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Innovation Happens When You Question The Status Quo
The need to innovate regularly has become the new norm from customer expectation perspective!
Photo Credit : Shutterstock
The customer today is an extremely powerful stakeholder and this holds good for any company. This is true irrespective of the industry, geography or capability area one operates. The bargaining power has been shifting from other industry stakeholders to the customer gradually.
Most industries are undergoing constant change
Anyone can fly: It was only a couple of decades ago when traveling in Air India was a privilege. As the aviation sector opened for private players, the 90s saw a series of new entrants who disrupted the market which eventually underwent a price-war. The economic surplus was picked up by the customer who now had choice and at a much better price. The airlines were now competing not on legacy honor or brand value but on KPIs that mattered to the customer like on-time departure, early arrival, zero cancellation etc. For the customer it means "anyone can fly".
Anyone can bank: We saw a similar state of affairs in the Banking sector. Most banks were nationalized by the Indian government leading to creation of public sector banks. Banking was now accessible to mass population yet customer service was not the priority. In the 90s, due to liberalization, banking sector was now open to private players. Where we stand today, by revenue the top 3 banks include 1 PSU bank and 2 Private sector banks. We are now seeing a spate of new players entering into the sector driven by Payment led solution. We saw the needle moving from banking for masses to improved customer service and now towards payment led micro-banking. For the customer it means "anyone can bank".
Anyone can invest: The Mutual Funds industry is undergoing a massive transformation as well. 2017 saw substantially increased participation from the Indian retail investors in the Mutual Fund market. It is partly due to other investments including bank deposits not yielding much but also because of the effort that the industry and companies has put on raising customer awareness. Additionally, companies have transformed the investment process making investments and withdrawals easy through few mouse-clicks rather than standing in long lines in Asset Management company offices. For the customer it means "anyone can invest".
Innovation is central to any transformation
The above three industries have a strong B2C interface and hence it is easy to relate. Yet the same holds true today for most industries. Those who are not able to innovate eventually will start losing market share as they will be displaced by players who will innovate.
It is not often easy to define innovation and every industry has its own way of defining innovation. To quote Crossan and Apaydin, Innovation is defined as:
"Production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and establishment of new management systems. It is both a process and an outcome"
In simplistic term, innovation is something unique that creates value for stakeholders and provides a distinct competitive advantage to the innovator. This can include improvement in or creation of product, process, technology, customer experience, pricing and in any other aspect that impacts the stakeholders.
Culture drives Innovation
If one goes through business literature, there will be a large number of case studies that will show the incumbent lost out as they did not innovate or even if they did innovate, it did not add value to stakeholders.
The culture of the organization plays the key role in making innovation important for everyone. If the organization is too focused in running the business as usual activities and meeting revenue and profit targets only, they don't make innovation as their priority. Similarly, if the company is very top-down heavy or hierarchical, the middle and bottom organization layers become execution focused and we don't see much grass-root innovation happening. Many people think by measuring innovation through a well-defined KPI will help drive it, yet people are smart enough to game the system if it just measured in numbers and not in true spirit.
Challenge the status quo
Innovation happens when you look beyond the obvious. It requires you to identify better ways of meeting the needs of the customer some of which may not even be known to the customer. Hence, in some cases it will include creating the need which is not explicitly known or articulated. This can happen only with focused effort and by continuously challenging the status quo. One need to continuously ask "What Next?". If the answer to the question is nothing, probably you are missing the point.
It is also very important for companies to understand the pulse of the marketplace and how their industry is shaping up and accordingly make hard investments through an innovation budget. This should not be looked as sunk cost but an investment to find ways to stay relevant in the marketplace. This needs to be combined with KPIs and metrics to measure innovation. Yet that is only effective when Innovation is a priority and not a side item.
Most companies struggle to keep both an Industry Analyst and the D-Street (Investment) Analyst happy. The Industry Analyst is always interested in understanding the capabilities and competitive advantage of the company that will help it become successful over the long term. On the other hand, the D-Street Analyst is interested in the quarter on quarter success of the company in order BUY, SELL or HOLD the company stocks. These are balancing forces and both are equally important. Innovation will definitely keep the Industry Analyst happy and a by-product will be the long term success of the organization.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.