creative thinking, critical reasoning using industry insight and implementation strategy. Profitability is a thread that runs throughout the process and is always foremost in the mind.
Let us look at the first step of any innovation – idea creation. Broadly classified, ideas fall into two groups: incremental ideas and innovative ideas. Incremental ideas are a dime a dozen – forming these ideas is something we do all the time. Sometimes this is a deliberately process in the company meeting room, sometimes it is unintentional. The issue is to figure out how to make an existing product better or how to kill off competitors’ products. Incremental improvements are the order of the day.
The lowly VCD player is a classic example. Early models accommodated a single disc only. When it become obvious that most movies require at least two discs, one manufacturer launched a model that held two discs. Another manufacturer followed by launching a model that could hold three discs. This was incremental improvement and hardly caught the industry by awe or surprise.
One Malaysian manufacturer has recently launched a multi-function home entertainment device that combines a videocassette recorder and a VCD player with karaoke features. VCD players for cars have been available for quite a while now. Both are incremental improvements.
The IT industry has been languishing with incremental improvements for over a decade now: it’s all about higher speed, larger storage capacity and smaller size. Little else has dominated the computer hardware sector for a while.
There is nothing wrong with incremental improvement, if it results in profitability. The life span of such innovation however, is limited and unless the company can continually engage in this cycle, the prospects of sustained profitability are limited. All incremental improvements must necessarily follow the principle of continuous obsolescence.
Incremental ideas are produced from our logical and analytical minds and as a result, are rarely creative or innovative. They are the product of unrelenting analysis or intensive logical thought. Innovative and novel ideas, on the other hand, are rare they are the result of creative thinking.
They come about by linking seemingly unrelated concepts and finding new relationships between these concepts. It is in the intersection of these new relationships that innovative ideas lie. Logic and reason have no place in this initial step of the innovation process -logic and reason lead to incremental improvements, not breakthrough ideas.
Take Teflon, for example. Discovered in 1938 by R. J. Plunkett at the du Pont Jackson Laboratory, Teflon has a high melting point (327 deg. C) and an extremely low coefficient of friction, making it ideal in a chemical plant for gaskets, diaphragms, rings, tubing and taps. Its use subsequently spread to the aerospace industry and appeared set to remain there, until an entrepreneur arrived on the scene.
Studying the unrelated concepts of Teflon and the cooking industry, he quickly concluded that Teflon could easily solve one of the biggest problems in the industry – cooking plans that do not stick. It was only by examining the relationships between the concepts of Teflon and the cooking industry that he found the missing link. Going down the path of logic and reason might not have led to the conclusion that a material suitable for a chemical plant would be equally desirable by homemakers.
Unlike disruptive technology where customers do not know their own requirements, in this case it was a known fact that homemakers wanted nonstick pans. What was unclear to them and others in the culinary industry was the most elegant solution to the problem. Inventing Teflon would have been outside the ambit of the entrepreneur but using it in an unrelated industry was pure innovation driven by creative thinking.
Innovative ideas also come from observing the marvels of nature. This is exactly what led George de Mestral to invent Velcro in 1951. As a person who was always outdoors, de Mestral was well aware that nature is the best engineer of all. The burrs that stuck to his woollen hunting pants and his dog’s fur were annoying to him because of the time it took to remove the pesky burrs. He also wondered why the burrs stuck so steadfastly in the first place.
Looking at the burrs under a microscope, he noticed each burr consisted of hundreds of tiny hooks that “grabbed” into loops of thread or fur -nature had naturally made a fastener that was foolproof. It did not take de Mestral long to figure out that this nature’s fastener could be easily turned into an everyday useful innovation.
Innovation can also come about from observing unmet needs of customers. Rice cookers have been around for decades. In fact, Malaysia is the largest rice cooker manufacturer in the world. However, what the manufacturers have overlooked is that for many Asian cultures, starch in the rice is unhealthy and should be discarded. Diabetics too have to limit their rice intake because of the high content of starch in rice. One Malaysian entrepreneur has found a way to fulfill this unmet need, his innovation involves around a little device that pumps out water from the rice cooker, thereby reducing the starch content considerably.
It is common for an innovation to be followed by a period of incremental improvement. When most avenues for incremental improvement are exhausted, another innovation appears on the horizon and the cycle repeats itself. A recent example is wireless networking or Wi-Fi for internet access, a true innovation that broke us free from the shackles of cabled bondage. Now, incremental improvements are underway to increase the speed of the networks as well as the communication distance. While an SME should not become an active player in this expensive game of research, innovation can come from novel and creative applications of the technology.
In India for example, an SME has designed an innovative solution where the technology allows fishermen to engage in an auction while they are still at sea. Township-wide Wi-Fi networks are being planned for new residential areas in Malaysiawhile another company is working on using a variation of Wi-Fi to overcome the last-mile problem in rural areas.
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