Jim Stikeleather, Chief Innovation Officer, Dell Services, touches on some of the key questions companies should ask as they position themselves for total global competition in the 21st century and how the current generation of innovation has transformed business models and strategies.
A dictionary definition of innovation is “introducing something new.” These days, with the rise of the buzzword “innovation” in business literature, you’d be led to think that innovation itself is something new.
Why all the newfound interest in innovation? In short; globalisation. Executives fear their companies becoming commoditised as a result of total global competition, and they desperately seek new ways of distinguishing their products and services so they can continue to earn healthy margins. But even though companies know they must innovate, it’s not clear exactly how to go about it in the complex global markets of the 21st century. Is there more to it than just inventing some new gizmo or thingamajig?
The brave new world of widely distributed knowledge has led to the business proposition of “open innovation.” No longer can companies win the innovation arms race from the inside‐out (internal R&D). Instead, they should buy or license innovations (e.g., patents, processes, inventions, etc.) from external knowledge sources, turning the table to outside‐in innovation. In turn, internal inventions should be considered for taking outside the company through licensing, joint ventures, spin-offs, and the like.
Open innovation is all about the money to be made. In today’s 24/7 business world, knowledge can be transferred so easily that it seems impossible for companies to stop it. Instead, smart companies are going to the ends of the Earth in search of knowledge that they can transform into money. The Industrial Age was about mass production and Innovation was R&D‐driven, from the inside‐out. It was about supply‐push. The Customer Age is about mass customisation and innovation must now be driven from the outside‐in. It’s now about demand‐pull. It is about turning a company, and its entire value chain, over to the command and control of customers.
This new reality demands a shift in our thinking about innovation. Winning companies will be so close to their customers, they will be able to anticipate their needs, even before their customers do, and then turn to open innovation to find compelling value to meet those needs. That, consequently, as pointed out by the late management guru, Peter Drucker, means becoming a buyer for your customers. That means “business mashups”, where your company joins forces with suppliers and sometimes even your competitors, to expand your product and services offerings, blurring industry boundaries. Your customers are your only true asset in the new world of low‐cost suppliers, and your business model will likely need to be expanded so that you can fulfil as many of your customers’ needs as possible. This is how smart companies are seeking true growth and avoiding commoditisation. They are no longer in the product business - they are in the customer business.
Innovation is no longer just about some star in the R&D suite delivering a radical breakthrough, a hole in one, every now and then. Isn’t it time that we stopped just talking about ‘out‐of‐the‐park’ innovation and got serious about developing the capability required to manage the complete innovation lifecycle? And companies better manage that lifecycle, because in today’s wired world competitors can catch up to your innovation in an instant.
Just look at the Apple iPhone series. Hackers broke the code and there are companies which have released clone versions of the iPhone, and Google began pursuing the gPhone. In just weeks after its introduction, Apple had to cut $200 off of its price due to competitive pressures. Today, it’s not a single innovation; the challenge is to set the Pace of Innovation—once you innovate, then you really have just begun and will need to run hard to outpace your competition.
There is certainly no lack of great ideas in today’s hyper‐connected, wired world. But companies report a 96% failure rate on their innovation attempts. Why is this? It’s largely a result of innovation being approached in a haphazard fashion. Today, however, leading companies are taking the systematic approach to business innovation and turning it into a repeatable, managed business processes.
We’ve touched on some of the key questions companies should ask as they position themselves for total global competition in the 21st century. Forget the old idea that innovation simply means product invention. We’ve seen the need for systematic innovation processes. We’ve seen that innovation certainly isn’t new. Innovation has been around since the harnessing of fire by early man.
The current generation of innovation is customer-driven process innovation, the kind that can transform business models and strategies in the brave new world of total global competition – the kind of process innovation that can transform innovation itself, the kind of innovation that touches, and is driven by, your customers.