April issue 2011
Business Insight: The Path of Neo Innovation
Conventional wisdom dictates that a downturn is not the best time to be investing in innovation initiatives such as product research or market development. It is believed that during tough times, organisational goals should be significantly altered and efforts to innovate are counter productive. But Warren Buffet has always advised differently: invest in a recession and save in a boom. So it makes perfect sense to innovate now, when the time taken to market new products can be reduced substantially, and make room for effective operations, talent retention and efficiencies from process improvement.
Cost Efficiency and Sustainability
Once Artistic Milliners began to define a clear strategy for innovation by outlining specific elements to refocus and re-energise, it brought together key members from line management to clarify the scope of the innovation effort (which primarily involved identifying and implementing cost efficiencies in the supply chain) to help ensure the initiative was aligned with the strategy.
Innovators usually insist on the appointment of a chief innovation executive who is accountable for coordinating and driving innovation efforts across an organisation. Furthermore, by treating innovation as a critical business discipline, like P&G does, firms inject efficiency into the process, which makes the effort more effective and targeted.
Human and working capital becomes a limited resource in a downturn, which is why promising areas need to have innovation redirected towards them to earn the greatest payoff. This is one of the ways Artistic Milliners considered how to use innovation to improve internal processes and reduce the project and product pipeline.
From an operational and financial standpoint, an abundance of product offerings can bog down an organisation by stalling productivity. Likewise, customer support costs exceed budgets when too many products are in circulation. By optimising product development practices, redeploying resources to other critical-path projects and phasing out costly products, companies can survive challenging times.
In the fall of 2010, marketing strategists from Sociality360 helped a local hotel and lodging company harness social media to gain brand preference with businessmen flying in from Lahore. It also implemented technological innovations to accelerate project delivery processes. Now the company can implement new room configurations and dÃ©cor in select hotels much more efficiently: this has saved millions of rupees. Detailed room requirements of each guest are taken at check-in and all the information is fed into a smart pad with the floor manager. Now when the same customer returns, he or she will find the room specifications exactly as requested previously.
Customer Retention and Acquisition
As competitors become more aggressive and resort to desperate measures (such as price cutting) innovation can be used to retain loyal customers and even acquire new ones. One way of achieving this is by creating, installing and implementing an improved CRM system, or by simply applying gathered customer insights to cater towards lower-end customer segments in the most cost-effective manner.
Emerging markets are not necessarily being impacted in the same way developed markets have been following the recession. If you lead an organisation that is considered a low-level threat, now is the time to innovate quickly and introduce products and services that are highly appealing to your customers. A famous local example comes from the oil and gas industry, a sector particularly hard-hit by the current downturn. Shell Pakistan could plainly see the opportunities foregone by giants like BP and Caltex in rural areas. The quick rise of the Shell Rimula®, reintroduced this year as the nation’s most advanced tractor and truck lubricant, demonstrates how customers are currently lining up for high-value offerings. In this case, companies in emerging markets may be better positioned to provide certain products and services due to the nature of demand in their home markets and its reliance on third-party suggestions, which in Shell Pakistan’s case, came from mechanics and dealership representatives.
For proof of innovation during recessionary periods, you don’t have to look that far back. The world’s most used search engine (Google), the engineer’s favourite work station (Dell notebook) and the techie’s must have toy (Apple iPod) were all created during weak economic periods.