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Competition is driving innovation

Competition is driving innovation
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First Published: Sun, Jan 06 2008. 10 32 PM IST

Robert Shelton
Robert Shelton
Updated: Sun, Jan 06 2008. 10 32 PM IST
In 2006, he co-authored the book Making Innovation Work that lays out the tools companies need to harness and the innovative business practices they need to implement in a globalized economy. In more than three decades of work in the consulting space, Robert Shelton has served as vice-president at Arthur D. Little Inc. and as managing director of Stanford Research Institute’s Worldwide Technology and Innovation Management Practice. His work is now focused on devising processes and tools for innovation in a services-dominated economy. Shelton, who is currently director and leader of innovation practice at PRTM Management Consultants, spoke to Mint on how, for many companies that develop products, learning to innovate in the services space is proving harder than expected. Edited excerpts:
Are small firms more adept at innovation?than ?large?corporations?
Robert Shelton
A smaller company has to reach out to resources outside of the company; an entrepreneur will call his old friend from school for an introduction to a customer, perhaps. He has to actively seek out relationships as he does not have all the resources in-house. In contrast, medium- and large-size companies tend to follow silos, trying to do it all by themselves. This approach can work against new innovation. Partnerships and collaborations are absolutely fundamental to innovation.
Should a corporation adopt a top-down approach in innovation?
People have always been innovative; it is just the ability to harness that innovation that is important. For instance, it is not enough to just have smart people within a company, managers need to listen to suppliers, customers and the community to leverage those ideas, and these are the innovation networks that are crucial to success.
The traditional approach is limited and, as customers demand new services, there has to be a different approach. Innovation must result in doing things faster, better and cheaper, so companies must learn to collaborate. For instance, a server manufacturer needs to work with the developer to make sure he can offer the right hardware support. There is innovation in people management such as getting sales and manufacturing divisions to collaborate, innovation in structuring services where companies can benefit by outsourcing, then there can be innovation to create intellectual property (IP) by drawing up a strategic partnership.
What is the primary factor that is driving this need for innovation?
Increased competition is doing this. As companies now compete in a globalized environment, they have to be faster, better and cheaper. All sorts of companies approach us, from large corporations to medium-size companies. Often we find that small start-ups know what works best in the innovation space. As consultants, we aim to move the needle for our clients. Innovation practice must actually result in increased revenues; so we do not just issue reports or diagnostics, we are measured by what real value we add to our clients. At PRTM, we consider ourselves experts in operational strategy, we make innovation work.
Why do product companies find it difficult to innovate in the services space?
There is a list of major companies that have faced terrible problems in this space. They have smart managements, but it is in sustaining innovation that most companies fail. This happens most often when companies begin to coast along, inertia takes over; they lose their ability to innovate, products and services become commoditized; people start to leave or start to not care. Examples of such companies include the Coca-Cola Co., Procter and Gamble Co. and Sony Corp.
So is the answer to such inertia new product launches or is it in adding on new services?
Companies need to protect core businesses; they have to hold market share, protect the food on the table. But there has to be incremental innovation and the folio of innovation must include new things. For instance, Apple Inc.came up with the iPod, then followed it up with iTunes and now it has the iPhone.
But innovation is about balance, not just breakthroughs. Companies must have the ability to sustain innovation in products and services. That’s why partnerships are important, it’s all about interdependence.
Which companies do you rate as being good on innovation?
Toyota Motor Corp. has been good; they have sustained business model and technological innovation. Parts of General Electric Co. continue to be good at it. In India, Wipro Ltd is focused on innovation, they have 12% of revenues coming from innovation projects and expect it to go up to 20%, and they are driving growth through innovation.
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First Published: Sun, Jan 06 2008. 10 32 PM IST