Category Archives: Innovation Management
In the past, I have contributed on topics like innovation management and open innovation. I have always been a big fan of innovation. But then recently I stumbled upon the term “fabrication”. I was talking to this friend of mine who works in the R&D department of an IT company. We were debating about product lines and how to expand or diversify them. As the debate heated up, he very passionately announced, “I would rather innovate than fabricate!”
What threw me off was not his intensity. I have always known him to be that way about his work. What had caught my attention was the term he had used – “fabricate”.
So what does fabrication mean for IT industry? It means you take a lesser known technology or application which is still rough around the edges. You then polish it, add some IP to it, and present it as a fairly new product. It’s something like taking a song from the yesteryears, adding synthesizer beats to it, and marketing it as a new piece. And what makes it more interesting is that the audience reacts the same to both, whether it’s music or IT. They get excited by it.
So how long product fabrication has been going on? Hard to say. But yes what we can be certain about is that it’s a growing trend. How come? The answer is mergers and acquisitions. When a larger IT player acquires an industry counterpart, they acquire it along with its applications and technology. After the acquisition the technology becomes stagnant for a while. But then it is revived with a new lease of life. The applications are taken and analyzed by a fresh pair of eyes. Conclusions are drawn and value addition is done. And then finally new IP is added and the applications are set afloat in the market again.
Now when you weigh fabrication versus innovation on a common scale, fabrication does have justifiable causes. It has its own set of pros and cons.
First and foremost, innovation is a complex and lengthy process. It’s a process that demands extensive R&D, detailed market research spanning across years, and budgets running, at times, into millions. And with all this, factor in the changing market conditions. There is usually a time gap between when a product is conceived and when it is actually launched. You might have done all your research and analysis during a certain period. But when you actually launch the product, the market might have moved on to other things. In this case, your innovation becomes less meaningful. The time lapse between conception and launch can tip the scales for a product. But fabrication – it takes comparatively less time. You already have the base ready. You have to find out where you can add value to it and polish out the rough edges. This becomes a faster way for companies to cash in on an opportunity.
Secondly, we know that innovation in and of itself is not cheap. But then how costly exactly? Well there is the basic cost of innovation which includes R&D, market study, analysis, actual development, and testing. In addition to this, there is the cost associated with managing the product in the launch pipeline. This includes the cost of marketing the product and setting up a sales and distribution channel for it. And with all these overheads, there is no guarantee of success. The innovation might or might not see positive market response.
So it makes sense when the innovator firm steps down and hands over the product to a bigger industry player. These big names already have an established sales channel. Thus, they are better positioned to draw out widespread product adoption. Their deeper pockets also allow them to undertake bigger marketing campaigns for the product. They can take bigger risks and manage them better.
So far what we have discussed is from the innovator firm’s angle. Now let’s consider the buying firm’s point of view. A company undertakes product development for two purposes – to meet market need or to meet internal needs. It makes sense to invest heavily in innovation when you are trying to innovate for the sake of the market. But when the internal processes demand a product, it’s better to buy out a ready application and mold it to meet specific requirements. Enterprises don’t need to pick the brains of their product champions for it. They can acquire a ready technology, modify it, and make it ready to use. This saves the buying firm a lot of time and resources. On the other hand, the innovator firm can rapidly recover the dollars invested in developing the product. Thus, fabricating a product plays out as a win-win situation for both.
So is fabricating products going to be the way forward? Well, in the coming years we shall see a lot more of product fabrication taking place. More and more technology acquisitions shall happen in the coming years. And by the way the economy is going currently enterprises are completely justified in trying to account for every single dollar that they spend.
But this does not mean innovation shall lose its place in enterprise strategy. What we shall see in coming years is that enterprises shall undertake innovation where it matters the most. They shall back their product innovation projects with lot more strategic level thinking and planning. They shall have better innovation management practices in place. And hopefully, some niche enterprises shall promote product innovation as a systematic discipline.
And let’s not forget, without innovation fabrication is not possible. Somebody has to innovate a product before it can be fabricated by others!
A few months back a colleague handed me a report published by Juniper Research on mobile augmented reality (AR). The report predicted mobile based AR apps to witness 1.4 billion downloads by 2015 – a business worth $1.5 billion approximately.
I dropped my jaw and gawked at Juniper’s report. My reaction had nothing to do with the figures contained in there. I have never doubted AR’s potential all this while. In fact, somehow I have always known that one day AR was going to be big – probably too big to handle. Rather it was a surreal feeling for me. I was like ‘yay I was right about AR.’
But it also got me thinking about those early days when AR was still an experimental concept. So here I have tried to relive the past of AR, analyze its present, and foresee its future.
Wow! A trip down the memory lane reveals that our affair with AR is more than decades old – almost as old as 1960s.
This was a time when the market was still confused between virtual reality and augmented reality. In 1961, when cinematographer Morton Heilig developed Sensorama, a multi-sensory device, some hailed it as first of its kind AR system. But the device worked more on the lines of virtual reality than AR. And then just 7 years down the line in 1968 AR found its first big break when Ivan Sutherland created head mounted display system. This was our first AR system and the start of a lifelong affair. Hot on the heels in 1974, Myron Krueger developed Videoplace which was an artificial reality laboratory.
From 1960s to 1990s, the concept of AR floated around in the market under the nom de guerre of artificial reality or artificial intelligence. But then in 1992, Tom Caudell and David Mizell, researchers at Boeing, rechristened the concept and coined the term ‘augmented reality’. For the first time, they discussed in detail the difference between AR and virtual reality, thus creating a space of its own for AR in the market.
From here on, there was no looking back for AR. In 1992, IBM and Bellsouth introduced first smartphone, which would play a very vital role in AR’s growth in coming years. Then December 1993 saw GPS achieving operational capability which further powered up AR.
2000s saw steady contributions coming in to AR from people who dared to dream up a reality.
At present, AR appears to have found its niche with smartphones and tablet devices. Today, mobile AR apps are mushrooming all over the place. In addition to their cool quotient, their cheap prices have made them highly popular. But it has also made them overhyped. At times these AR apps are just ‘cool’ but not genuinely useful per se. Resultantly, we have an overcrowded mobile AR space.
But even amidst this crowd, we have a few stalwarts who have tasted success with AR apps for variety of purposes.
Branding: Two names that stand out here are Museum of London and Ben & Jerry’s. Museum of London’s Streetmuseum app has practically engaged its users in a historical experience. The app uses geo tagging to identify the user’s current location. Then it opens up a map and shows the London locations for which the user can view historic images. When the user clicks on the location the app overlays historical photos on that location in real-time.
Ben & Jerry’s Moo Vision is another great example of AR based branding. Their AR app allows users to use their iPhone camera to interact with product packaging of Ben & Jerry’s different flavors. The users can simply point their camera at a particular carton lid and take a virtual tour of the place where the ingredients originated.
Utility: The one name that pops up in utility based AR apps is AKQA’s AR app for USPS. They have developed PriorityMail.com for USPS that helps customers find out the right kind of packaging for their item. How it works is the customer first prints an eagle icon that triggers the hologram. Then he turns on his webcam and sound and launches the Virtual Box Simulator. Once done, he can point the printed icon to the webcam till a holographic image of a box appears. They can then compare the size of the item to be shipped with this holographic image to see if it fits.
Another utility based AR app example would be Tobi Virtual Dressing Room. It’s a classic app that overlays images of clothes on a customer’s image, as if in a dressing room. It’s a great way of enhancing online shopping for customers. Similarly, the World Lens app translates foreign language text in real-time – a lifesaver for linguistically challenged tourists.
Product Demos: Customers often cite lack of tangible product experience in online shopping as a deterring factor. But brands across the world are using AR powered demonstrations to improve customers’ visualization of their product. One such example is AT&T’s Unboxing. This Facebook app is specifically designed for the Windows 7 smartphones. The app lets users simulate and experience the latest features of the phones. It integrates a layer of social content like photos and status updates with chic motion graphics and interactive hot spots.
There are other brands like Converse, Rayban, JC Penny, to name a few, who are using AR apps for online product demos.
What all these highly successful AR apps have in common is that they are neatly thought out, well planned, and aimed at making life easy and thrilling for customers.
Augmented reality has finally found its ideal platform in smartphones and handheld devices. But we are not done yet with this platform. There is a lot more to be explored. The next big wave of development in augmented reality will focus on image, object, and color recognition.
While still evolving on the smartphone platform, augmented reality shall not be limited to it. We can foresee an AR based eyewear or glasses in very near future. Now a device like this will find immediate takers in the gaming community. But it will see a gradual social acceptance.
The other area where AR will start making inroads is B2B marketing and medicine. Now these fields will require AR to drift away from single viewer experience to a more collaborative experience wherein larger audiences can be engaged simultaneously. But nevertheless, it will happen.
Now that augmented reality has finally found strong ground under its feet and a direction to move ahead in, the next 5 to 7 years will potentially redefine our reality. Just wait and watch!
While we have been spending time dealing with innovation and innovation management, a new trend has snuck up on us called ‘open innovation’. The term was first coined by author Henry Chesbrough in his path-breaking book Open Innovation: The New Imperative for Creating and Profiting from Technology.
The book brought to attention the growing but subtle trend of companies drifting away from closed R&D and adopting a more open innovation process. Enterprises have always worked hand-in-glove with external partners like universities to match steps with the latest and greatest in research. But open innovation brings in a whole another dimension.
Open innovation integrates the external resources into a company’s innovation processes. It combines internal competencies of a company with its external associations to enhance development of new technologies. So great is this marriage-like union that at times it’s difficult to separate out external from the internal.
Principles of Open Innovation
What open innovation implies is a change in the mindset of enterprises and their people. It’s a whole another point of view that companies are slowing warming up to. But the most fundamental ideas that drive open innovation are presented here as principles.
Work with Smart People: The old school of thought insisted that all the smart people of a field worked ‘for’ an enterprise as in-house team. But that is not true today. Enterprises have learnt to accept that not all smart people of their field are going to work for them. These people exist even outside the company. Enterprises will have to work ‘with’ them instead to benefit from their knowledge.
External R&D Holds Value: Again a deviation from the old school thought which insisted that innovation meant discovering, developing, and shipping – all singlehandedly. Now enterprises show surprising level of acceptance to externally performed R&D. In fact, they even see value in it and are ready to leverage it further with internal R&D for their own purpose.
You Don’t Always Have to Be Initiator: The old school believed that in order to benefit from an innovation you need to be the originator of its research. But open innovation rebuffs this belief. Under open innovation you don’t always have to be the originator. You can adopt someone else’s research and work on it to develop a product out of it.
Business Model & Not Innovation Ensures Success: The classical theory insists that a company that conceives and launches a product first becomes market winner. But that is again not the case. In modern times, it’s the business model developed for the product that determines its success. If you have an excellent product on hand but don’t have a plan in place to market it, then the product can turn out to be a market dud.
Best Use of Ideas and Not the Best Ideas Win: You may have a huge repository of the best ideas but if you cannot use them wisely then they are of no use. That’s the thought promoted by open innovation. You don’t need to reinvent the wheel every single time for innovation. You can simply make smart use of someone else’s ideas and still win.
Intellectual Properties Can Be Mutually Beneficial: In the past, enterprises closely guarded the confidentiality of their intellectual properties from their head-on competitors. But now changing times require that companies share their ideas and create collective value for the industry.
Some Open Innovation Examples
Like mentioned earlier, open innovation has snuck up to us – literally. It has been around for more than a decade now but has gone unnoticed. Now that we know of it, we can find examples of open innovation all around us. Let’s recount a few here.
GE Capital & Hyundai Mutually Benefit
This is a classic example of open innovation in the financial industry. The case of GE Capital and Hyundai was initially just a merger of activities. But soon Hyundai acknowledged that GE’s risk management and financial knowhow made a huge difference in the joint venture. Similarly, GE capital gained from Hyundai’s superior marketing skills which helped them break out of the stagnant growth period.
InnoCentive and its Challenge Platform
This is again a great example of open innovation. InnoCentive operates an online community of challenge solvers. Companies from around the world pose challenges to this community and seek solutions. Interestingly, this online community has successfully solved almost half the challenges posed by companies looking for practical solutions.
Procter & Gamble the Pioneer of Open Innovation
P&G is often heralded as one of the first enterprises to open up its innovation processes for external resources. Today, the company operates a ‘Connect + Develop’ website where their customers submit new product ideas. P&G then takes these ideas forward and develops concrete products out of them. The website today routes almost one-third of P&G’s new products. The success of P&G’s open innovation initiative shows that more often than not good ideas for new products originate at the end user level.
LG Joins Hands with CrowdSpring
LG recently initiated a partnership with CrowdSpring to conduct a competition that encouraged users to design the next LG phone. The competition successfully generated a lot of design ideas for LG’s in-house R&D team to develop further.
All these examples show that ‘open innovation’ is not a matter of if but when. The sooner enterprises embrace it the better possible partnerships lay ahead for them.
‘What’s the new thing’ – how many times do we hear this? On a daily basis, right? We are a generation that is constantly craving for something new in the markets. We change our preferences overnight and expect technologies to emerge out of nowhere to meet them. And have we been disappointed till date? Absolutely not! It seems like before we even conjure up what we want, we have it catered to us, courtesy constantly innovating enterprises.
Today enterprises are buzzing and pulsating with incessant innovations. The brutal competition requires these enterprises to be on their toes and keep innovating new products, technologies and concepts to dazzle the markets.
However, this does not mean innovation should be undertaken on an ad hoc basis. In fact, innovations should follow a carefully crafted corporate strategy.
Innovation – A Discipline
Boston Consulting Group brought out in one of its report that innovation features in the top 3 priorities for enterprises. Even the knowledge-based markets today differentiate enterprises based on their capacity to innovate. So, what does this say about innovation as a business activity?
First and foremost, innovation is a cardinal function that needs to be undertaken on a continuous basis. In order to succeed in the long run, enterprises will need to maintain a constant flow of ideas and promote a culture of constant choices. Secondly, innovation is no longer the forte of techno geeks. It is now a natural extension of every single job role.
Simply put, we now need to change our outlook and view innovation as a discipline rather than a mere activity or process taking place behind glass doors of labs.
Innovation is not a freewheeling task for enterprises. An innovation project consumes valuable resources in terms of human talent, capital and decision-making authority. This calls for an approach to profoundly manage these projects and account for them.
Innovation management is one such systematic method of supervising and streamlining all the processes that form a part of innovation. It starts at creating an environment that fosters generation and exchange of ideas. The next step is to handpick the executable and profitable ideas and bring them to fruition. The final stage is to introduce the innovations into the market.
Innovation management creates and maintains a stable pipeline of innovations for an enterprise.
Large multifarious enterprises typically have several innovation projects underway at the same time. All of these projects would not hold the same value for the business. Here enterprises can use innovation portfolio to assess the risks involved in each project and determine the high value projects. They can identify the redundant activities and strike a balance between different projects.
Innovation portfolio also helps enterprises discover hidden synergies in one project that can be leveraged across other projects to yield better results. But more importantly, it imparts improved market visibility to enterprises. It helps them better phase out the launch of their new products. Enterprises can thus be sure that at no of point of time they overwhelm or underwhelm the markets with new introductions.
Innovation Management – An Integrated Approach
Innovation is not a timeless concept that has remained untouched by change. In fact, innovation has shrugged off its historically linear course and is no longer limited to just the product. Today, it spans across strategy, business, organization, process, technology, and marketing.
With innovations taking place at the system level it is crucial that we manage them from a systemic perspective. But the traditional piecemeal approach to managing innovations bundles them up into silos. It’s prudent that enterprises adopt an integrated approach that ties innovation to the very heart of the business.
Governance of Innovation Management
Although innovation is a very critical activity, it is not the only activity for an enterprise. We have seen cases in the past where companies focused so much on innovating that they lost track of their bigger goals. They came up with innovative products that were absolute works of genius. But they were not viable and conflicted with the business vision. This highlighted the need for governance.
Now, innovation management aligns the different processes that go into innovation. But governance aligns the goals of this management function to greater business objectives. It helps enterprises limit the scope of innovations to feasibility parameters and justify them to business vision.
After all, innovation cannot be undertaken at the risk of profitability or worse yet bankruptcy!