Innovation is critical to success of enterprises in current world. However, many companies struggle with Innovation. Why? Should Innovation be driven as a program or culture? How do we make it happen?
Companies always used to position themselves to be extremely good in one of the areas of Cost, Product or Customer Experience; and be on parity on the other two. However, the world has changed dramatically over the last 4 years (after the collapse of 2007/2008). Today, Companies have mastered the art of Cost effectiveness. It is no more an option but a need. Companies across the board are tending to achieve the position of cost leadership. Companies are increasingly valuing the importance of customer experience in the current world. Hence, across the board, they are implementing programs to quickly move up the customer experience value. Some of the companies are taking advantage of technology to leapfrog on the customer experience. As for Product, the amount of time it takes for a competitor to emulate a function/feature is shortening dramatically (Patenting used to be a way for companies to protect revenues but companies have mastered the art of working around patenting. A regulation whose aim is to protect the interests of a company that innovated has failed to meet its objective in the way it is being administered – more on this at a different time).
Given the above scenario, the only way a company can stay ahead of the game is through Innovation. It has to innovate across all the dimensions of Cost, Customer Experience and Product to lead in the market and for that fact, even to survive.
How can a company be successful at Innovation? Unfortunately, in most Organizations, Innovation is run as a program. We usually assign a Leader who is responsible for Innovation in the organization and they roll out programs after programs, launch communications, and announce rewards to encourage Innovation. This kind of approach usually leads to failure. The only way Innovation can be successful is if we are able to imbibe it in the culture. Innovation cannot be owned by a group or a leader but has to permeate across the organization where every employee takes responsibility for it (not by goals but through ownership). I am not de-riding the importance of Leaders on Innovation – we definitely need Leaders to actively participate in Innovation (and this would happen once it is part of culture). We also need dedicated Leaders who can support the Innovation process by incubating ideas and helping to bring them to fruition by assigning necessary resources (this is a big need in large organizations). However, Innovation cannot be just owned as a program by a leader. That will not work.
Before we proceed, let us look at few examples of companies that are successful at Innovation. Some of the world-class companies like 3M, P&G, Apple, Samsung, Google, IBM, Amazon have made Innovation as culture and have been successful for many years.
Following are few examples of Indian companies that have exhibited Innovation:
Narayana Hrudayalaya: Dr. Shetty of Narayana Hrudayala is bringing Walmart approach to healthcare. His model of taking advantage of economies of scale to keep the surgery costs low is making the hospital profitable while doing social good by delivering quality healthcare at lower costs to patients. Dr. Shetty achieved this, not by product innovation but through process innovation. He changed the model of compensation of doctors (by paying fixed compensation as against per-surgery compensation – still being market competitive but getting doctors to do more number of surgeries per day and excluding non-surgical activities from doctors’ responsibilities). Dr. Shetty offers concessional rates to extreme poor by charging relatively higher rates to people who can afford them. They do a daily P&L that gives them a view of the profitability per surgery and overall profitability on a daily basis. Narayana Hrudayala is now expanding across India to provide high quality low cost healthcare to patients across India.
RedBus: Red Bus has originated with personal experience of its founder Phanindra Sharma who had to run across multiple operators to catch a bus home. He thought of creating an integrated platform that could bring together all bus operators on a single platform that helps passengers track seat availability in real time from multiple operators, purchase tickets and post ratings. In order to achieve this vision, they had to work through the challenges of working closely with bus operators (many, who are illiterate) to use computers and keep costs extremely low so that they can make a margin on Rs. 500 ticket. To get operators onto the platform, they conceived the business model of standard commissions as against the prevalent commissions per ticket (counter-intuitive). To keep costs low, they used open source technology for call center and moved all their IT to cloud computing and saved 40% of costs. This has helped RedBus organize an unorganized sector and bring better customer experience to passengers while increasing profitability to both operators and to themselves. Now, they are planning to expand at a national level and potentially look at going global.
Tata Nano: Tata Nano car is conceived by Ratan Tata. He wanted his company, Tata Motors to create car under Rs. 1 lakh cost that would help lower middle class to buy a car and travel comfortably with their family. This vision of their Chairman has galvanized Tata Motors organization and they partnered with suppliers, manufacturing and distribution channels to keep costs low so that they could hit the Rs. 1 lakh target. This has led to significant innovation in many parts of the car to build a quality product at lower cost. Many a times, we have seen how a vision of the leader galvanizes an organization and lead to Innovation. Another example of similar nature is how a country (USA) could be galvanized on Innovation to make the wish (command) of the President (JFK) when he proclaimed that they would land a man on the moon by end of the decade.
How do we permeate this innovation across Organizations? How can we imbibe it as culture? In next set of articles, we will discuss how Design Thinking can be leveraged as a model to imbibe innovation in the organization. We will also discuss what we can do to instill creativity into Organization that can fuel ideas.
Meanwhile, what stories of innovation have you seen successful? What attributes of organization are supporting the Innovation? If you are CEO and need to instill innovation as a culture, what would you do?
P.S.: My writing has become erratic due to my travel and work schedules. I feel bad that it took me more than a month to get back to my blog. I plan to get back on schedule (once every 2 weeks) immediately.
